Court Opinion

ID: 6496072
Source: CourtListenerOpinion
Date Created: 2022-06-28 23:01:31.368647+00
Date Added: 2024-06-11T08:48:32.727793
License: Public Domain

Filed 6/28/22 Shekarchi v. Fischbach CA2/8
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                      DIVISION EIGHT

EIMAN SHEKARCHI et al.,                                                 B311989

         Plaintiffs and Respondents,                                    (Los Angeles County
                                                                        Super. Ct. No. 20SMCV00636)
         v.

JOSEPH S. FISCHBACH et al.,

         Defendants and Appellants.

      APPEAL from an order of the Superior Court of Los
Angeles County. Mark H. Epstein, Judge. Affirmed.
      Nemecek & Cole, Mark Schaeffer and Marshall R. Cole, for
Defendants and Appellants.
      Law Firm of Harold Greenberg, Harold Greenberg and
Jenifer Anisman for Plaintiffs and Respondents.

                              _________________________________
       Eiman Shekarchi and April Heidarian (respondents) signed
a retainer agreement with the law firm of Fischbach &
Fischbach. Respondents subsequently filed suit against
Fischbach & Fischbach and partner Joseph S. Fischbach
(appellants) alleging legal malpractice. Appellants moved to
compel arbitration based on an arbitration clause in the parties’
retainer agreement. The trial court credited respondent’s version
of the facts and denied the motion, finding that respondents met
their burden of establishing that the agreement was
unconscionable. Appellants appeal, contending that the parties’
valid arbitration agreement was not revocable due to procedural
or substantive unconscionability. We find substantial evidence of
unconscionability and affirm.
       FACTUAL AND PROCEDURAL BACKGROUND1
       In March 2017, respondents met with attorney Joseph S.
Fischbach at his law firm, Fischbach & Fischbach. The parties
discussed a real property issue for which respondents sought
counsel, and Fischbach agreed to represent respondents.
       Fischbach then handed the respondents a retainer
agreement. He told them that although he usually charges a
$25,000 retainer, he would only charge $5,000 because he could
complete the case for a total of $25,000. Fischbach then
handwrote “$5,000” on the first page of the retainer, opened it to
the signature page, and gave the respondents a pen to sign the

1     We present the evidence in the light most favorable to the
judgment. (Whiteley v. Philip Morris, Inc. (2004) 117 Cal.App.4th
635, 642, fn. 3.) The trial court credited respondents’ version of
the facts, which are recited herein without attribution, except
where the facts are specifically attributed to the Fischbach
declaration.

                                   2
agreement. After they signed, Fischbach told respondents that
he would email them a copy. Fischbach never emailed
respondents a copy of the retainer, nor does it appear that he nor
anyone else at his firm ever signed it. At no time did Fischbach
go over the provisions of the retainer with respondents.
       A little over three years later, respondents filed suit
against appellants in Los Angeles Superior Court, alleging
professional negligence. Appellants moved to compel arbitration,
citing the arbitration clause in the retainer agreement.
Fischbach submitted a declaration in support of the motion
stating that he had watched respondents “review and sign the
full retainer,” and that his standard practice, which he said he
followed with respondents, is to tell clients to read every
paragraph. Fischbach also declared that he went over the entire
agreement, including the arbitration clause, with respondents.
Finally, his declaration states that he gave respondents a hard
copy of the retainer agreement before they left his office on the
day they signed the agreement.
       The retainer agreement is a 10-page document, and the
arbitration provision is on page six. It is in bold, underlined font
that is slightly larger than the font of the other provisions in the
agreement. The arbitration clause states:
       “13. ARBITRATION. In the event of any dispute arising
out of, under or by virtue of this Agreement and the rendition of
services to Client(s), both Client(s) and Attorney agree to submit
that dispute to binding arbitration before a private mediation
service, not the American Arbitration Association nor JAMS, to
be selected by the demanding party and handled by a retired
Superior Court Judge selected by the service. This is a self-
executing clause, and no court order shall be required to compel

                                    3
compliance. In the event either party refuses to attend an
arbitration, the arbitrator shall have authority to proceed by way
of default. Client(s) acknowledge(s) that by agreeing to this,
Client(s) is/are waiving his/her constitutional rights, including
but not limited to a jury trial. Client(s) understand(s) that but
for the agreement to arbitrate any dispute, including those
related to legal malpractice, that Attorney would not enter into
the relationship. The Client(s) has/have been advised of the
consequences of this paragraph and has been given the option to
seek independent legal advice concerning its significance and has
chosen to enter into this Agreement freely and voluntarily.
Client(s) is/are not, by executing this Agreement, waiving the
privileges and rights granted to Client(s) pursuant to the
Business and Professions Code of the State of California with
relation to non-binding fee dispute arbitration before the local
Bar Associations. All Costs related to the arbitration shall be
borne equally by the parties and the failure of a party to so
participate in the fees and costs as billed shall be deemed to be a
default at the option of the nondefaulting party and the
nondefaulting party may proceed by default prove up in the
Arbitration.”
       After holding a hearing on appellants’ motion to compel
arbitration in January 2021, the trial court issued an order
denying the motion in February 2021. The trial court found the
arbitration agreement both procedurally and substantively
unconscionable. It did not take oral testimony, but it reviewed
conflicting evidence in the declarations and found respondents’
version credible after reviewing other provisions of the retainer
agreement and determining that it was unlikely that those

                                    4
clauses were truthfully explained to the respondents at the time
of signing.
       Appellants timely appealed.
                            DISCUSSION
       In ruling on a motion to compel arbitration, a trial court
must make two determinations. First, the trial court must
determine whether there is a valid agreement to arbitrate. If so,
the trial court must grant the motion to compel arbitration unless
a ground for revocation of the arbitration agreement exists.
(Alvarez v. Altamed Health Services Corp. (2021) 60 Cal.App.5th
572, 580 (Alvarez).) State law favors the enforcement of valid
arbitration agreements.2 (Ibid.)
       The party that files the motion to compel arbitration has
the burden of showing by a preponderance of the evidence that a
valid agreement exists. The burden then shifts to the other party
to show by a preponderance of the evidence that the agreement
should not be enforced. (Alvarez, supra, 60 Cal.App.5th at
p. 580.) “ ‘In these summary proceedings, the trial court sits as a
trier of fact, weighing all the affidavits, declarations, and other
documentary evidence, as well as oral testimony received at the
court’s discretion, to reach a final determination.’ [Citation.]”
(Ibid.)

2     We apply state law. When it applies, the Federal
Arbitration Act preempts state law, but the party seeking to
compel arbitration has the burden of showing the case impacts
federal commerce, which does not appear to be the case here, nor
do appellants cite or mention federal law in their briefs. (See
Williams v. 3620 W. 102nd Street, Inc. (2020) 53 Cal.App.5th
1087, 1091.)

                                   5
       When the trial court’s decision regarding arbitrability rests
on the resolution of disputed facts, as is the case here, “we review
the decision for substantial evidence.” (Baker v. Italian Maple
Holdings, LLC (2017) 13 Cal.App.5th 1152, 1158; accord,
Engineers & Architects Assn. v. Community Development Dept.
(1994) 30 Cal.App.4th 644, 653 (Engineers & Architects) and
Lopez v. Bartlett Care Center, LLC (2019) 39 Cal.App.5th 311,
317.) In doing so, we defer to the trial court’s findings of
credibility and resolve the evidentiary conflicts in favor of the
trial court’s decisions. (Engineers & Architects, supra, 30
Cal.App.4th at p. 653.) In other words, “we view the evidence in
the light most favorable to the prevailing party, and then
consider whether this evidence is sufficient to allow a reasonable
trier of fact to reach the challenged decision.” (Sanchez v.
Martinez (2020) 54 Cal.App.5th 535, 548 (Sanchez).)
I.     Substantial Evidence Supports the Trial Court’s
       Ruling That the Arbitration Agreement Is
       Unconscionable
       The trial court found that the parties had a valid
agreement to arbitrate. In their appeal, appellants claim that
the trial court erred in not enforcing the valid agreement by
finding both procedural and substantive unconscionability. In
the alternative, they argue that even if there is evidence of both
procedural and substantive unconscionability, it is insufficient to
find the agreement unconscionable.
       “An agreement to arbitrate, like any other contract, is
subject to revocation if the agreement is unconscionable.
[Citation.]” (Carmona v. Lincoln Millennium Car Wash, Inc.
(2014) 226 Cal.App.4th 74, 83 (Carmona).) “Unconscionability is
determined based on the unique factual situations of each case.”

                                    6
(Dennison v. Rosland Capital LLC (2020) 47 Cal.App.5th 204,
210.)
       “The general principles of unconscionability are well
established. A contract is unconscionable if one of the parties
lacked a meaningful choice in deciding whether to agree and the
contract contains terms that are unreasonably favorable to the
other party. [Citation.] Under this standard, the
unconscionability doctrine ‘ “has both a procedural and a
substantive element.” ’ [Citation.] ‘The procedural element
addresses the circumstances of contract negotiation and
formation, focusing on oppression or surprise due to unequal
bargaining power. [Citations.] Substantive unconscionability
pertains to the fairness of an agreement’s actual terms and to
assessments of whether they are overly harsh or one-sided.’
[Citation.] [¶] Both procedural and substantive
unconscionability must be shown for the defense to be
established, but ‘they need not be present in the same degree.’
[Citation.] Instead, they are evaluated on ‘ “sliding scale.” ’
[Citation.] ‘[T]he more substantively oppressive the contract
term, the less evidence of procedural unconscionability is
required to’ conclude that the term is unenforceable. [Citation.]
Conversely, the more deceptive or coercive the bargaining tactics
employed, the less substantive unfairness is required.
[Citations.] A contract’s substantive fairness ‘must be considered
in light of any procedural unconscionability’ in its making.
[Citation.] ‘The ultimate issue in every case is whether the terms
of the contract are sufficiently unfair, in view of all relevant
circumstances, that a court should withhold enforcement.’ ”
(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125–126 (OTO).)
“The burden of proving unconscionability rests upon the party

                                   7
asserting it.” (Ibid.)
       A.    There Is Some Procedural Unconscionability
       Courts begin a procedural unconscionability analysis by
determining whether the contract is one of adhesion. (OTO,
supra, 8 Cal.5th at p. 126.) The trial court determined that the
retainer agreement was not a contract of adhesion, citing
evidence that the parties negotiated the retainer amount from
$25,000 to $5,000, and that in general under California law
attorney-client retainer agreements are not considered contracts
of adhesion. (Powers v. Dickson, Carlson & Campillo (1997) 54
Cal.App.4th 1102, 1110.)
       A trial court need not find that a contract is one of adhesion
to find there is procedural unconscionability, for which “the core
issues are surprise and oppression.” (Torrecillas v. Fitness
Internat., LLC (2020) 52 Cal.App.5th 485, 493.) Here, the trial
court found the arbitration clause procedurally unconscionable,
citing evidence that Fischbach took steps to conceal it from the
respondents. The court cited evidence that Fischbach handed the
contract to respondents open to the signature page and did not
give them a copy of the contract. The trial court correctly
recognized that respondents should have read the contract before
signing it, are generally bound to a contract they signed even if
they did not read it, and that Fischbach did not have a duty to
bring the arbitration clause to the respondents’ attention. (See
Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler & Mitchell, LLP
(2013) 219 Cal.App.4th 1299, 1309 [where clients had substantial
experience with litigation and legal representation before signing
the retainer, and clients had not established the retainer was one
of adhesion, attorneys had no duty to point out the arbitration
provision, and their failure to do so did not invalidate the

                                     8
arbitration agreement].) What the trial court viewed as critical
and distinguished this matter from cases like Mt. Holyoke Homes
was that Fischbach’s actions impeded the respondents from
seeing the arbitration clause for themselves.
       There is some evidence supporting the finding of procedural
unconscionability. We must “look at the evidence in support of
the successful party, disregarding any contrary showing, and we
resolve all conflicts in favor of the respondent, indulging in all
legitimate and reasonable inferences to uphold the verdict if
possible. [Citation.]” (Canister v. Emergency Ambulance Service,
Inc. (2008) 160 Cal.App.4th 388, 394.) Both turning to the
signature page and failing to give a copy of the contract to the
non-drafting party are evidence of procedural unconscionability.
In the context of an electronic agreement, our colleagues in the
Third District found that one factor pointing towards procedural
unconscionability was that the party who drafted the contract
scrolled past the arbitration clause and directly to the places
within the contract to be signed. (Cabatit v. Sunnova Energy
Corp. (2020) 60 Cal.App.5th 317, 323 (Cabatit).) Similarly, when
Fischbach turned directly to page eight, the signature page, and
past the arbitration agreement on page six, he impeded the
respondents from seeing the arbitration clause. (Cf. Desert
Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th
866, 874–875 [finding no fraud in the inducement of attorney-
client retainer where, among other factors, there was no effort to
conceal the arbitration clause]; accord Olsen v. Breeze, Inc. (1996)
48 Cal.App.4th 608, 622 [no procedural unconscionably because
no evidence of concealment of arbitration clause].)

                                    9
       In addition, failing to give the respondents a copy of the
retainer agreement after they signed it (as determined by the
trial court) is also evidence of procedural unconscionability.
(OTO, supra, 8 Cal.5th at p. 128; accord Cabatit, supra, 60
Cal.App.5th at p. 323.)
       Accordingly, there is evidence that Fischbach took steps to
conceal the arbitration agreement from respondents to support
the trial court’s finding of procedural unconscionability.
       B.     There Is Significant Substantive
              Unconscionability
       “ ‘ “Substantively unconscionable terms may take various
forms, but may generally be described as unfairly one-sided.”
[Citation.] “ ‘In assessing substantive unconscionability, the
paramount consideration is mutuality.’ ” [Citation.]” (Pinela v.
Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 241.)
       The trial court found the arbitration clause substantively
unconscionable for two reasons. We agree with both
determinations.
       First, the arbitration clause states that the “[c]lient(s)
has/have been advised of the consequences of this paragraph and
has been given the option to seek independent legal advice
concerning its significance and has chosen to enter into this
Agreement freely and voluntarily.” The trial court found that
this “factual representation was apparently false. Defendants
did not point the clause out to plaintiffs; defendants did not
explain to plaintiffs what the clause meant; defendants did not
tell plaintiffs that they had the option to seek independent advice
as to the clause. All of those representations were false.”
Assuming, as we must, that this statement in the arbitration
clause is false due to the evidence to the contrary that the trial

                                   10
court credited below, then it is substantively unconscionable
because it unfairly favors the appellants. As the trial court
recognized, the appellants had an advantage by drafting the false
statements in the arbitration agreement because their claim to
compel arbitration would be “far stronger were the
representation true.” While the appellants had no duty to point
out the arbitration clause, they cannot make an affirmative
misrepresentation that is in their favor and claim mutuality.
       Second, the trial court found the arbitration clause
impermissibly one-sided in favor of appellants because, due to the
steps taken to impede respondents from knowing the arbitration
clause existed,3 appellants were realistically the only party that
would demand arbitration, and, under the clause, the demanding
party always picks the arbitration organization, and that
organization always picks the arbitrator. The arbitration clause
states that that the party demanding arbitration gets to pick the
arbitration organization, excluding the American Arbitration
Association and JAMS, and that the arbitration organization
chosen by that demanding party gets to pick the arbitrator.
The trial court found that because respondents lacked the ability
to be the demanding party due to appellants’ actions impeding
them from reading the agreement before and after signing it,
“[respondents] had no way of knowing that the clause was there
at all, which meant that defendants had set the system up so that

3     The trial court properly considered the evidence of
procedural unconscionability in determining substantive
unconscionability in concluding that due to Fischbach’s actions,
the seemingly neutral arbitration clause is unilateral. (OTO,
supra, 8 Cal.5th at p. 126 [substantive fairness is measured
considering any procedural unconscionability].)

                                   11
they would always be the demanding party. That makes what
appears on its face to be a bilateral provision into a unilateral
one.”
       Where, as here, the stronger (drafting) party is the only
side that can realistically pick the choice of forum for dispute
resolution, the clause is not mutual and is substantively
unconscionable. (See Carmona, supra, 226 Cal.App.4th at p. 86
[“[T]he arbitration agreement is lacking in mutuality in that it
‘requir[es] arbitration only for the claims of the weaker party but
a choice of forums for the claims of the stronger party’ ”].)
Seemingly neutral clauses can be unfairly one sided when, upon
closer look, they favor the more powerful party in that only that
party will exercise a right under the clause. (See Saika v.
Gold (1996) 49 Cal.App.4th 1074, 1080–1082 [in medical-
malpractice case, where arbitration clause stated that either
party could request a trial if the arbitration award exceeded
$25,000, it would be very rare that patient would do so with an
award of such a large amount, so the clause was substantively
unconscionable because it favored the doctor].)
       Effectively having control of selection of the arbitration
organization is more than just a theoretical advantage to
appellants. It is common knowledge among experienced
litigators (and a matter of common sense) that some arbitration
organizations are notoriously biased in favor of parties that could
end up repeatedly selecting the organization in future
arbitrations. (See Carstensen, Legal Experts Say Bias in
Arbitration Is a Growing Problem (Sept. 23, 2021) Law.com
 [as of June 28, 2022].)

                                   12
Selection of the organization could also affect the type of
background possessed by the arbitrator (e.g., legal, business,
etc.), and the location of any hearing. These are tactical
advantages that appellants received by having effective control of
initiating arbitration under the facts as determined by the trial
court.
       Accordingly, there is significant evidence of substantive
unconscionability.
       C.    The Totality of the Evidence of
             Unconscionability Constitutes Substantial
             Evidence
       Appellants argue that even if there is some evidence of both
procedural and substantive unconscionability, the evidence
overall is insufficient to affirm the trial court.
       “As with any contract, the unconscionability inquiry
requires a court to examine the totality of the agreement’s
substantive terms as well as the circumstances of its formation to
determine whether the overall bargain was unreasonably one-
sided.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th
1109, 1146, 1159-1160 [rejecting view in dissenting opinion that
terms “ ‘must be “so one-sided” as to ‘shock the conscience’ ” ’ ”].)
       For the reasons above, we find that substantial evidence
supported the trial court’s determination of unconscionability.
Although there is less evidence of procedural unconscionability,
there is significant evidence of substantive unconscionability.
Taken collectively, and viewing the evidence on a sliding scale as
we must, the amount of substantive unconscionability makes up
for the more minimal procedural unconscionability. (OTO, supra,
8 Cal.5th at p. 125 [the more of one type of unconscionability
required the less of the other type required].)

                                    13
       The facts here are materially different from those in Marin
Storage & Trucking, Inc. v. Benco Contracting & Engineering,
Inc. (2001) 89 Cal.App.4th 1042 (Marin Storage), which
appellants cite for their claim that the evidence overall is
insufficient here. In Marin Storage, the First District concluded
that “[i]n light of the low level of procedural unfairness, we
conclude that a greater degree of substantive unfairness than has
been shown here was required before the contract could be found
substantively unconscionable.” (Id. at p. 1056.) There, the “low”
procedural unfairness was simply that the contract was one of
adhesion. (Id. at pp. 1053–1054.) The sole evidence of
substantive unconscionability was an indemnification clause in a
contract to lease a crane that required the leasing party to cede
indemnification rights whenever the crane was used on its own
premises, where the contractor had control over the crane, or
when the injury was caused by the contractor. The court found
“nothing so inherently unfair about this reallocation of the risk as
to shock the conscience.” (Id. at p. 1056.)
       Here, there is more evidence of unfairness than in Marin
Storage. There is evidence that appellants concealed the
arbitration clause by failing to provide respondents with a copy of
the agreement and by turning the agreement past the arbitration
clause to the signature page, made a false statement in the
arbitration provision that favored appellants, and drafted an
arbitration clause, that, when considered along with the steps
appellants took to conceal it, rendered it without mutuality and
in favor of appellants because they would always be the party
that picked the arbitration organization.

                                   14
       Viewing the evidence as we must in the light most
favorable to the prevailing party below (Sanchez, supra, 54
Cal.App.5th at p. 548), we conclude that substantial evidence
supports the trial court’s determination that the arbitration
agreement is not enforceable due to unconscionability.
                           DISPOSITION
       The order is affirmed. Respondents are entitled to their
costs on appeal.

                                                               *
                                           HARUTUNIAN, J.
We concur:

                  STRATTON, P. J.

                  WILEY, J.

*     Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.

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