ADR Case Updates
MFAA's Right To Trial De Novo Does Not Trump Client's Obligation To Arbitrate With Law Firm Under CAA, 01/29/09
In Schatz v. Allen Matkins Leck Gamble & Mallory LLP, __ Cal. Rptr. 3d __, 2009 WL 161199 (January 26, 2009), the California Supreme Court held that the client's right to a trial de novo under the Mandatory Fee Arbitration Act ("MFAA," Bus. & Prof. Code, § 6200 et seq.), does not override an arbitration clause in his law firm's retention agreement under the California Arbitration Act ("CAA," Code Civ. Proc., § 1280 et seq.). Therefore, the client was not entitled to seek a trial de novo after his unsuccessful nonbinding fee arbitration before the Bar Association, but may be compelled to binding arbitration under the arbitration provisions in the retention agreement.
After the client signed a retainer agreement with an arbitration clause, a fee dispute arose. Pursuant to the MFAA, the client insisted upon nonbinding arbitration before the Bar Association, and then sought a trial de novo after receiving an award in favor of the law firm. The firm then petitioned to compel arbitration under the CAA pursuant to the arbitration clause in the predispute retention agreement. Concluding the MFAA superseded the retainer agreement, the trial court denied the petition. The court of appeal affirmed on the basis that a client may commit to binding arbitration under the MFAA only after a fee dispute arises, not before as in the case at bar. The law firm sought petition for review.
The California Supreme Court reversed and remanded. To allow the MFAA's right to trial de novo to override the arbitration clause would permit a client to go through the "charade" of demanding nonbinding arbitration under the MFAA and then seek trial de novo to avoid the mandatory arbitration clause in the retention agreement. Construing the MFAA to "impliedly repeal" the CAA would be contrary to the policies in favor of enforcing arbitration agreements.
The opinion may be viewed at: http://www.courts.ca.gov/opinions.htm.
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