The Arbitrator’s Award Assessing Fees, Costs, And Expenses Ran Only Against The Attorney, Not The Client
The highly deferential standard of review given to an arbitrator’s award, encompassing as it does the arbitrator’s resolution of questions of law or fact, largely explains the result in Kaufman v. Diskeeper Corporation, B247315 (2nd Dist. Div. 4 April 28, 2014) (Manella, Epstein, Willhite) (unpublished). See today’s post on California Mediation and Arbitration. In Kaufman, the Court of Appeal affirmed the trial court’s confirmation of an arbitrator’s award – an award assessing liquidated damages of $70,000, attorney’s fees of $297,000 and costs against attorney/appellant Kaufman.
The arbitrator had agreed with Diskeeper that the attorney violated confidentiality provisions in a settlement agreement containing a liquidated damages provision. Believing it would be inequitable to award fees, costs, and expenses against the client because of the attorney’s acts, the arbitrator assessed fees, costs, and expenses only against the attorney.
Attorney argued on appeal that he was not a party to the liquidated damages provision of the settlement agreement. The arbitrator, however, had concluded that the attorney had signed the settlement agreement, agreeing to be bound by its non-disclosure terms, which terms the arbitrator held to encompass the liquidated damages terms. Furthermore, the Court of Appeal concluded that appellant forfeited the argument that he was not a party to the liquidated damages provision by not raising it before the arbitrator.
As to the attorney’s fees award, the arbitrator relied on two independent grounds: first, that the attorney “engaged in negligent representation” when he assured Diskeeper that all documents had been returned; second, that the attorney was contractually bound by the fee provision.
Attorney argued that American jurisprudence does not allow an award of attorney’s fees for “negligent representation.” The Court of Appeal did not, however, have to reach that issue, finding instead that the attorney, having signed the settlement agreement, had agreed to be bound by the relevant fee provision. Although the arbitrator’s “determination is beyond our review,” the Court of Appeal weighed in, “we would regard it as reasonable were we to examine it.”
TIP: If there is a lesson here for attorneys it is: be wary about agreeing to be bound by the settlement agreement.