Except for Slander Claim, Attorneys Relegated to Arbitrating Remaining Fee Claims.
This next one is an interesting dispute between (former) clients and attorneys, where the lawyers sued for standard breach of contract, fraud, and slander. The problem is that lawyers could not effectively showe that they served a notice of right to arbitrate to clients under the Mandatory Fee Arbitration Act, Bus. & Prof. Code § 6200 et seq. [BLOG NOTE–This notice must be given personally or sent to the client’s last known address, accompanied by a proof of service if mailed, before an attorney can sue to collect fees. Philipson & Simon v. Gulsvig 154 Cal.App.4th 347, 365 (2007).] Frustrated with some hemming and hawing on whether the MFAA notice was sent, the trial court finally dismissed the entire action with prejudice, with the parties agreeing to do so for purposes of creating an appealable order. [BLOG NOTE #2–This was no go under Don Jose’ s Restaurant, Inc. v. Truck Ins. Exchange, 53 Cal.App.4th 115, 118-119 (1997).] Lawyers appealed.
They obtained mixed success in Khosro Reghabi et al. v. Tayebati, Case No. B219122 (2d Dist., Div. 3 July 20, 2011) (unpublished).
The claims dismissed with prejudice based on failure to provide MFAA notice had to be reinstated as “without prejudice” dismissals, otherwise attorneys had no remedy. The appellate court at least decided that the parties should be able to proceed to arbitration, which is what the parties intended in attempting to impermissibly create an appealable order so that lawyers had some remedy on the contract-based/fraud claims. With respect to the slander claim, no MFAA notice was needed, so that the “with prejudice” dismissal had to be reversed on that count.