Richardson v. Hutchinson

• Decision Date: 07 June 2017
• Docket Number: 2d Civil No. B277355
• Court: California Court of Appeals Court of Appeals
• Parties: SCOT RICHARDSON, Plaintiff and Appellant, v. THOMAS J. HUTCHINSON et al., Defendants and Respondents.

SCOT RICHARDSON, Plaintiff and Appellant, v. THOMAS J. HUTCHINSON et al., Defendants and Respondents.

2d Civil No. B277355

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX

June 7, 2017

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 1466685)

(Santa Barbara County)

Scot Richardson, M.D., appeals from an order of the Santa Barbara County Superior Court (the Santa Barbara court) confirming an arbitration award and denying his motion to vacate the award. The arbitrator awarded Richardson nothing for his legal malpractice claims against Thomas J. Hutchinson and Norman Dowler, LLP (collectively Norman Dowler). She awarded $80,917.74 against him on Norman Dowler's cross-claim for unpaid legal fees.

Richardson challenges only the fee award. He contends the fee agreement is unenforceable as against public policy because it contains an illegal collection provision and because his attorneys did not disclose a conflict of interest that arose during the representation. He also contends that only the Ventura County Superior Court (the Ventura court) had jurisdiction to confirm the fee portion of the award because the arbitration occurred in Ventura. We affirm.

BACKGROUND

Hutchinson and Norman Dowler represented Richardson in a marital dissolution proceeding in the Santa Barbara court. The retainer agreement provides for binding arbitration of all disputes before a sole arbitrator in Ventura in accordance with the California Code of Civil Procedure, except disputes over legal fees which are to be resolved through the California State Bar's process. (Bus. & Prof. Code, § 6200 et seq.)

The retainer agreement provides that each party will pay their own costs and attorney's fees in the event of a dispute. But it also contains a nonreciprocal collection costs provision which obligates Richardson, if he does not pay his legal bill, to pay "the full hourly rate for all time actually expended" by Norman Dowler attorneys and staff in connection with collection activities. Hutchinson testified at the arbitration that the collection provision was "specifically tailored to deal with what [he] call[s] the Trope¹ problem, which is . . . if you're a self-represented attorney, you don't incur attorney fees, so you don't have anything to recover . . . ." He testified that he did not explain the provision to Richardson. In correspondence, Hutchinson referred to a similar provision in an expert's contractas "unethical," and "wonder[ed] if . . . he uses this to [intimidate] parties."

Richardson became dissatisfied with Norman Dowler's work and stopped paying his bills. Norman Dowler initiated collection proceedings under the State Bar process by serving Richardson with notice of his right to arbitrate their fee claim. Six weeks later, Richardson filed a complaint in the Santa Barbara court against Hutchinson and Norman Dowler for professional negligence and breach of fiduciary duty.

Norman Dowler demanded arbitration of Richardson's complaint. Richardson agreed to arbitrate, but only on the condition that the arbitration would be conducted in Santa Barbara. He took the position that the Ventura venue provision was invalid.

The Santa Barbara court ordered arbitration upon stipulation of the parties. They stipulated that they "entered into a written Fee Agreement that calls for binding arbitration"; they "agreed to resolve the Action by way of binding Arbitration in Santa Barbara, California"; and that "[t]he [Santa Barbara Superior] Court shall retain jurisdiction over the Action in order to confirm, correct, or vacate the award pursuant to Code of Civil Procedure [s]ection 1285." About a month later, Richardson agreed to resolve Norman Dowler's fee claims in the same arbitration. He agreed in writing "to consolidate the hearing on the fee recovery dispute and professional malfeasance claims."

The parties selected an arbitrator from Los Angeles. A few days before the hearing, she informed them she would "go as far as Ventura" without charging for travel. The parties relocated the hearing to Ventura in order to avoid paying for her travel time, hotel, and meals. They did not amend or discusstheir stipulation that the award would be confirmed, vacated, or modified in the Santa Barbara court.

Richardson discovered during the arbitration that a Norman Dowler paralegal accepted a job with opposing counsel while she was working on his dissolution case. She was his primary contact at Norman Dowler and had access to his confidential files. She worked 11 days on his case after accepting her new employment and before she left for the opposing firm.

The opposing firm created an ethical wall between the paralegal and other employees in regards to the Richardson matter and notified Norman Dowler. Norman Dowler did not tell Richardson about the paralegal's new employment with opposing counsel. It continued to represent him. When Richardson learned about the paralegal's conflict and heard testimony from Hutchinson about the collection provision, he added a claim for unfair business practices and argued before the arbitrator that the entire agreement was unenforceable because it was illegal or in violation of public policy.

After an evidentiary hearing, the arbitrator issued a written award. She found Norman Dowler did not inform Richardson when the paralegal was hired by the opposing firm and did not inform him of his option to seek to disqualify the firm based on the conflict. But she found he suffered no prejudice or damage because the paralegal never discussed Richardson's matter with anyone at the opposing firm, Richardson would not have terminated Norman Dowler if he knew of the conflict, and the court would not have disqualified the opposing firm because the paralegal disclosed no confidential information. She found Norman Dowler's failure to disclose the conflict did not rise to breach of fiduciary duty because it caused no damage, andNorman Dowler did not engage in any unlawful, unfair, or fraudulent practices.

The arbitrator awarded $80,917.74 to Norman Dowler on its fee claim. She disallowed recovery for all services rendered during the 11 days that the firm had the undisclosed conflict (about $12,000.00). She disallowed Norman Dowler's claim for $161,618 in collection costs after finding the collection provision was unenforceable, but severable. She found that Richardson had time to read and consider the terms of the agreement including the collection provision, he was advised to consult with an attorney before signing it, and Norman Dowler did not exert any undue influence to secure his signature. She also disallowed recovery for Norman Dowler's work on an imprudent motion to quash and related sanctions.

Hutchinson and Norman Dowler petitioned the Santa Barbara court to confirm the arbitration award. Richardson moved to strike or transfer the petition on the ground that it must be heard in the Ventura court where the arbitration was held. (Code Civ. Proc., § 1292.2.)² The Santa Barbara court denied Richardson's motion to strike or transfer. He filed a motion to vacate the award in which he reasserted his venue argument. Richardson also filed a petition for writ of mandate in this court asserting that only the Ventura court has jurisdiction to confirm the fee award. We summarily denied the petition. (Richardson v. Superior Court (June 28, 2016, B275674).)

The Santa Barbara court confirmed the arbitration award and denied Richardson's motion to vacate. Richardson filed a petition in the Ventura court to vacate the award. TheVentura court denied his petition after taking judicial notice of the Santa Barbara court's orders.³

DISCUSSION

The arbitration award is beyond our review, except for Richardson's contention that the fee agreement is unenforceable because it is wholly illegal—a claim we reject. We also conclude the Santa Barbara court had jurisdiction to confirm the fee award because Richardson agreed to have the fee dispute resolved in an arbitration over which he stipulated the Santa Barbara court had jurisdiction.

Enforceability of the Agreement

An arbitrator's legal and factual determinations are not generally subject to judicial review, even if the errors appear on the face of the award and cause substantial injustice. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6, 28 (Moncharsh).) Section 1286.2 provides the exclusive grounds for vacating an arbitration award. (Ibid.) Richardson does not invoke it, but we construe his contention that the agreement was illegal as a claim that the arbitrator exceeded her powers within the meaning of section 1286.2, subdivision (a)(4).

If an otherwise enforceable arbitration agreement is contained in an illegal contract, a party may avoid arbitration altogether. (Moncharsh, supra, 3 Cal.4th at p. 29.) We review de novo a claim that the entire agreement or transaction is illegal, because the arbitrator's power depends on a valid agreement. (Loving & Evans v. Blick (1949) 33 Cal.2d 603, 609-610 [court vacated an arbitration award for fees to an unlicensed contractorbecause the entire transaction was illegal].) Judicial review does not extend to claims of partial illegality. (Moncharsh, at pp. 30, 32 [claim that a single fee-splitting provision of an attorney's employment contract was illegal was not subject to judicial review because it "goes to only a portion of the contract (that does not include the arbitration agreement)"].)

A contract with a single unlawful object is void. (Civ. Code, §§ 1550, 1598, 1608.) Courts will not enforce a contract for arbitration if its sole purpose is illegal or against public policy. (Green v. Mt. Diablo Hospital Dist. (1989) 207...