Maxon v. Apc

• Decision Date: 02 October 2015
• Docket Number: A139068
• Court: California Court of Appeals Court of Appeals
• Parties: TERRI MAXON, as successor-in-interest, Plaintiff and Respondent, v. INITIATIVE LEGAL GROUP APC, et al., Defendants and Appellants.

TERRI MAXON, as successor-in-interest, Plaintiff and Respondent, v. INITIATIVE LEGAL GROUP APC, et al., Defendants and Appellants.

A139068

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION TWO

October 2, 2015

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(San Francisco County Super. Ct. No. CGC-12-523966)

Plaintiff David Maxon sued his former attorneys for breach of fiduciary duty, violation of Business and Professions Code section 17200, and declaratory relief arising out of their representation of him in wage and hour claims against his former employer.¹ His former attorneys (defendants and now appellants in this matter) petitioned to compel arbitration of plaintiff's claims, relying on an arbitration clause in the attorney-client agreement between them and plaintiff. Plaintiff opposed the petition on the ground that, although he had signed the agreement, defendants had never signed it, and thus no contract was ever formed and, perforce, no agreement to arbitrate.

The trial court denied the petition to compel arbitration without expressly reaching the issue of whether an attorney-client agreement was formed. Instead, its analysis wasbased on Business and Professions Code sections 6147 and 6148, which state that an attorney-client fee agreement not signed by the attorney is voidable at the client's option. The trial court found that this option to void the agreement was incorporated into the fee agreement as an express term and that, as a matter of fact, plaintiff had exercised his option to void the agreement, including the arbitration clause.

Defendants appeal the order denying the petition to compel arbitration. We agree with the trial court's decision, and will affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Signs a Fee Agreement Containing an Arbitration Clause.

Plaintiff was formerly employed by Wells Fargo Bank as a Home Mortgage Consultant (HMC). In 2010, defendants² approached plaintiff about representing him in possible wage and hour claims against Wells Fargo. Defendants sent plaintiff a two-page "Attorney-Client Agreement" that proposed the terms of their representation. The Attorney-Client Agreement contained an arbitration clause stating that plaintiff and defendants "agree to submit all disputes between them to binding arbitration."³ Plaintiff signed the Attorney-Client Agreement on May 26, 2010. The agreement was never signed on behalf of defendants.

Plaintiff Alleges Serious Misconduct Against Defendants.

Plaintiff commenced this action on September 5, 2012, suing defendants for breach of fiduciary duty, violation of Business and Professions Code section 17200 etseq, and declaratory relief. Plaintiff sought to represent himself and a purported class of approximately 600 other HMC's who had also retained defendants to prosecute wage and hour claims against Wells Fargo (the purported class). Plaintiff's causes of action are based on allegations of serious misconduct by defendants related to their representation of plaintiff and the purported class. In essence, plaintiff alleges that defendants and Wells Fargo agreed to a $6 million settlement of the lawsuits filed by defendants on behalf of plaintiff and the purported class. The $6 million settlement was a "supplemental" settlement and part of a global settlement in which Wells Fargo also agreed to pay $19 million to settle separate class actions instituted by other counsel. Plaintiff alleges that defendants schemed to keep the $6 million supplemental settlement for themselves as attorneys' fees by encouraging plaintiff and the purported class to participate in the $19 million class action settlement while hiding details about the $6 million supplemental settlement from plaintiff and the purported class.

Shortly after commencing this action, plaintiff successfully moved to intervene in Lofton v. Wells Fargo Home Mortgage (S.F. Super. Ct. Case No. CGC-11-509502), the matter in which the trial court had already given final approval to the $19 million class action settlement. Among other things, plaintiff successfully sought a temporary restraining order requiring approximately $5.5 million of the $6 million supplemental settlement to be deposited into a trust account.⁴

Defendants Petition to Compel Arbitration in this Matter.

In October 2012, defendants' counsel sent a letter to plaintiff's counsel demanding arbitration of "all claims that have been brought" in this action. Plaintiff did not respond to the demand to arbitrate.

On December 5, 2012, defendants filed a petition to compel arbitration of plaintiff's individual claims. On December 24, plaintiff's counsel sent defendants' counsel a letter stating that "there was never an agreement reached or formed" betweenplaintiff and defendants, and that "[t]o the extent [defendants] now claim that there was such an agreement, and that a document dated May 26, 2010 manifests that agreement, [plaintiff] hereby formally exercises his option to void that purported or proposed agreement in accordance with the provisions of Business and Professions Code §6147(b) and §6148(c)." These provisions of the Business and Professions Code state, in essence, that a contract for legal services must be in writing and signed by the attorney, and that the failure to comply with these requirements "renders the agreement voidable at the option of the plaintiff." (Bus. & Prof. Code, §§ 6147, subd. (b); 6148, subd. (c).)⁵

In March 2013, plaintiff filed an opposition to the petition to compel arbitration. Plaintiff's argument against arbitration was that the parties never formed an agreement to arbitrate because defendants never signed the Attorney-Client Agreement.

After a lengthy hearing, the trial court denied the petition to compel arbitration, but on a different ground than the one argued by plaintiff. The trial court found it unnecessary to address plaintiff's contention that no written agreement had been formed. Instead, it found that because defendants had not signed the agreement, plaintiff had an option to void it pursuant to Business and Professions Code sections 6147 and 6148 andthat, as a matter of fact, plaintiff had exercised the option to void the agreement, including the arbitration clause. The trial court's order stated, in part:

"As a matter of law, an attorney-client fee agreement not signed by the attorneys is voidable at the client's option. Bus. & Prof. Code §§ 6147-48. Under the rules of contract interpretation, that option is read into such an agreement as if it were an express term of the agreement. As the California Supreme Court explained in Edwards v. Arthur Andersen, LLP, 44 Cal. 4th 937, 954 (2008), '[a]ll applicable laws in existence when an agreement is made, which laws the parties are presumed to know and to have had in mind, necessarily enter into the contract and form a part of it, without any stipulation to that effect, as if they were expressly referred to and incorporated.' . . . [¶] [Plaintiff] Maxon filed this action against defendants on September 5, 2012. About a week later in a separate lawsuit, Maxon intervened and obtained a temporary restraining order against the defendants ordering them to deposit into a court-controlled account the $5.5 million at issue in this case. Thereafter, in November, Maxon effectively rejected defendants' request that he arbitrate his claims, and in December, in an abundance of caution, Maxon advised defendants by letter that he was exercising his contractual right to void the agreement, assuming one existed at that time. That course of conduct persuasively establishes, and this Court finds as a factual matter, that Maxon has exercised his contractual right to void the entire agreement, including its arbitration clause. This finding of fact leads inexorably to the legal conclusion that the attorney-client agreement, including its arbitration provision, no longer exists."

The trial court addressed a line of United States Supreme Court cases cited by defendants' counsel, including Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967) 388 U.S. 395 (Prima Paint). According to the trial court, "Defendants' reliance on Prima Paint, supra, 388 U.S. 395 . . . and its progeny is misplaced. Those cases hold that general attacks on the validity of an entire agreement, as opposed to specific challenges to the validity of an arbitration clause within that agreement, must be sent to arbitration. . . . This Court's ruling is predicated on its interpretation of the attorney-client agreement and giving effect to its terms; it has nothing to do with resolving a challenge toits validity. Put differently, there simply is no general attack on the validity of the attorney-client agreement for the arbitrator to resolve, and it is for this Court to decide whether there exists a commitment to arbitrate. The authorities cited by defendants do not excuse defendants from the statutory requirement of establishing the existence of an agreement to arbitrate. [¶] As noted, under the very terms of the contract here at issue, there is no commitment to arbitrate. Defendants seek specific performance of an agreement which no longer exists, and it is axiomatic that a court does not properly grant such relief, at least in the circumstances here presented. The situation at hand is analytically indistinguishable from one in which a party seeks to enforce a contract which has expired by its own express terms. In the latter situation, a court would simply read the contract and decline any invitation to enforce it. This Court likewise does the same here."

The trial court concluded by saying that "this Court recognizes that Maxon has advanced a somewhat different analysis from...