Retainer Agreements: LLC Managing Member Held Liable To Former Attorneys For $210,613.39

 

First District, Division 5 Affirms Judgment Against LLC Managing Member.

     LLC managing member signed a retainer letter with an affiliated management company and paid litigation attorneys through checks drawn on dba accounts, before deciding to terminate the attorneys having a sizable receivable. After a lot of procedural and lower court tussles, attorneys finally obtained a $210,613.39 judgment against LLC manager for unpaid fees—even after LLC manager was granted a new trial and lost again in a retrial. LLC manager was disgruntled and appealed on numerous grounds.

     Manager lost in Lippenberger v. Canal Properties, Case No. A121591 (1st Dist., Div. 5 Oct. 20, 2009) (unpublished).

     Even though there is a split of authority on whether a notice of appeal filed in propria personal for an LLC is void or can be cured (compare Paradise v. Nowlin, 86 Cal.App.2d 897, 898 (1948) [void] with CLD Constructions, Inc. v. City of San Ramon, 120 Cal.App.4th 1141, 1149 (2004) [curable defect]), the appellate panel did not have to resolve this issue because the LLC sought no relief on its behalf.

     LLC manager argued that dismissal of attorneys’ action was mandatory because attorney failed to give notice of the Mandatory Fee Arbitration Act. Not quite, under these circumstances, said the court. Dismissal under the MFAA is discretionary, and Manager never asked for dismissal—showing there was no abuse of discretion. Beyond that, Manager waived MFAA arbitration because he only requested it in his closing brief following the first trial in the matter—too little, too late, with the “delays … wholly inconsistent with an intent to arbitrate ….” (Law Offices of Dixon R. Howell v. Valley, 129 Cal.App.4th 1076, 1097 (2005).)

     That brought the Court of Appeal to the critical issue: Manager’s liability for attorney’s fees. Business and Professions Code section 6148(c) establishes that liability lies with the person or party that induced the performance, rather than the direct recipient of the services. (Earhart v. William Low Co., 25 Cal.3d 503, 505, 515 (1979).) Because LLC manager was that person and agreed to orally pay attorneys for their services, attorneys were entitled to an award of reasonable fees, which sustained their quantum meruit judgment.

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