Powers v. Dickson, Carlson & Campillo

• Decision Date: 05 May 1997
• Docket Number: No. B092041,B092041
• Citation: 54 Cal.App.4th 1102,63 Cal.Rptr.2d 261
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 3352, 97 Daily Journal D.A.R. 5736 Daniel POWERS et al., Plaintiffs and Respondents, v. DICKSON, CARLSON & CAMPILLO et al., Defendants and Appellants.

Page 261

63 Cal.Rptr.2d 261

54 Cal.App.4th 1102, 97 Cal. Daily Op. Serv. 3352,

97 Daily Journal D.A.R. 5736

Daniel POWERS et al., Plaintiffs and Respondents, v. DICKSON, CARLSON & CAMPILLO et al., Defendants and Appellants.

No. B092041.

Court of Appeal, Second District, Division 5, California.

May 5, 1997.

As Modified May 23, 1997.

Archbald & Spray, Kenneth L. Moes and Karen Burgett, Santa Barbara, for Defendants and Appellants.

Valensi, Rose & Magaram, M. Laurie Murphy and Kenneth L. Heisz, Los Angeles, for Plaintiffs and Respondents.

GRIGNON, Associate Justice.

Defendants and appellants Dickson, Carlson & Campillo; Maguire, Toghia & Orbach; and Nicholas J. Toghia appeal from the denial of their petition to compel arbitration in this legal malpractice action brought by plaintiffs and respondents Daniel and Fala Powers. ¹ We conclude that the arbitration provisions of the initial retainer agreement and its amendment are enforceable and applicable

to legal malpractice actions. We reverse and remand for further proceedings.

FACTS AND PROCEDURAL BACKGROUND

In 1992, the Powers purchased a $2 million luxury home in the Pacific Palisades. They were represented in the negotiations by Attorney Roy Glickman of the law firm of Narvid, Glickman, Scott & Frangie (collectively Glickman). The Powers signed a written purchase agreement with the seller/developer of the property. This written purchase agreement contained an arbitration provision. After moving into the home, the Powers became aware of construction defects. They retained Attorney Glickman to represent them in connection with the resolution of these construction defect disputes with the seller/developer. In November 1992, Attorney Glickman demanded arbitration on behalf of the Powers and the matter proceeded to arbitration.

In March 1993, the Powers became dissatisfied with both the pace of the arbitration and Attorney Glickman. They contacted Nicholas J. Toghia with the law firm of Maguire, Toghia & Orbach (MTO). The Powers retained Attorney Toghia to represent them in the construction defects arbitration on an hourly fee basis. The Powers met with Attorney Toghia at his office on March 3, 1993, and signed a four-page "Attorney Retainer and Fee Agreement." The Agreement contained 12 numbered paragraphs: scope of agreement; duties of attorney and client; attorney's billing and case management; costs and expenses; attorney's statements; attorney's lien; professional liability coverage; termination or withdrawal; termination or conclusion; binding arbitration; authority of client; and client's deposit. Numbered paragraph 10, concerning arbitration, provided in full as follows:

"10. BINDING ARBITRATION. [p] The parties hereto agree that any dispute relating to ATTORNEY'S fees under this CONTRACT shall be submitted to binding arbitration before the Los Angeles County Bar Association pursuant to California Business and Professions Code Section 6200, et seq., or, should that organization decline to arbitrate the dispute, before the State Bar of California pursuant to California Business and Professions Code Section 6200, et seq.

"Any other dispute (other than ATTORNEY'S fees) between the parties hereto arising out of or relating to this CONTRACT or ATTORNEY'S professional services rendered to or for CLIENT, shall be resolved by binding arbitration before the American Arbitration Association in Los Angeles, California, in accordance with the Commercial Rules of the American Arbitration Association prevailing at the time of the arbitration."

In July 1993, Attorney Toghia moved from MTO to the law firm of Dickson, Carlson & Campillo (DCC). In August 1993, the Powers became concerned about their financial arrangements with Attorney Toghia, which were becoming expensive. On September 9, 1993, the Powers and Attorney Toghia modified their financial arrangements by entering into a "First Amendment to Attorney Retainer and Fee Agreement," which changed their fee arrangement from hourly to flat fee. This amendment was four pages long and included an introduction, a paragraph detailing the background and description of the pending arbitration case, and seven numbered paragraphs: conditions; scope of services; clients' duties; fees; no representations; arbitration; and affirmation of the original attorney retainer and fee agreement. Numbered paragraph 6, concerning arbitration, provided in full as follows:

"6. ARBITRATION. If any dispute arises out of, or related to, a claimed breach of this agreement, the professional services rendered by Toghia, or Clients' failure to pay fees for professional services and other expenses specified, or any other disagreement of any nature, type or description regardless of the facts or the legal theories which may be involved, such dispute shall be resolved by arbitration before the American Arbitration Association by a single arbitrator in accordance with the Commercial Rules of the American Arbitration [Association] in effect [at] the time the proceeding is initiated. The hearings shall be held in the Los Angeles offices of the American Arbitration Association The arbitration of the construction defects dispute was ultimately suspended, because neither the Powers nor the seller/developer had initialed, as required, the written purchase agreement's general arbitration provision.

and each side shall bear his/their own costs and attorney fees."

On January 3, 1995, the Powers sued Attorney Glickman, Attorney Toghia and their respective law firms for legal malpractice. The Powers alleged Attorney Glickman had been negligent in negotiating and drafting the purchase agreement. The Powers further alleged that Attorneys Glickman and Toghia had both been negligent in prosecuting the Powers' construction defects claim in an arbitration proceeding, when the arbitration provision in the purchase agreement was inapplicable. Finally, the Powers alleged that Attorney Toghia had caused them to incur great unnecessary expense in prosecuting the arbitration proceeding.

On February 7, 1995, Attorney Toghia and his law firms petitioned the trial court to compel arbitration of the Powers' legal malpractice action against them. On February 21, 1995, Glickman answered the complaint. On March 1, 1995, the Powers opposed Attorney Toghia's motion to compel arbitration. The Powers' opposition contended that the arbitration provisions in the two retainer agreements were not enforceable because the Powers had not been advised by Attorney Toghia that they were giving up their right to a jury trial in any legal malpractice action which they might subsequently bring against Attorney Toghia. They also argued that attorney-client arbitration agreements were subject to strict scrutiny for conflict of interest, and the arbitration provisions were required to be in 10-point bold red type. The Powers further contended that even if the arbitration provisions were enforceable, they should not be enforced pursuant to Code of Civil Procedure section 1281.2, which gives the trial court discretion to refuse to enforce an arbitration agreement where the action involves third parties who are not subject to the arbitration agreement.

The trial court denied the petition to compel arbitration relying on Lawrence v. Walzer & Gabrielson (1989) 207 Cal.App.3d 1501, 256 Cal.Rptr. 6 and two opinions of the State Bar, Nos.1989-116 and 1977-47. The trial court determined that an agreement between an attorney and a client to arbitrate legal malpractice claims must be strictly scrutinized. The trial court found: "As to the March 3, 1993 agreement, the Court found specifically that the arbitration clause in it was not in bold or otherwise large or distinct print, it was at the end of the document, the Powers were not encouraged to seek the advice of independent counsel, and Toghia did not specifically inform them that by signing it they were waiving important rights, to wit, the right to a jury trial on a malpractice claim against him and his law firm. Accordingly, there was no informed consent to arbitrate the Powers' malpractice claim brought herein against Toghia and [MTO]. [p] As to the September 9, 1993 fee agreement, the Court found specifically that the Plaintiffs were not informed or advised by their lawyer, Toghia, that they were waiving their right to a trial on any malpractice committed by Toghia, that the arbitration clause came at the end of the agreement, that the arbitration clause was not set out in bold or otherwise large or distinct type, and that the Plaintiffs were not encouraged to seek the advice of independent counsel. Accordingly, the Court found that the Powers did not give their informed consent to arbitrate their malpractice claim against Toghia and [DCC], under the September 9, 1993 agreement."

DISCUSSION

As a general rule, a written agreement to arbitrate a future controversy is valid and enforceable and requires no special waivers or provisions. Exceptions to the general rule may apply if the arbitration provision is included within an adhesion contract or the scope of the arbitration provision is ambiguous. An attorney may ethically, and without conflict of interest, include in an initial retainer agreement with a client a provision requiring the arbitration of both fee disputes and legal malpractice claims.

Arbitration Agreements

"A written agreement to submit to arbitration an existing controversy or a controversy An arbitration provision need not contain an express waiver of the right to a jury trial to be enforceable. "[T]o predicate the legality of a consensual arbitration agreement upon the parties' express waiver of jury trial would be as artificial as it would be disastrous. [p] When parties agree to submit their disputes to arbitration they select a forum that is alternative to, and independent of, the judicial--a forum in which, as they well know, disputes are not resolved by juries. Hence there are literally thousands of...