Opinion ID: 2572757
Heading Depth: 2
Heading Rank: 2

Heading: The MFAA

Text: The parties in this case arbitrated their dispute pursuant to the CAA, set forth in part 3, title 9 of the Code of Civil Procedure, commencing with section 1280. The CAA represents a comprehensive statutory scheme regulating private arbitration in this state. (§ 1280 et seq.) Through this detailed statutory scheme, the Legislature has expressed a `strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.' ( Moncharsh, supra, 3 Cal.4th at p. 9, 10 Cal.Rptr.2d 183, 832 P.2d 899.) The statutes set forth procedures for the enforcement of agreements to arbitrate ([Code Civ. Proc.,] §§ 1281.2-1281.95), establish rules for the conduct of arbitration proceedings except as the parties otherwise agree ( id., §§ 1282-1284.2), describe the circumstances in which arbitrators' awards may be judicially vacated, corrected, confirmed, and enforced ( id., §§ 1285-1288.8), and specify where, when, and how court proceedings relating to arbitration matters shall occur ( id., §§ 1290-1294.2). ( Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 830, 88 Cal.Rptr.2d 366, 982 P.2d 229.) Defendant invoked this statutory scheme in response to plaintiff's malpractice lawsuit. By contrast, the MFAA constitutes a separate and distinct arbitration scheme. The MFAA was first proposed by the Board of Governors of the State Bar of California in 1976 when, finding that disputes concerning legal fees were the most serious problem between members of the bar and the public, the board sought to create a mechanism for arbitrating disputes over legal fees and costs. Recognizing the disparity in bargaining power in attorney fee matters which favors the attorney in dealings with infrequent consumers of legal services (Hargarten & Ardisson, Fine Tuning California's Mandatory Attorney Fee Arbitration Statute (1982) 16 U.S.F. L.Rev. 411, 415 (Hargarten & Ardisson)), that many clients could not afford hiring additional counsel to litigate fee disputes in the civil courts ( ibid. ), and that previous schemes that called for voluntary arbitration were ineffective ( id. at pp. 413-414), the Legislature enacted the MFAA. The original legislation provided in pertinent part: The Board of Governors [of the State Bar of California] shall, by rule, establish, maintain, and administer a system and procedure for the arbitration of disputes concerning fees charged for professional services by members of the State Bar or by members of the Bar of other jurisdictions. (Stats.1978, ch. 719, § 1, p. 2249.) This mandate has been expanded to include mediation, but is otherwise unchanged today. (§ 6200, subd. (a).) In contrast to the CAA, which is governed by the Code of Civil Procedure, the MFAA has its own rules and limitations, as set forth in the Business and Professions Code. As one appellate court has described it, the MFAA is a closed system and the binding arbitration agreed to ... is the arbitration conducted by [a] local bar association under the MFAA, not some other private alternative dispute resolution provided by another forum. ( Alternative Systems, Inc. v. Carey (1998) 67 Cal.App.4th 1034, 1042-1043, 79 Cal.Rptr.2d 567.) The primary limitation of the MFAA is that it applies only to disputes concerning [legal] fees, costs, or both (§ 6200, subd. (a)) and is specifically inapplicable to [c]laims for affirmative relief against the attorney for damages or otherwise based upon alleged malpractice or professional misconduct ( id., subd. (b) (2)). By contrast, virtually any civil dispute, including claims of legal malpractice, can be the subject of arbitration under the CAA. (See Code Civ. Proc., § 1281 [A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract]; see, e.g., Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102, 63 Cal.Rptr.2d 261.) Although the parties here arbitrated their dispute pursuant to the CAA, the MFAA is potentially relevant because defendant, in her petition to compel arbitration, included a claim for unpaid legal fees and costs. The nature of the obligation to arbitrate under the MFAA differs from that under standard arbitration in two important ways. First, the obligation to arbitrate under the MFAA is based on a statutory directive and not the parties' agreement. Thus, a client may invoke the MFAA and proceed to arbitration despite the absence of any prior agreement to do so. By contrast, standard arbitration requires that both parties to a dispute agree to arbitrate. ( Benasra v. Marciano (2001) 92 Cal.App.4th 987, 990, 112 Cal.Rptr.2d 358 [a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration].) Second, section 6200, subdivision (c) provides: [A]rbitration under this article shall be voluntary for a client and shall be mandatory for an attorney if commenced by a client. In other words, whereas a client cannot be forced under the MFAA to arbitrate a dispute concerning legal fees, at the client's election an unwilling attorney can be forced to do so. The finality of an arbitration award under the MFAA also generally differs from an award rendered pursuant to standard arbitration under the CAA. Although parties choosing to resolve their dispute in standard arbitration pursuant to the CAA typically expect that the arbitrator's decision will be final ( Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 373, 36 Cal.Rptr.2d 581, 885 P.2d 994; Moncharsh, supra, 3 Cal.4th at p. 10, 10 Cal.Rptr.2d 183, 832 P.2d 899), an award rendered pursuant to an arbitration under the MFAA is nonbinding, and either party may seek a trial de novo (§ 6204, subd. (a)). The MFAA, however, also provides that the parties may agree in writing that the arbitrator's award will be binding. ( Ibid. ) Finally, the MFAA specifies the conditions under which the client can waive its protections. A client's right to request or maintain arbitration under the provisions of this article is waived by the client commencing an action or filing any pleading seeking either of the following: [¶] (1) Judicial resolution of a fee dispute to which this article applies. [¶] (2) Affirmative relief against the attorney for damages or otherwise based upon alleged malpractice or professional misconduct. (§ 6201, subd. (d).) The MFAA thus provides the client with an alternative method of resolving a fee dispute with his attorney, not one in addition to traditional litigation. ( Juodakis v. Wolfrum (1986) 177 Cal.App.3d 587, 593, 223 Cal.Rptr. 95.) As indicated, the parties in this case arbitrated their dispute pursuant to the CAA, not the MFAA. When plaintiff filed his complaint in superior court against defendant for professional negligence and breach of fiduciary duty, defendant understandably petitioned to compel arbitration pursuant to the parties' agreement. Had the parties simply arbitrated the malpractice-related claims, no question regarding application of the MFAA would have arisen. But because defendant in her petition to compel arbitration added a claim for unpaid legal fees and costs, plaintiff asserts the MFAA applies. Although plaintiff has never sought to arbitrate the fee dispute in an MFAA arbitration, he seeks to invoke the act's client protections in order to invalidate the parties' agreement. This case thus poses the question whether the parties' agreement to arbitrate is enforceable or is superseded by the MFAA. [3] The question is significant in light of the proliferation of arbitration clauses in attorney retainer agreements during the last two decades. This proliferation is understandable, for we have presided over a recent period of rapid expansion of arbitration as a dispute resolution mechanism. At the time the MFAA was enacted in 1978, arbitration under the CAA was still in its infancy. Though the CAA was enacted in 1961, it was not until the early 1980's that the use of arbitration as an alternative method to resolve legal disputes became prevalent and both this court and the United States Supreme Court began determining the outer limits of the procedure. For example, we held in 1983 that when a party to an arbitration agreement in a contract contended the contract was induced by fraud, that claim was itself arbitrable. ( Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 197 Cal.Rptr. 581, 673 P.2d 251.) In 1992, we held an arbitrator's decision was generally unreviewable for legal error, thereby enhancing the finality of an arbitral decision. ( Moncharsh, supra, 3 Cal.4th 1, 10 Cal.Rptr.2d 183, 832 P.2d 899.) Meanwhile, in 1984, the high court began giving strong endorsements of arbitration under the Federal Arbitration Act. ( Southland Corp. v. Keating (1984) 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1; see Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1074-1075, 90 Cal.Rptr.2d 334, 988 P.2d 67 [discussing the FAA].) The many cases involving arbitration that have reached this court in the last 15 years testify to its increasing use as a dispute resolution method. Preliminary to deciding the merits of plaintiff's claim, however, we must decide two questions: (1) Is plaintiff judicially estopped from relying on the statute's protections, as the appellate court held? (2) If not, did he waive the statute's protections by filing his suit for malpractice, as defendant contends?