Arbitration Fee Clause Broad Enough to Encompass Torts, and Trope Waiver Clause Enforced For Judicial Confirmation Recovery Fees By Law Firm Personnel.
This next 2-1 decision, Quinn Emanuel Urquhart & Sullivan v. Kurtin, Case No. B250245 (2d Dist., Div. 5 Jul. 28, 2014) (unpublished), is an interesting one involving affirmance of an arbitration award in favor of a well-known L.A. law firm and against a sophisticated ex-client defendant, especially focusing on a very broad arbitration clause allowing for fee recovery in any dispute and for a Trope waiver.
A dispute developed between L.A. firm and sophisticated businessman ex-client. The enabling arbitration clause was broad: “Any dispute regarding or arising out of our representation . . . will be resolved by binding arbitration under the Commercial Rules of the American Arbitration Association . . . before a single arbitrator appointed from the [American Arbitration Association’s] Large Complex Commercial Case Panel.”
The arbitration fees clause between the parties stated: “The prevailing party in any arbitration or litigation will be entitled to recover all attorneys’ fees (including if the firm is the prevailing party, the value of the time of all professionals in our firm who perform legal services in connection with the dispute, computed at their normal billing rates), all experts’ fees and expenses and all costs (whether or not these costs would be recoverable under the California Code of Civil Procedure) that may be incurred in obtaining or collecting any judgment and/or arbitration award, in addition to any other relief to which that party may be entitled.” Law firm won a Phase I malpractice arbitration, with the arbitrator awarding $2.19 million in fees. Law firm also won a Phase II, but was not awarded fees. Then, in the judicial confirmation proceedings, the trial court awarded law firm another $66,698 in fees. Ex-client appealed, but to no avail.
On a procedural basis, the majority found that the failure of appellant to designate a reporter’s transcript supported affirmance alone, while the dissent found that the transcript had to go to an essential issue before its absence was deemed dispositive.
The issue on the substantial Phase I fee award was whether the arbitration clause was illegal in allowing fee recovery to Quinn Emanuel attorneys in the arbitration under Trope v. Katz. The majority found that the arbitration clause was broad, applying to any dispute—even a tort legal malpractice case which would not normally apply under Civil Code section 1717, but did apply based on broader fees clause wording under CCP §1021 based on First District precedents. Because Trope involved Civil Code section 1717 fee recovery, the breadth of the clause allowed recovery on the tort claims no matter who did the work. The dissent saw it differently, finding the Trope prohibition was a public policy prohibition such that the arbitration fee awards should not have been awarded even on the tort claims.
The judicial confirmation fee awards were sustained based on the broad terms of the Trope waiver clause, with the majority observing that such a waiver was validated in Lockton v. O’Rourke, 184 Cal.App.4th 1051, 1075-1077 (2010).
NOTE: Query whether Trope limitation pertaining to fee recovery matters handled by firm’s attorneys is “waived”, or whether Trope simply does not limit recovery when the fee clause is broad enough to encompass tort claims beyond “actions on a contract.” In other words, does avoiding the Trope limitation depend upon “waiver” or upon the tort/contract distinction?