First District, Division 3 Affirms Lower Court Award in Favor of Attorney, Including Substantial Fees Award.
In our category “Cases: Arbitration,” we have discussed the Mandatory Fee Arbitration Act (MFAA), Business and Professions Code section 6200 et seq. This allows a client to engage in a nonbinding arbitration with an attorney over a fee dispute (but it does not cover other issues such as malpractice, breach of fiduciary duty, or affirmative claims for money over and above the fee dispute). However, even if client and former attorney engage in a nonbinding fee arbitration, the client needs to proceed with caution if the client asks for a new trial due to dissatisfaction with the arbitration award. Section 6204(d) provides that a party prevailing at trial after a rejected MFAA arbitration award—if the trial result is better than the arbitration award—can be awarded discretionary attorney’s fees by the trial court. That provision rose up to the bite the client in the next case we discuss.
King & Kelleher v. Carpenter, Case Nos. A113780/A115085 (1st Dist., Div. 3 Jan. 21, 2009) (unpublished) concerned a soured client-attorney client relationship in an inverse condemnation action involving Caltrans. Attorney law firm “carried” client through the condemnation trial, even though it was owed about $50,000 before trial and incurred another $110,000 to try a case that was ultimately lost. The unpaid bill after trial was a little more than $160,000. Client asked for MFAA arbitration and obtained an award that was rejected. Law firm sued to recoup the $160,644.50 receivable, client cross-complained for malpractice/fraud/contractual breach/rescission/elder abuse, and the matter went to trial after some cross-claims were eliminated through pretrial motions. Law firm eventually won across the board, obtained a principal judgment of $160,644.50 plus prejudgment interest, attorney’s fees and costs. The fees/costs award occurred because client rejected an arbitration award more favorable than the ultimate judgment after trial under section 6204(d).
Adding in the fees/costs award, client was now looking at an adverse judgment of $331,951.58—more than double the principal judgment amount.
On appeal, client lost the merit challenges and had to face the prospect of satisfying a $332,000 judgment (plus possible appellate costs should the law firm go back to the trial court for more fees under section 6204(d)).
As we have warned in the past based on the importance of fees in modern day litigation, this case illustrates that a client needs to be careful what it asks for—if an arbitration award is only “mixed,” carefully assess whether you want to litigate further in light of the uncertainty of whether you can do better after a full-blown trial.