Court Opinion

ID: 9746067
Source: CourtListenerOpinion
Date Created: 2023-08-27 13:55:14.819863+00
Date Added: 2024-06-11T12:26:21.607505
License: Public Domain

SIMS, Acting P. J.
I concur in the result and analysis of the majority opinion, which I understand to be as follows:
1. The only way attorneys could recover more than $18 million in fees was to recover on a common fund theory;
*4572. When the Legislature enacted Revenue and Taxation Code section 6909, subdivision (b) (section 6909(b)), authorizing arbitration of the fee dispute, attorneys’ recovery on a common fund theory was barred by the decision of our Supreme Court in Serrano v. Priest (1977) 20 Cal.3d 25 [141 Cal.Rptr. 315, 569 P.2d 1303];
3. Section 6909(b), providing for binding arbitration of “the appropriate level of . . . fees ... in the settlement of the case of Jordan v. Department of Motor Vehicles (1999) 75 Cal.App.4th 449 [89 Cal.Rptr.2d 333] ...” must be read as implicitly forbidding recovery on a common fund theory (or, put differently, (o a cap of $18 million), because recovery by attorneys on a common fund theory would constitute an unconstitutional gift of public funds;
4. By awarding attorneys fees in excess of $18 million, the arbitrators exceeded their powers, because the fundamental source of their powers is section 6909(b), and their award violated that statute. (See Code Civ. Proc., § 1286.2, subd. (a)(4); see Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269, 272 [52 Cal.Rptr.2d 115, 914 P.2d 193].)
Having said this, I write to add a few thoughts as to the practical effect of this case upon the government of the State of California (State) and upon its taxpayers.
On the one hand, it is all to the good that the State will not have to pay an $88 million fee award that was—at more than $8,000 per hour—completely in outer space, totally over-the-top.1 The fact that attorneys even requested a fee award of that absurd magnitude from the taxpayers is a testament to the unreal world of greed in which some attorneys practice law in this day and age.
On the other hand, I think that this case will have other long-range effects that will be less beneficial to the State.
This is because the record of this case demonstrates that the State wantonly breached its arbitration agreement (Agreement) with attorneys in at least two important respects.
First, the Agreement provided in no uncertain terms, “This award shall be binding on all parties, and there is no right of appeal, collateral attack, or *458other review.” What happened in this case is that when the gigantic magnitude of the fee award became known in Sacramento, the political stuff hit the fan, the State retained private counsel, and the State began to appeal, collaterally attack, and obtain review of the award like crazy. That is how we got here. This is the first breach of the Agreement by the State.
A second breach of the Agreement by the State occurred when, in its attack on the award, the State for the first time took the position that the arbitrators were limited by law to an award of $18 million. As a general rule, unless the arbitration “submission agreement” provides for a monetary cap on an award, there is no limit on the amount the arbitrators may award. (See Blatt v. Farley (1990) 226 Cal.App.3d 621 [276 Cal.Rptr. 612].) Of course, the Agreement in this case contains no such limitation. Indeed, the State’s position flies in the face of the language of the Agreement that provides, “Attorneys may argue entitlement to any amount of Fees on any theory they believe is supported by the facts and circumstances of the case.” This language clearly contemplated that attorneys could receive an award in excess of $18 million on a common fund theory. Indeed, at no time before or during the arbitration hearing did the State assert that the law or the Agreement imposed an $18 million cap on the award. There was simply not a peep from the State in this regard. Would you not think that if you were a party to an arbitration where attorneys were seeking more than $100 million in fees, at some point before or during the hearing, you would say to the arbitrators: “Ladies and gentlemen, not that it matters, but, by the way, you cannot lawfully award fees in excess of $18 million.” I think you would say that if you believed it.
The State asserts that the language of the Agreement quoted above did not, in fact, authorize an award of more than $18 million, because the language merely permitted attorneys to “argue” entitlement to such an award. To put it charitably, this is a silly argument. Why would the Agreement authorize attorneys to “argue” for such an award if the State thought the arbitrators had no power to award that amount? Did the State’s attorneys at the arbitration hearing simply want to watch the legal skills of attorneys in action? Was this some kind of moot court? I think not. Rather, the Agreement plainly contemplated that attorneys could seek more than $18 million on a common fund theory, and the arbitrators could lawfully make such an award.
So, in my view, the State wantonly breached the Agreement in at least two important respects. There is nothing attorneys can do about it, because the State cannot, by contract, authorize an unconstitutional gift of public funds. (Cal. Const., art. XVI, § 6; Orange County Foundation v. Irvine Co. (1983) 139 Cal.App.3d 195, 200-201 [188 Cal.Rptr. 552].)
*459However, I think this case will have serious deleterious consequences for the State in the future. This case illustrates that the State will breach an arbitration agreement with impunity when it is in the State’s interest to do so. This case will therefore result in fewer private citizens agreeing to arbitrate disputes—and particularly major disputes—with the State. We will all see these major cases in court, at considerable increased expense to the taxpayers.
Lest I be misunderstood, I leave it to the attorneys of this state to advise their clients when the clients ask whether they should agree to binding arbitration with the State.
But I know what I would say.
Nicholson, J., and Morrison, J., concurred.
Petitions for a rehearing were denied August 20, 2002, and the opinion was modified to read as printed above. Appellants’ petitions in C038339 and C038343 for review by the the Supreme Court were denied November 26, 2002.

In his dissent to the denial of the State’s request for reconsideration of the arbitration award, Retired Chief Justice Malcolm Lucas said the award of fees of $8,800 per hour “may be too handsome.” Chief Justice Lucas was always the master of decorous understatement.