Arbitration Was Properly Ordered Because The Claims Between Client And The Two Law Firms Arose Out Of The Underlying Retainer And Arbitration Agreements Client Signed With The First Law Firm.
Client retained a law firm to represent her in an ongoing dissolution action – signing a Retainer Agreement and a binding Arbitration Agreement. During the next 15 months, the law firm billed Client more than $4.5 million in fees and costs, which included fees/costs incurred for the first 23 days of trial (with an estimated 45 additional trial days to follow). Around this time, the trial court denied the law firm’s request for an award of $1 million in interim attorneys’ fees to continue representing Client. That same day, an attorney from the law firm notified Client that the law firm had dissolved and that he was forming a new law firm where the same staff would be available to continue working on her case. He requested Client sign an acknowledgment that the new firm would represent her under the same terms as the Retainer and Arbitration Agreements from the first firm. She refused to sign, but requested the new firm represent her. The new firm and Client did not sign a retainer agreement.
About a week-and-a-half later, the attorney filed a motion to withdraw as Client informed him she would not make additional payments until completion of the trial. Client opposed the motion – stating she had “no irreconcilable differences with [the attorney]” and only disputed his demand for additional fees. A year after the motion to withdraw was granted, the attorney, dissolved firm, and the new firm collectively filed a lawsuit against Client for breach of contract – among other causes of action – resulting from the unpaid fees. On the same day, Client filed a lawsuit against the attorney and firms alleging breach of fiduciary duty, breach of contract, and legal malpractice – based on representations Client alleged were made to her when she agreed to retain the now dissolved law firm.
The trial court related the two lawsuits, and attorney/firms successfully moved to compel arbitration of all claims raised in both lawsuits based on the Arbitration Agreement signed between Client and the now dissolved firm. Several months after completion of the multi-day arbitration, the arbitrator issued written award in favor of the firms – awarding the now dissolved firm $1,037,719.16 in unpaid fees and costs, plus interest, under breach of contract; awarding the second law firm $236,046.75 for the reasonable value of its services, under the theory of quantum meruit, using the same billing rates outlined in the Retainer Agreement signed with the now dissolved firm; and awarding an additional $508,678.82 to the “prevailing party” attorney/firms for fees/costs incurred in the arbitration. After the trial court confirmed the arbitration award, Client filed a motion for a new trial – arguing the trial court erred in granting the petition to confirm the arbitration award. Upon denial of that motion, Client appealed.
On appeal, Client argued that none of the claims concerning the new law firm arose out of the obligations created by the Retainer Agreement and Arbitration Agreement signed with the now dissolved firm, and that she never signed such agreements with the new firm. The 2/3 DCA in Kolodny v. Wondries, Case No. B293985 (2d Dist., Div. 3 November 25, 2019) (unpublished) disagreed.
Citing Strasbourger Pearson Tulcin Wolff Ins. v. Wiz Technology, Inc. (1999) 69 Cal.App.4th 1399, 1404, the 2/3 DCA found “an attorney-client relationship can be created by an express or implied agreement; the terms of an implied agreement ‘are manifested by conduct’.” Here, although Client refused to sign anything with the new law firm, she requested that the attorney continue representing her through the new firm. She never proposed different terms, nor did she ask to negotiate a different retainer agreement, when she requested the continued representation. Further, Client pursued claims against the new law firm based on obligations originating out of the Retainer Agreement signed with the now dissolved firm. Therefore, the trial court was correct in determining that the original Retainer and Arbitration Agreements were the source of the attorney-client relationship between Client and new firm, and that the disputes between the law firms and Client arose from those original agreements.
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