However, Arbitrator’s Decision Not To Award Almost $1 Million In Arbitration Fees Based On Trope Prohibition Was Nonreviewable “Arbitrator Judgment Call.”
In eGumball, Inc. v. Call & Jensen, et al., Case Nos. G055852 and G055989 (4th Dist., Div. 3 May 17, 2019) (unpublished), a well-known Orange County law firm initiated arbitration to collect unpaid fees from a client, with the client’s subsequent malpractice suit also ordered to arbitration. After a lengthy arbitration in which the law firm used internal attorneys and expended close to $1 million in seeking to recoup fees, the arbitrator found that one attorney’s failure to advise the client he might be a witness based on an “advice of counsel” defense, albeit below the standard care, was not egregious enough to impede collection of fees. However, he denied the firm’s request for about $1 million in arbitration fees and expert witness fees, prompting appeals by both firm and ex-client.
Everything was affirmed on appeal, in a 3-0 decision authored by Justice Fybel.
Using the analytical framework set forth in Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., 6 Cal.5th 59 (2018), client could not show a violation of any Rules of Professional Conduct such that fee forfeiture was not appropriate. With respect to the denial of arbitration attorney’s fees to the law firm, the appellate court did not believe it could review the merits of the arbitrator’s conclusions that fee recovery butted up against the Trope prohibition (collecting attorneys who litigate fee recovery cannot obtain fees for collection efforts) and that the retainer letter did not have an applicable Lockton v. O’Rourke, 184 Cal.App.4th 1051 (2010) waiver (in essence, a Trope waiver). The reason is that questions of contract interpretation by an arbitrator, on the merits, are not subject to general review. Finally, on the denial of expert witness fees, nothing in the arbitration agreement or JAMS rules required such an award, meaning that the denial, too, was unreviewable.