Case Number: BC685444 Hearing Date: November 13, 2018 Dept: 24
Defendants’ Motion for an Order Compelling Arbitration is GRANTED. Defendants’ request for a stay pending the outcome of the arbitration is GRANTED. Plaintiff’s request for a stay pending the outcome of the underlying proceedings is DENIED. Defendants’ request for judicial notice is GRANTED as to Exhibits D-G and DENIED as to Exhibit H.
On December 1, 2017, Plaintiff Robert S. Crowder commenced this legal malpractice action against Defendants O’Rielly & Roche LLP and Daniel J. O’Rielly concerning Defendants’ representation of Plaintiff, who is also an attorney, during his transition from one law firm to another. Presently, Defendants seek an order compelling arbitration of all claims, defenses, and cross-complaints and cross-complains in this action, and staying this action pending the completion of arbitration. While Plaintiff opposes arbitration, he also seeks a stay of this action, but pending resolution of the underlying proceedings with his prior law firm.
Request for Judicial Notice
In support of their reply, Defendants seek judicial notice of the following:
- Exhibit D: Order Granting Defendant’s Motion to Compel Arbitration and to Stay Action Pending Arbitration, dated June 3, 2010, by Judge Kevin C. Brazile, Dept. 20 of the Los Angeles County Superior Court in Robert S. Crowder v. Locke Lord Bissell & Liddel, LLP, LASC No. BC434264.
- Exhibit E: Verified Petition to Compel Arbitration, filed June 26, 2012, on behalf of Certain Underwriters of Lloyds of London, in Los Angeles County Superior Court Case No. BS138092, titled Certain Underwriters At Lloyds of London, et al. v. Bart Enterprises International Ltd.
- Exhibit F: Verified Petition to Compel Arbitration, filed August 30, 2012, behalf of Certain Underwriters of Lloyds of London, in Los Angeles County Superior Court Case No. BC489098, titled Bart Enterprises International Ltd. v. Certain Underwriters At Lloyds of London, et al.
- Exhibit G: Opinion, filed May 21, 2013, by Court of Appeal of the State of California, Second Appellate District (Division Seven) in Certain Underwriters At Lloyds of London, et al. v. Bart Enterprises International Ltd., Court of Appeal Case No. B244323 (Los Angeles Super. Ct. Nos. BS138092 and BC489098.)
Exhibit H: Professional Biograph of Robert S. Crowder from his prior employment at the law firm, Freeman, Freeman, and Smiley LLP, publically available as of October 11, 2018, at http://www.ffslaw.com/tasks/sites/ffslaw/assets/file/pdfs/bio/RobertS-Crowder.pdf(Request for Judicial Notice (“RJN”) ISO Defendants’ Reply, pp. 2.)Exhibits D-G are records and decisions of this Court and the Court of Appeals; thus, judicial notice is proper. (See Evid. Code §§ 451(a); 452(a), (d); 453.) However, the Court may not take judicial notice of the truth of statements contained in those documents, including any factual findings made on issues in dispute in the present action. (Fremont Indem. Co. v. Fremont Gen. Corp. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113; Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1563.) Defendants’ request for judicial notice provides no legal basis for taking judicial notice of Exhibit H.The request is GRANTED as to Exhibits D-G and DENIED as to Exhibit H.
Legal Standard“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (CCP § 1281.) The Federal Arbitration Act (“FAA”) similarly provides that any agreement to arbitrate “evidencing a transaction involving commerce” is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C.A. § 2.)Our Legislature “has expressed a ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’ ” (Bunker Hill Park Ltd. v. U.S. Bank National Assn. (2014) 231 Cal.App.4th 1315, 1325.) The FAA similarly embodies a strong federal policy favoring arbitration; thus, any conflicting state law is preempted by the FAA under the Supremacy Clause. (Southland Corp. v. Keating (1984) 465 U.S. 1, 12; Marmet Health Care Ctr., Inc. v. Brown (2012) 565 U.S. 530, 531-533.) The FAA does not, however, preempt state procedural rules where such rules do not defeat the FAA purpose of favoring arbitration. (See Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394, 409-410.)“[A] petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.” (Hotels Nevada, LLC v. L.A. Pacific Center, Inc. (2012) 203 Cal.App.4th 336, 347.) “Section 1281.2 establishes ‘a summary proceeding’ for resolving such petitions to compel arbitration. [Citation.] In Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413[58 Cal.Rptr.2d 875, 926 P.2d 1061] (Rosenthal), our Supreme Court explained the requisite procedure: ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement … that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ The high court reiterated these procedures in Engalla, supra, 15 Cal.4th at p. 972, 64 Cal.Rptr.2d 843, 938 P.2d 903 and noted, ‘[i]n these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.’ [Citation.]” (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1057–1058 [citations omitted].) A motion to compel arbitration may be filed in lieu of an answer to the complaint. (CCP § 1281.7.)
If the court finds that an arbitration agreement exists and none of the grounds for denying arbitration enumerated in section 1281.2 exist, then the court may not refuse to compel arbitration on the ground that the petitioner’s claims lack substantive merit. (CCP §1281.2(d) (2nd para.).) Similarly, under the FAA the court should not address the merits of the underlying dispute when on ruling on a petition to compel arbitration. (Zurich American Ins. Co. v. Watts Indus., Inc. (7th Cir. 2006) 466 F3d 577, 581; see Howsam v. Dean Witter Reynolds, Inc. (2002) 537 US 79, 84.)
Section 1281.2 of the Code of Civil Procedure provides that “[o]n petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) [t]he right to compel arbitration has been waived by the petitioner; or (b) [g]rounds exist for the revocation of the agreement[;] (c) [a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact[;] (d) [t]he petitioner is a state or federally chartered depository institution that . . . is seeking to apply a written agreement to arbitrate, contained in a contract consented to by a respondent consumer, to a purported contractual relationship with that respondent consumer that was created by the petitioner fraudulently without the respondent consumer’s consent and by unlawfully using respondent consumer’s personal identifying information. . . .”
Existence of an Arbitration AgreementA petitioner may meet its initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party’s signature to the petition. (Espejo, supra,246 Cal.App.4th at 1060 [holding petitioners met their initial burden by attaching to their petition a copy of the purported arbitration agreement bearing the employee’s electronic signature]; see also Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219 [“as a preliminary matter the court is only required to make a finding of the agreement’s existence, not an evidentiary determination of its validity.”]; Cal. Rules of Court, Rule 371 [requiring a copy of the agreement be attached to the petition or its “provisions. . . shall be set forth” in the petition].)Here, Defendants submitted a copy of the retainer agreement containing the arbitration clause that bears Plaintiff’s electronic signature, which Defendants emailed to Plaintiff via DocuSign on August 8, 2016. (Declaration of Daniel J. O’Rielly (“O’Rielly Decl.”), ¶ 3; Defendants’ Notice of Lodgment (“NOL”), Ex. A.) Plaintiff confirms receiving the retainer agreement and signing it the same day. (Declaration of Robert S. Crowder (“Crowder Decl.”), ¶ 16.) Plaintiff does not dispute that the FAA applies to the retainer agreement.The arbitration agreement is located at paragraph 13 of the retainer agreement and provides:ATTORNEYS FEES AND ARBITRATION OF DISPUTES.
Accordingly, Defendants have met their initial burden and the arbitration agreement covers the instant dispute between Plaintiff and Defendants.
In addition, the Court finds that the arbitration agreement covers this dispute. Specifically, the arbitration agreement covers “any dispute” between the parties concerning “fees charged or services rendered under this Agreement that are beyond the limit of Small Claims Jurisdiction, including a claim for negligence….” The term “any” is “broad, general, and all embracing.” (Bunker Hill Park Limited v. U.S. Bank Nat’l Ass’n (2014) 231 Cal.App.4th 1315, 1327.) Based on the allegations of the complaint, this dispute concerns Defendants’ services rendered under the retainer agreement. For example, Plaintiff alleges he retained Defendants to provide him with legal advice concerning the contemplated transition of his law practice; Defendants’ failure to adequately and fully advise him regarding aspects of his transition fell below the standard of care; and Defendants breached their duty by failing to properly counsel and advise Plaintiff as to the risks associated with decisions that he was contemplating. (Compl., ¶¶ 4, 10, 18, 24.)
The Court finds that Defendants’ evidence sufficiently establishes the existence of an arbitration agreement.
(O’Rielly Decl., ¶ 5; NOL Ex. A at pp. 3-4.)
c. Any arbitration award is final and binding on both the Firm and Client. Therefore, the right to appeal or seek modification of any arbitration award is strictly limited.
b. Generally, discovery in connection with arbitration proceedings is more limited than and is different from discovery available in court proceedings; the arbitrator’s award is not required to include factual findings or legal reasoning; and
a. Both the Firm and Client waive their right to a jury trial and to seek remedies available in court proceedings;
The Firm and Client agree that any dispute between the Firm and Client regarding fees charged or services rendered under this Agreement that are beyond the limit of Small Claims Jurisdiction, including a claim for negligence, breach of contract, or breach of fiduciary duty, or other claims, must be resolved by binding arbitration by the Judicial Arbitration and Mediation Services (JAMS) in San Francisco. This Arbitration Provision is made pursuant to a transaction involving interstate commerce and shall be governed by the FAA. If a final non-appealable judgment of a court having jurisdiction over this transaction finds, for any reason, that the FAA does not apply to this transaction, then this agreement to arbitrate shall be governed by the arbitration laws of the State of California. The prevailing party in any action made on this Agreement shall be entitled to recover reasonable attorneys’ fees and costs incurred in connection with that action. Client acknowledges that:
Defenses to the Arbitration AgreementPlaintiff raises two arguments opposing enforcement of the arbitration agreement. First, Plaintiff argues that the arbitration agreement is insufficient because he did not have the luxury of several hours to review the retainer agreement, his ability to review the terms and conditions was limited to what appeared on the screen while the terms scrolled by, and Defendants failed to explain the arbitration provision to him. While Plaintiff does not explicitly state the arbitration agreement is unconscionable, these arguments implicate procedural unconscionability.“Procedural unconscionability focuses on oppression or unfair surprise” in the making of the agreement. (Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 980.) “Oppression results from unequal bargaining power, when a contracting party has no meaningful choice but to accept contract terms. Unfair surprise results from misleading bargaining conduct or other circumstances indicating that party’s consent was not an informed choice.” (Id.; see Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1252 [referring to oppression and surprise, which is a function of the disappointed reasonable expectations of the weaker party].) Plaintiff’s arguments do not establish oppression. Since Plaintiff and Defendants are experienced attorneys, there is no issue of unequal bargaining power and, therefore, no oppression.Plaintiff’s arguments also do not establish unfair surprise. Plaintiff’s argument regarding the lack of sufficient time to review the retainer agreement lacks merit. Plaintiff states that Mr. O’Rielly sent him an email at 4:19 p.m. stating that he would be sending over the retainer agreement for Plaintiff to sign electronically, and he would need numerous documents from Plaintiff with the goal of sending Plaintiff the firm’s initial analysis of his case by the following day. (Crowder Decl. ¶ 15.) Plaintiff received the retainer agreement later the same day by email at 7:15 p.m. and promptly executed it and returned it. (Crowder Decl. ¶ 16.) These facts do not establish that Plaintiff was under undue pressure to immediately sign and return the retainer agreement. The retainer agreement was not a contract of adhesion forced upon Plaintiff. There was no unequal bargaining power; both parties are attorneys. Plaintiff provides no facts indicating that he would have suffered any prejudice if he did not sign the agreement immediately. Therefore, he could have simply insisted on more time to review the agreement. He failed to do so; instead, he signed it immediately and returned it. “A cardinal rule of contract law is that a party’s failure to read a contract, or to carefully read a contract, before signing it is no defense to the contract’s enforcement.” (Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866, 872 [emphasis added].)Plaintiff’s “scrolling” argument also lacks merit. If Plaintiff’s view was limited to what appeared on the screen while the term’s scrolled by (Crowder Decl. ¶ 17), Plaintiff could have simply asked Defendants to forward a complete PDF version of the retainer agreement. Plaintiff failed to do so. Additionally, “Docusign allows a user to download a document or take a photo of it, sign it, and send it.” (Department: Computer Counselor: Procedures and Applications for Obtaining Electronic Signatures, 37 Los Angeles Lawyer 41, (Sept. 2014).)Defendants’ failure to explain the arbitration agreement to Plaintiff or point it out to him (Crowder Decl. ¶ 18) also does not establish unfair surprise. An attorney does not have a duty to explain an arbitration clause to a sophisticated client where the arbitration provision was set forth in a separate paragraph and was readily discernable and clear. (Desert Outdoor Advertising, supra, 196 Cal.App.4th at 873-874.) Here, Plaintiff is an attorney and the evidence establishes that he has both personal and professional experience with arbitrations. As Plaintiff states in his opposition, he had an arbitration agreement with his prior law firm, represented himself in an arbitration against his prior law firm, and he has been litigating a challenge to an adverse arbitration award. In 2010, Plaintiff sued another law firm and the defendant law firm filed a motion to compel arbitration. (RJN, Ex. D.) In 2012, Plaintiff and his then law firm represented a client in two related matters wherein Plaintiff’s client moved to compel arbitration and when the motion was denied, Plaintiff with two other lawyers appealed the decision. (RJN Exs. E, F, G.) Clearly, Plaintiff was a sophisticated client. Additionally, the arbitration agreement in the retainer agreement is preceded by a separate bolded heading in all caps, set forth in a separate paragraph, and is readily discernable and clear. (NOL Ex. A at pp. 3-4.) Consequently, the procedural unconscionability here is minimal at best.Even if Plaintiff had established a high degree of procedural unconscionability, the arbitration agreement is still enforceable absent some degree of substantive unconscionability. Substantive unconscionability “focuses on the terms of the agreement and whether those terms are so one-sided as to shock the conscience.” (Kinney v. United Healthcare Servs., Inc. (1999) 70 Cal.App.4th 1322, 1330.) For an arbitration agreement to be unenforceable as unconscionable, both procedural and substantive unconscionability must be present. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.) The analysis is a sliding scale; the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to support the conclusion that the term is unenforceable, and vice versa. (Gentry v. Superior Court (2007) 42 Cal.4th 443, 469.) Since Plaintiff has not identified any substantive unconscionability, the agreement is not unconscionable.Plaintiff’s second argument opposing enforcement of the arbitration agreement is that his legal malpractice claims against Defendants are not ripe and will not ripen until a determination is made in the underlying proceedings wherein Plaintiff is challenging an adverse arbitration award issued in favor of his prior employers. Plaintiff explains that he only filed this “placeholder” action because Defends failed to respond to his request to enter into an agreement to toll the statute of limitations. Plaintiff argues that ordering arbitration to proceed at this time would be unjust, would require premature determination of claims that may never accrue, and would force all parties to incur associated costs.This argument fails as well. Where an arbitration provision is broadly worded, such as covering “[a]ny and all disputes, controversies or claims”, a court must compel arbitration even if a claim is alleged to not be “ripe for adjudication” and would on that basis not properly be the subject of a court proceeding. (Bunker Hill Park Limited v. U.S. Bank Nat’l Ass’n (2014) 231 Cal.App.4th 1315, 1325-1329 [issue whether sublease automatically terminated in event of early termination of ground lease].)Here, the arbitration agreement similarly covers “any dispute” between the parties concerning “fees charged or services rendered under this Agreement that are beyond the limit of Small Claims Jurisdiction….” “From the earliest days of statehood the courts have interpreted ‘any’ to be broad, general, and all embracing.” (Id. at 1327.) The only limiting language contained in the arbitration agreement is a requirement that the claims be beyond the limit of Small Claims Jurisdiction. Otherwise, all claims are covered. Consequently, the arbitration agreement “encompasses both legally justiciable and nonjusticiable disputes.” (See Id. at 1327.) Plaintiff has therefore failed to establish a defense to the arbitration agreement. Accordingly, the motion is GRANTED.
Stay of ProceedingsSection 1281.4 of the CCP provides, in pertinent part:If an application has been made to a court of competent jurisdiction, whether in this State or not, for an order to arbitrate a controversy which is an issue involved in an action or proceeding pending before a court of this State and such application is undetermined, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until the application for an order to arbitrate is determined and, if arbitration of such controversy is ordered, until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.“This statute is clear and unambiguous: it requires that the trial court stay an action pending before it while an application to arbitrate the subject matter of the action is pending in a court of competent jurisdiction.” (Twentieth Century Fox Film Corp. v. Superior Court (2000) 79 Cal.App.4th 188, 192; see also Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 443 [word “shall” is ordinarily construed as mandatory, while “may” is ordinarily construed as permissive].) Under section 1281.4, the court has the “authority to stay ‘the action or proceeding’ as to all issues, as to all causes of action, and as to all parties, until arbitration is concluded or such earlier time as the court specifies.” (Cook v. Superior Court of Los Angeles County (1966) 240 Cal.App.2d 880, 885.) Since the Court has ordered this dispute to arbitration, a stay under section 1281.4 is mandatory.In his opposition, Plaintiff requested a stay of these proceedings as well, but pending the resolution of the underlying proceedings challenging the adverse arbitration award. Plaintiff contends that the California Supreme Court in Adams v. Paul (1995) 11 Cal.4th 583 provided a roadmap as to how to handle matters such as these where a client must file a premature legal malpractice claim forcing the client to run the risk of inconsistent judgments. Plaintiff’s reliance on Adams is misplaced. In Adams, the Supreme Court noted that the risks associated with such premature claims can be overcome by existing law, for example a court can exercise its inherent authority and stay the malpractice action, holding it at abeyance pending the resolution of the underlying litigation. (Id. at 600-601.) However, Adams did not concern a pending motion to compel arbitration. Instead, the Supreme Court was reviewing the Court of Appeal’s ruling affirming the trial court’s order sustaining a demurrer without leave to amend and dismissing the action on the ground the legal malpractice action was time-barred under CCP section 340.6. Thus, Plaintiff’s request for a stay pending the outcome of the underlying proceedings is DENIED. Moving party is ordered to give notice.
Pursuant to CCP section 1281.4, Defendants’ request for a stay pending the outcome of the arbitration is GRANTED.
 CCP § 1281.2 was recently amended effective Jan. 1. 2018.