Moral of the Story …. Be Careful What You Ask For (Or Don’t Ask For).
Here is a very interesting arbitration/litigation saga about attorneys and clients bickering over how to divide class action attorney’s fees. It also shows an objecting attorney that you better be careful how you proceed (and the objecting attorney is a well known class action practitioner).
McCall v. Morris Polich & Purdy (The Quisenberry Law Firm), Case No. B239142 (2d Dist., Div. 5 Oct. 30, 2012) (unpublished) is a situation where two defendant law firms were conflicted out based on representing both salaried managers and hourly workers, with a third firm (Quisenberry) substituting in for the salaried managers and another counsel coming in to represent the hourly workers (although the new hourly workers counsel was not involved in the fee dispute). Third firm (Quisenberry) eventually negotiated a settlement on behalf of the salaried managers class, with the first two defendants filing a notice of lien in the wage/hour class action. A court hearing then resulted in a fee award of $380,000, but the trial judge refused to allocate the fees between the two defendants and Quisenberry. Third law firm then argued that the conflict interest disqualified the two defendants from any fees, but this motion was denied. Then, the trial judge ordered the $380,000 to be escowed, payable to the two defendants and third law firm, while clients went to binding arbitration against the defendants. Clients did file an arbitration proceeding, but only against the two defendants, with a court denying defendants’ requests to include Quisenberry in the arbitration. An arbitrator eventually allocated 65% of the fee award to the two defendants and 35% to Quisenberry. However, on a petition to confirm the award filed by defendants, another superior court judge corrected the award to strike the 35% allocation to Quisenberry because he was not a party to the arbitration.
Quisenberry appealed, but lost.
The arbitrator did not have the power to allocate the fee because Quisenberry was not a party to the arbitration. However, the arbitrator could determine the quantum meruit amount owed to the two defendants who did have an arbitration clause with clients (the class representatives). The trial court did well to correct the award by striking the 35% allocation to Quisenberry. (Ikerd v. Warren T. Merrill & Sons, 9 Cal.App.4th 1833, 1837, 1842-1846 (1992); Jones v. Humanscale Corp., 130 Cal.App.4th 401, 411-412 (2005).)
So, what could have Quisenberry have done to avoid this affirmance of the corrected arbitration award? These options, according to the appellate court: (1) file suit to adjudicate his rights to the $380,000 fee fund created by the prior superior court judge; (2) institute litigation to bring all interested parties into court pursuant to CCP 1281.2(c) [the provision allowing a trial court discretion on how to deal with arbitration parties and nonparties]; (3) seek to stay the arbitration in order to resolve the dispute in the judicial forum; (4) agree to be a part of the arbitration between class representative clients and defendants; or (5) challenge the prior superior court judge’s final order regarding the fee fund and conflict rulings. Corrected arbitration award affirmed.