Filed 8/31/20 Peter L. Kaufman, Panish etc. v. Prospect Funding CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on 

opinions not certified for publication or ordered published, except as specified by rule 8.1115(a). This 

opinion has not been certified for publication or ordered published for purposes of rule 8.1115(a).

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

PETER L. KAUFMAN, 

PANISH, SHEA & BOYLE LLP,

 Petitioners and 

Appellants,

v.

PROSPECT FUNDING LLC,

 Defendants 

and Respondents.

B293259

Los Angeles County

Super. Ct. No. BS169525

Appeal from a Judgment of the Superior Court of Los 

Angeles County. Daniel Murphy, Judge. Reversed.

Peter L. Kaufman, Panish, Shea & Boyle for Petitioners 

and Appellants. 

Patrick R. Mahoney and Tyson W. Kovash for Respondent. 
2

The law firm of Panish Shea & Boyle (PS&B) and one of its 

attorneys, Peter L. Kaufman, Esq., appeal from a judgment 

confirming an arbitration award against them in favor of 

Prospect Funding (NY) LLC. We reverse, concluding the 

arbitrator exceeded his authority in finding Kaufman and PS&B 

agreed to arbitrate disputes arising out of a litigation funding 

agreement between their client, La-Phosa Sangkaphim, and 

Prospect, and by entering an arbitration award against them in 

absentia.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

1. The Underlying Personal Injury Litigation and 

Prospect’s Purchase of an Interest in the Litigation.

Kaufman and PS&B represented La-Phosa Sangkaphim on 

a contingency basis in a personal injury suit in Riverside County 

Superior Court. 

While the lawsuit was pending, Prospect provided $10,000 

to Sangkaphim under an undated “Sale and Repurchase 

Agreement” (Agreement) drafted by Prospect. The Agreement 

provided that Prospect, as the “Purchaser,” would buy from 

Sangkaphim, as the “Seller,” an interest in Sangkaphim’s 

eventual recovery, if any. The Agreement specified a “Purchase 

Price” of $13,600, of which Sangkaphim received $10,000 ($3,600

was a fee paid to Prospect). In exchange, Prospect acquired a 

right to receive proceeds from any eventual settlement or 

recovery through Sangkaphim’s “repurchase” of the interest sold 

to Prospect. The amount Prospect would receive varied depending 

on when Sangkaphim “repurchased” the interest sold. If the 

interest were “repurchased” within six months, Prospect would be 

paid $17,680. The amount to be paid to Prospect out of any 
3

recovery (the “Repurchase Amount”) increased steeply to a 

maximum of $46,240 (the “Prospect Ownership Amount”) if paid 

after April 15, 2019.1 The Agreement contained a liquidated 

damages clause providing in the event Sangkaphim did not 

comply with the Agreement, “[Sangkaphim] SHALL 

IMMEDIATELY PAY TO [Prospect] LIQUIDATED DAMAGES 

IN THE AMOUNT OF TWICE THE PROSPECT OWNERSHIP 

AMOUNT REGARDLESS OF THE OUTCOME OF THE LEGAL 

CLAIM,” plus costs.

The Agreement provided for mandatory arbitration of 

claims, including the determination of arbitrability: “[i]nstead of 

suing in court, [Prospect] and [Sangkaphim] agree to arbitrate all 

disputes . . . . ” and “THE PARTIES AGREE THAT THE ISSUE 

OF ARBITRABILITY SHALL BE DECIDED BY THE 

ARBITRATOR AND NOT BY ANY OTHER PERSON.” Prospect 

and Sangkaphim were the only parties to the Agreement. 

Underneath Sangkaphim’s signature on the last page of the 

Agreement, Kaufman signed a separate “Certification of Seller’s 

Attorney” (Certification), also drafted by Prospect. It states 

Kaufman “certifies to [Sangkaphim] that [Kaufman] has

reviewed the terms and conditions of this . . . Agreement and 

explained [them] to [Sangkaphim].” The Certification also states:

“I have a written fee agreement with Purchaser [sic]2 to pay my 

1 This structure is known as a prepaid forward contract. (See 

Wood, Capital Gains, Litigation Finance & Legal Fees, (Mar. 

2015) Vol. 23, No. 8 The M&A Tax Report

(Woodllp.com/publications/articles/pdf/capital_gain_litigation.pdf)

.)

2 In the Agreement, Sangkaphim was referred to as the 

“Seller” while Prospect was the “Purchaser.” Kaufman’s 
4

fees contingent upon the outcome of the case. I agree that all

disputes regarding this agreement will be resolved via arbitration 

and I have explained this to [Sangkaphim]. All proceeds of the 

legal claim will be disbursed via the attorney’s trust account and 

the attorney is following the written instructions of 

[Sangkaphim] with regard to this [Agreement] and the 

Irrevocable Letter of Directions which attorney has 

acknowledged.” Below Kaufman’s signature was a signature 

block for Prospect. 

The Irrevocable Letter of Direction (Letter), referenced in 

the Agreement and Certification, is dated October 6, 2015.

Prospect prepared it for Sangkaphim’s signature, and addressed 

it to Kaufman. The Letter directed Kaufman, among other 

things, to “place an assignment, consensual lien and security 

interest against any and all settlement proceeds . . . after 

payment of legal fees and reimbursable costs, and to protect and 

satisfy this assignment, consensual lien and security interest of 

$46,240 which is the Prospect Ownership Amount.” It also 

directed Kaufman to pay Prospect in full before disbursing any 

settlement funds to Sangkaphim. The Letter states that in the 

event of a dispute over Prospect’s ownership amount, Kaufman is 

to hold the amount in dispute in PS&B’s trust fund “until the 

dispute is resolved by arbitration as per [Sangkaphim’s] 

agreement with [Prospect].” The concluding sentence of the letter

states, “By signing the acknowledgement below, you acknowledge 

that this letter is from me and that you will comply with this 

irrevocable Letter of Direction for the benefit of [Prospect].”

contingent fee agreement was with Sangkaphim, not Prospect, so 

this is a scrivener’s error. The contingent fee agreement is not 

part of the record. 
5

In an “Attorney Acknowledgment” (Acknowledgment)

placed below Sangkaphim’s signature line in the Letter, 

Kaufman states, among other things: “[¶] I . . . acknowledge 

receipt of this Letter from my client; [¶] I will honor my client’s

irrevocable letter of direction . . . as per instructions above. . . . [¶

. . . ¶] I acknowledge that all disputes arising out of this 

transaction will be resolved via arbitration per the Sale and 

Repurchase Agreement and the irrevocable letter of 

direction . . .[;] [and] [¶] [Prospect] has relied upon this letter and 

acknowledgement . . . .”

2. Settlement of Claim and Arbitration.

The litigation settled for $350,000 in February 2016, with 

net settlement proceeds to Sangkaphim of $70,120.87, after 

deduction of attorneys’ fees, medical liens, non-recourse loans, 

and other costs and expenses. At the time of the settlement, 

pursuant to the terms of the Agreement, $17,680 was due 

Prospect, but PS&B did not pay it. Instead, PS&B later sent 

Prospect a check for $5,000 with a letter stating, “[e]nclosed 

please find a check in the amount of $5,000 as re-payment for the 

loan provided to [Sangkaphim]. Unfortunately, the case settled 

for much less than the actual value and we have no additional 

funds.”

3

Prospect submitted a “Certification of Damages” to 

Sangkaphim and Kaufman, asserting $138,720 plus costs was 

due, consisting of the Prospect Ownership Amount of $46,240 

3 Apparently, PS&B mistakenly disbursed Sangkaphim’s 

share of the settlement proceeds, except for $5,000, to 

Sangkaphim, without first paying Prospect. When PS&B

discovered the error, it sent the remaining $5,000 to Prospect.
6

plus liquidated damages of two times that amount ($92,480). As a 

result of PS&B’s failure to pay, Prospect took the matter to

arbitration in July 2016, alleging breach of contract against 

Kaufman and PS&B. Sangkaphim was not a party to the 

arbitration. PS&B notified the arbitrator that neither it nor 

Kaufman was a party to any agreement to arbitrate and that 

they objected to the arbitration. Kaufman and PS&B further 

objected to Prospect’s calculation of damages because it omitted 

the $5,000 payment PS&B had made and its claim for liquidated 

damages of $92,480 exceeded the maximum $46,240 awardable 

under the Agreement. PS&B and Kaufman did not present 

evidence at or participate in the arbitration hearing. 

On November 10, 2016, the arbitrator found for Prospect, 

concluding the Acknowledgment and Certification bound 

Kaufman and PS&B to the arbitration clause in the Agreement, 

and concluding (apparently incorrectly) that they failed to tender 

any funds to Prospect. The arbitrator ordered PS&B to pay 

$138,720 to Prospect. He noted that PS&B challenged the 

jurisdiction of the arbitration, but concluded “[t]he documents 

signed by Peter Kaufman, whom the Arbitrator finds to be an 

agent of [PS&B]” established that PS&B agreed to arbitration.

Further, he concluded the liquidated damages award was not

inequitable because “[PS&B] blurs the distinction between a true 

loan and a purchase of a contingent interest in a lawsuit. The 

latter involves a substantial amount of risk to Prospect because 

the personal injury case may either result in a defense verdict or 

be otherwise dismissed.”
7

3. Petitions to Vacate/Confirm Award.

On May 1, 2017, Kaufman and PS&B filed a motion to 

vacate the award, asserting Prospect failed to establish any

arbitration agreement with them because they were not parties 

to the Agreement or its arbitration clause, nor were they parties 

to any agreement with Prospect. Thus, they asserted, because 

they had no contractual obligation to arbitrate, the arbitrator 

exceeded his authority by deciding the arbitrability issue and 

making the award. PS&B and Kaufman denied that the Letter 

bound them in any fashion to the terms of the Agreement. 

Prospect responded by filing a motion to confirm the award, 

asserting that the arbitrator did not exceed his authority in 

ruling on the arbitrability of the contract because Kaufman twice 

agreed (in the Certification and Acknowledgement) to arbitration.

Further, it contended PS&B was bound by the arbitration clause 

based on agency and contract principles by acting as 

Sangkaphim’s agent and fiduciary in connection with the 

contract. Prospect sought the full amount of the arbitration 

award plus interest and costs.

In reply, PS&B distinguished cases relying on agency 

principles on the ground that the party who was a signatory 

received a benefit, while, here, PS&B and Kaufman received no 

benefit from the contract or underlying transaction. PS&B also 

objected that Prospect’s calculation of liquidated damages was 

excessive. 

The trial court entered judgment on July 26, 2018, 

awarding Prospect $138,720, plus interest, legal fees and costs. It 

rejected Kaufman’s and PS&B’s argument that they were not 

parties to the arbitration agreement, relying on the sentence 

fragment in the Certification stating “I agree that all disputes 
8

regarding this agreement will be resolved via arbitration . . . . ”

Regarding damages, the court concluded Kaufman and PS&B

had not shown grounds for vacating the award under Code of 

Civil Procedure4 section 1286.2 because the court could not 

review the arbitrator’s reasoning nor the sufficiency of the 

evidence supporting the award, and an arbitrator does not exceed 

his powers merely by rendering an erroneous decision on a legal 

or a factual issue. 

DISCUSSION

I. STANDARD OF REVIEW

Generally, arbitration awards are not reviewable for errors 

of fact or law, even when the errors appear on the face of the 

award. (Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 916.) 

Courts are authorized to vacate an award only if the award was 

(1) procured by corruption, fraud, or undue means; (2) issued by a 

corrupt arbitrator; (3) affected by prejudicial misconduct by the 

arbitrator; or (4) in excess of the arbitrator’s powers. (Ibid.) 

“Under this [code] provision, the trial court is authorized to

vacate an arbitrator’s determination that he or she has the 

jurisdiction to resolve an issue” if arbitrability “is outside the 

scope of an arbitration agreement[.]” (Glassman v. McNab (2003) 

112 Cal.App.4th 1593, 1598.) We conduct a de novo review except 

to the extent there are disputed factual issues. (Haworth v. 

Superior Court (2010) 50 Cal.4th 372, 383; Suh v. Superior Court 

(2010) 181 Cal.App.4th 1504, 1511 [“trial court’s resolution of 

disputed facts will be upheld if supported by substantial 

4 All statutory references are to the Code of Civil Procedure 

unless otherwise noted. 
9

evidence, but if there is no disputed extrinsic evidence, the trial 

court’s decision on arbitrability is reviewed de novo [Citation.]”].) 

II. THE ARBITRATOR EXCEEDED THE SCOPE OF HIS 

POWERS BY DECIDING THE ISSUE OF ARBITRABILITY

Arbitration is a matter of contract and ordinarily a 

nonparty to the arbitration agreement cannot be compelled to 

arbitrate. (See, e.g., AT&T Techs. v. Communs. Workers of Am.

(1986) 475 U.S. 643, 648 (AT&T); Williams v. Atria Las Posas

(2018) 24 Cal.App.5th 1048, 1053.) 

Generally, the court, not the arbitrator, decides the 

arbitrability of a dispute, but the parties to an arbitration 

agreement may, pursuant to their agreement, have the arbitrator 

decide the issue. (AT&T, supra, 475 U.S. at p. 649.) (This would, 

of course, require a valid arbitration agreement compelling the 

parties to arbitrate.) Unless the parties “clearly and 

unmistakably” so provide, however, whether they agreed to 

arbitrate the particular dispute must be decided by the court, not 

the arbitrator. (Ibid.; Jackpot Harvesting, Inc. v. Applied 

Underwriters, Inc. (2019) 33 Cal.App.5th 719, 730.) The 

willingness of parties to enter into arbitration agreements “would 

be ‘drastically reduced’ . . . [if an] arbitrator had the ‘power to 

determine his own jurisdiction. . . .’” (AT&T, supra, 475 U.S. at p. 

651.) 

This rule “necessarily requires the court to examine and, to 

a limited extent, construe the underlying agreement.” (Freeman 

v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481.) If

the “drafter of a form contract has prepared an arbitration 

provision whose application to a particular dispute is uncertain,”

we construe the provision against the drafter under ordinary 
10

contract principles. (Sandquist v. Lebo Automotive, Inc. (2016) 1 

Cal.5th 233, 248.) Here, Prospect drafted all the documents, and 

they appear to be form contracts.

Recently, our Supreme Court addressed whether an 

attorney’s acknowledgment to an agreement between the 

attorney’s client and a third party would bind the attorney to the 

provisions of the underlying agreement. Monster Energy Co. v.

Schechter (2019) 7 Cal.5th 781 (Monster) held that an attorney’s 

signature on a notation approving a client’s settlement 

agreement as to form and content did not preclude a finding that 

the attorney also intended to be bound by terms of the 

agreement. (Id at pp. 785-786.) Monster observed that if the 

agreement itself contained no provision purporting to bind 

counsel, then “the question is easily answered. . . . In that 

circumstance, counsel’s signature that he approved the 

agreement as to form and content could only mean he is 

approving it for his client’s signature.” (Id. at p. 792.) On the 

other hand, “[a]n attorney’s signature on an agreement

containing substantive provisions imposing duties on counsel 

may reflect an intent to be bound even though counsel also 

approves the document for his client’s signature.” (Ibid.) Thus, 

Monster concluded in the case before it, a factfinder considering 

all circumstances could conclude the attorney intended to be 

bound by confidentiality provisions in the agreement, and the 

question was one of fact. (Id. at pp. 792, 795.) 

But nothing in Monster precludes interpreting an attorney 

certification as a matter of law where no factual issues exist. The 

parties here did not present any extrinsic evidence to aid the 

interpretation of the contracts, and both the arbitrator and trial 

court ruled as a matter of law on the meaning of the Certification 
11

and Acknowledgment. Thus, we construe the various documents 

as a matter of law. 

As Monster envisions, an attorney’s certification must be 

considered with the contract to which it is appended. Here, by 

solely relying on language in the Certification and 

Acknowledgment, Prospect takes the provisions out of context 

and fails to consider their language in concert with the 

Agreement and Letter. Indeed, the only way the references to 

arbitration in the Certification and Acknowledgment can be 

interpreted to bind Kaufman and PS&B to arbitrate is to ignore 

the terms of the agreements to which they are appended. That

runs contrary to a central principle of contract interpretation 

requiring “[t]he whole of a contract to be taken together,” “to give 

effect to every part, if reasonably practicable, with each clause 

helping to interpret the other.” (Civ. Code, § 1641.) The language 

of a provision should be construed in context, in view of the 

intended function of the provision and of the contract as a whole. 

(Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1265.) 

Under Monster, we consider whether the attorney had any 

duties under the agreements to which an arbitration clause could 

apply. Kaufman and PS&B were not parties to the Agreement

and had no duties under it. The Agreement’s liquidated damages 

clause explicitly states that such damages were payable by 

Sangkaphim to Prospect. Given his lack of duties in the 

Agreement, the only reasonable interpretation of the 

Certification of the Agreement is — as it says — that Kaufman 

“has reviewed the terms and conditions of this Sales and 

Repurchase Agreement and explained such terms and conditions 

to [Sangkaphim].” The sentence reading “I agree that all disputes 

regarding this agreement will be resolved via arbitration and 
12

that I have explained this to the seller” can only reasonably be 

understood as Kaufman certifying that he has reviewed the 

Agreement, agrees the Agreement requires the parties to it (i.e., 

Sangkaphim and Prospect) to arbitrate their disputes, and he has 

explained that to Sangkaphim. We know from the first sentence 

of the Certification that “this agreement” refers to the 

Agreement, to which neither Kaufman nor PS&B was a party, 

rather than some new agreement contained in the Certification. 

We cannot read the use of the phrase “I agree” to mean that 

Kaufman also independently agreed to arbitration because that 

would be contrary to the stated purpose of the Certification 

(explaining the Agreement’s terms to Sangkaphim), and expand 

the scope of the Agreement’s arbitration provision to include 

Kaufman, a non-party. To the extent there is any uncertainty, we 

construe the provision against the drafter, Prospect. (Sandquist 

v. Lebo Automotive, Inc., supra, 1 Cal.5th at p. 248.) It is far from 

a “clear and unmistakable” agreement by Kaufman to arbitrate 

disputes with Prospect.

The Letter directed Kaufman to pay Prospect out of any 

settlement proceeds before paying Sangkaphim and stated that 

Kaufman was to hold any disputed funds until the dispute was 

resolved. Although Kaufman did have independent duties to his 

client under the Letter (holding settlement funds in PS&B’s trust 

account and forwarding the Ownership Amount to Prospect), the 

language of both the Letter and the Acknowledgement clearly 

contemplates any arbitration would solely involve Sangkaphim 

and Prospect, not Kaufman. The Letter directs Kaufman to 

“retain only the amount in dispute in your trust fund until the 

dispute is resolved as per my agreement with Prospect . . . .” 

Again, Kaufman was not a party to that agreement. In the 
13

Acknowledgment, Kaufman similarly merely observes that all 

disputes arising out of this transaction will be resolved via 

arbitration “per the [Agreement] and the irrevocable letter of 

direction.” (Emphasis added.) Neither the Agreement nor the 

Letter requires Kaufman to arbitrate, so we have no reason to 

conclude Kaufman would have intended his statement that 

disputes would be resolved “per” those documents to require him 

to arbitrate disputes involving him or his firm. 

Moreover, Kaufman and PS&B cannot be bound by any 

purported agreement to arbitrate with Prospect because they did 

not receive any consideration. (Civ. Code, § 1550; Orcilla v. Big 

Sur, Inc. (2016) 244 Cal.App.4th 982, 1006 [“consideration is an 

essential element of a contract”].) 

Finally, we cannot overlook the fact that Kaufman and 

PS&B were serving as Sangkaphim’s attorneys, with all the 

fiduciary and ethical duties that relationship entails. Their duties 

under the Letter were to their client, Sangkaphim, not Prospect. 

Indeed, we assume the transaction was structured as it was —

i.e., not including Kaufman and PS&B as parties to the 

Agreement but instead having Sangkaphim impose duties on his 

lawyers through a letter of instruction — to avoid creating a 

conflict of interest necessitating a conflict waiver from 

Sangkaphim due to the parties’ adverse interests. No such waiver 

was sought or obtained. (Sheppard, Mullin, Richter & Hampton,

LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 84

[necessity of client waiver of adverse interests].) 

Given this context, the only reasonable interpretation of 

the Acknowledgment is that Kaufman assented to do the things 

Sangkaphim requested of him in the Letter, and acknowledged 

that the terms of the Agreement and Letter include 
14

Sangkaphim’s consent to arbitrate disputes with Prospect. As a 

result, Prospect cannot claim it reasonably relied on the isolated 

statements in the Certification and Acknowledgment such that 

PS&B and Kaufman are bound to arbitrate by principles of 

promissory estoppel. (Aceves v. U.S. Bank N.A. (2011) 192 

Cal.App.4th 218, 225 [reliance must be reasonable for promissory 

estoppel to apply].)

We therefore conclude Appellants’ purported consent to 

arbitrate any dispute arising out of the Agreement and Letter is 

not “clear and unmistakable.” We reverse the trial court and 

direct it to enter an order vacating the arbitration award and 

enter judgment thereon in Appellants’ favor. Consequently, we 

need not address the arbitrator’s award of liquidated damages or 

his failure to acknowledge the $5,000 payment by PS&B. 
15

DISPOSITION

The judgment of the superior court is reversed. The case is 

remanded for further proceedings consistent with this opinion. 

Appellants are to recover costs on appeal. 

CURREY, J. 

We concur: 

WILLHITE, Acting P.J. 

COLLINS, J.