Court Opinion

ID: 9952789
Source: CourtListenerOpinion
Date Created: 2024-03-20 19:03:25.218444+00
Date Added: 2024-06-11T14:44:29.738380
License: Public Domain

Filed 3/20/24 Liberty Law Office v. The Bloom Firm CA1/1
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS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(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                   DIVISION ONE

 LIBERTY LAW OFFICE, INC.,
           Plaintiff and Appellant,                                     A165269
                                                                        A166497
 v.
 THE BLOOM FIRM,                                                        (Alameda County Sup. Ct.
                                                                        No. HG20079536)
           Defendant and Respondent.
                                                                       ORDER MODIFYING OPINION
                                                                       AND DENYING REHEARING

                                                                        [NO CHANGE IN JUDGMENT]

         It is ordered that the opinion filed herein on February 26, 2024 be
modified as follows:
1. “CPRC” shall be corrected to read “CRPC” throughout the opinion as
   follows:
       a. On page 5, lines 5, 9, and 14;
       b. On page 10, Section B, line 4;
       c. On page 12, first full paragraph, line 12;
       d. On page 19, lines 7, 13, and 17;
       e. On page 22, first full paragraph, line 9.

2. “Micha Starr” shall be corrected to read “Micha Star Liberty” on page 21,
   first full paragraph, line 9.

                                                               1
3. Lastly, on page 22, we add new footnote 6 at the end of the sentence in
   line 2 from the top of the page (ending “in its entirety”) to read as follows:

            In a petition for rehearing, Liberty Law complains that our
      opinion only mentions CRPC rule 5.4 once in determining that the fee
      sharing agreement between Liberty Law and Bloom should not be
      voided on public policy grounds. Liberty Law suggests that if we “truly
      believe” that the Agreement did not violate rule 5.4 because of Bloom’s
      lack of registration with the State Bar “then the opinion needs to
      actually say that.” We thought we had made ourselves clear. The
      question with which we have grappled in this lengthy opinion is not
      whether the rule was violated. The question is whether the Agreement
      should be voided on that basis. On these facts, our answer is no.

      The petition for rehearing is denied.

Dated:

                                            ____________________________
                                            Humes, P. J.

A165269N, A166497N

                                        2
Filed 2/26/24 Liberty Law Office v. The Bloom Firm CA1/1 (unmodified opinion)
                  NOT TO BE PUBLISHED IN 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(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                   DIVISION ONE

 LIBERTY LAW OFFICE, INC.,
             Plaintiff and Appellant,                                   A165269
                                                                        A166497
 v.
 THE BLOOM FIRM,                                                        (Alameda County Sup. Ct.
                                                                        No. HG20079536)
             Defendant and Respondent.

         In this dispute over legal fees, Liberty Law Office, Inc. (Liberty)
appeals from the trial court’s confirmation of an arbitration award in favor of
The Bloom Firm (Bloom). Liberty argues that the arbitrators exceeded their
powers within the meaning of Code of Civil Procedure1 section 1286.2,
subdivision (a)(4) by enforcing an illegal contract. Specifically, citing
Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing (2018) 6
Cal.5th 59 (Sheppard, Mullin), Liberty contends its agreement with Bloom is
void and unenforceable as against public policy because Bloom failed to
register as a professional law corporation as required by various statutes, the
California Rules of Professional Conduct (CRPC), and the Rules of the State

       All statutory references are to the Code of Civil Procedure unless
         1

otherwise specified.

                                                               1
Bar of California (State Bar Rules). A panel of three arbitrators has
thoroughly considered and rejected this claim, as has the trial court in its
written decision confirming the arbitration award. We affirm.
           I. FACTUAL AND PROCEDURAL BACKGROUND
A.    The Joint Venture Agreement & Arbitration Request
      On August 23, 2019, Lisa Bloom for The Bloom Firm and Micha Star
Liberty for Liberty Law Office entered into an agreement entitled Joint
Venture Agreement Between the Bloom Law Firm and Liberty Law Office
(JVA or Agreement). The JVA provided that the two organizations would be
known as members of Bloom with Micha Liberty and her office having “of
counsel” status. Thus, the JVA provided that Liberty and Bloom would
“collectively and collaboratively prosecute legal matters.” To that end,
Liberty agreed to contribute to the joint venture “currently filed or retained
personal injury and employment rights cases which Liberty had filed on a
contingency basis” as listed on an attached schedule, and Bloom agreed to
provide all aspects of business management and to fund all litigation matters
subject to the joint venture. Any fees earned on these existing cases
contributed by Liberty were to be split 50/50 between Liberty and Bloom.
The JVA contained additional provisions for the payment of costs and the fee
splitting with respect to any new cases retained for the joint venture.
      The Agreement included provisions for the winding up of the joint
venture under specified circumstances, including the “[e]xpress will of either
Party” or the death or disability “of a Party.” And it contained an arbitration
clause requiring that—after a good faith attempt to settle “any controversy
relating to the Agreement”—the parties would submit the matter to binding
arbitration. Finally, a stated purpose of the Agreement was “for the Parties
to engage in the practice of law in the State of California (or elsewhere) in

                                        2
accordance with the California Business and Professions Code and all rules of
practice and other regulations adopted by any courts and administrative
bodies before which the Parties or the associates of either Party shall be
admitted to practice.” The parties agreed not to “engage in any conduct that
would contradict or compete with the purpose of the Joint Venture.”2
      In March 2020, Bloom indicated its intention to terminate the JVA. On
June 3, 2020, Bloom filed an arbitration demand pursuant to the arbitration
provision of the JVA. Bloom alleged that Liberty had failed to comply with
the fee-splitting terms of the Agreement after dissolution.
B.    Court Challenge
      On November 9, 2020, Liberty filed a complaint for declaratory relief in
this action, seeking resolution of the following issues: (1) whether the JVA
was a valid and enforceable fee sharing agreement; and (2) whether Bloom
was entitled to relief in quantum meruit when the attorney fee-sharing
provision in the JVA is unenforceable. Specifically, citing Sheppard, Mullin,
supra, 6 Cal.5th 59, Liberty alleged that “[w]here attorneys fail to comply
with the requirements of [CRPC rule] 1.5.1 and do not obtain written,
informed consent from the client, any fee sharing agreement between them is
rendered unenforceable as a matter of public policy.” Liberty also asked for
an order staying any arbitration proceedings pending resolution of the court
action.

      2 As these provisions make clear, although the Agreement was executed

by the Liberty and Bloom firms, it uses the term “Party” more broadly to
refer as well to individual attorneys Micha Liberty and Lisa Bloom. Indeed,
the joint venture was at bottom a marriage between two sophisticated and
well-known licensed attorneys, and it is doubtful it would have continued
absent the participation of both lawyers.

                                       3
      On November 25, 2020, the arbitration panel denied Liberty’s request
to delay the arbitration proceedings, confirming that it had jurisdiction over
the claims relating to the JVA, notwithstanding Liberty’s attack on the
validity of the fee sharing provision in the Agreement. Liberty, however,
refused to withdraw its lawsuit. On December 15, 2020, Bloom filed a motion
to compel arbitration and stay proceedings in the declaratory action. On
January 20, 2021, Liberty filed a statement of non-opposition to Bloom’s
motion to compel, agreeing to arbitrate but asking the trial court to retain
jurisdiction of the matter pending conclusion of the arbitration proceedings.3
The trial court granted the motion to compel arbitration and stayed the trial
court proceedings on February 3, 2021.
C.    Decision of the Arbitrators
      After evidentiary hearings on seven dates in May 2021 and post-
hearing written submissions and oral presentations from the parties, the
panel of three arbitrators issued its decision on August 25, 2021. Bloom’s
arbitration demand alleged breach of contract, breach of the implied covenant
of good faith and fair dealing, and quantum meruit. Liberty asserted
numerous counter claims/affirmative defenses, including fraud, illegality,
unenforceability due to violations of the CRPC, and serious legal and ethical
violations precluding quantum meruit. The arbitration panel preliminarily
found that the parties attempted in good faith to settle their dispute before
resorting to arbitration as required by the Agreement.
      On the merits, the panel determined that there was no evidence any
clients were harmed by formation or dissolution of the JVA or by Bloom’s

      3 Liberty asserts that this statement of non-opposition does not waive
her right to contest the enforceability of the JVA because she did not know at
that time that Bloom was not registered as a law corporation with the State
Bar. We will assume without deciding that this is correct.

                                       4
alleged breaches of the CRPC. While the evidence showed that at all times
during the joint venture Bloom had failed to register as a professional law
corporation with the State Bar, the panel concluded that this was a matter
for the State Bar, not a defense to Bloom’s claims. In so finding, the panel
rejected Liberty’s general suggestion that “any and all violations of the CPRC
and the [State Bar Rules] implicate the public policy of the State of
California,” rendering any contract entered into by an offending attorney or
law firm void and unenforceable as against public policy. And it denied
Liberty’s specific argument that failure to register as required by the CPRC
and State Bar Rules implicated public policy such that the JVA should be
deemed unenforceable. Moreover, since Liberty conceded during the
arbitration that the client consents obtained by Bloom under the JVA were
valid except to the extent they were entered into with a firm not authorized
to practice law, its defense under CPRC Rule 1.5.1 with respect to client
consents “[fell] with the law corporation registration defense.” The panel
went on to reject the remainder of Liberty’s affirmative defenses.4
      Having concluded that Liberty was in breach of a valid and enforceable
JVA, the panel next turned to the issue of damages. It found that client
consents to the fee-splitting arrangement in the JVA had only been signed by
eight clients. Accordingly, the arbitrators awarded Bloom contract damages
under the fee-splitting provision of the JVA (50 percent) for those eight
clients (three whose cases had been resolved and five whose matters were

      4 The panel found much of the evidence presented by the parties—

including the involvement of Lisa Bloom’s husband (a non-lawyer) with
Bloom, Lisa Bloom’s prior representation of Harvey Weinstein, Micha
Liberty’s management style, Lisa Bloom’s trial experience, and the financial
resources and professional experience of Bloom and its staff—irrelevant to
the resolution of the issues presented. We concur.

                                       5
still pending). Damages in quantum meruit were awarded for ten other cases
(five resolved and five unresolved). Liberty was entitled to a setoff for unpaid
management expenses and case costs for which Bloom was responsible.
However, administrative fees and expenses for the arbitration which had
previously been advanced by Bloom were required to be reimbursed by
Liberty. On October 13, 2021, the panel modified its decision to correct
several calculation errors.
D.    Confirmation by the Trial Court
      On October 25, 2021, Bloom filed a petition in the trial court to confirm
the arbitration award. Liberty responded by filing a motion to vacate the
award in November 2021. On January 28, 2022, the trial court issued its
written decision, granting Bloom’s request to confirm the arbitration award
and concomitantly denying Liberty’s motion to vacate. Specifically—noting
that Sheppard, Mullin has facts bearing “little resemblance” to those in the
instant case—the trial court rejected Liberty’s argument that the arbitration
award must be vacated because the JVA was executed in violation of public
policy as expressed in CRPC rules 1.5.1 and 5.4. Asserting that not every
violation of every rule of professional conduct would render a fee-sharing
agreement unenforceable as against public policy and that the cases relied
upon by Liberty involved rules designed for the protection of the public, the
trial court opined that Bloom’s failure to register as a law corporation did not
render it incapable of validly executing the JVA (CRPC rule 5.4). Nor did its
unregistered status impact the ability of clients to execute valid consents to
the fee splitting (CPRC rule 1.5.1).
      Judgment was issued on March 23, 2022, awarding Bloom $738,395.80
in contract and quantum meruit damages for five resolved cases, $160,020.00
in arbitration fees and expenses, and pre-judgment interest. In addition, the

                                       6
judgment provided for a 50 percent fee share upon receipt of attorney’s fees in
five unresolved cases, and quantum meruit awards ranging from $332,300.00
to $253.50 upon receipt of fees with respect to five other pending cases.
Liberty timely appealed. On September 13, 2022, the trial court issued an
amended judgment nunc pro tunc correcting a clerical error. Liberty also
appealed from the amended judgment. On April 5, 2023, we consolidated the
two matters for briefing, oral argument, and decision.5
                               II. DISCUSSION
A.    Legal Frameworks and Standards of Review
      1.    Rules of Arbitral Finality
      “California law favors alternative dispute resolution as a viable means
of resolving legal conflicts. ‘Because the decision to arbitrate grievances
evinces the parties’ intent to bypass the judicial system and thus avoid
potential delays at the trial and appellate levels, arbitral finality is a core
component of the parties’ agreement to submit to arbitration.’ ” (Richey v.
AutoNation, Inc. (2015) 60 Cal.4th 909, 916 (Richey).) Accordingly, “[i]n
considering an appeal from a judgment confirming an arbitration award, we
may not ‘ “review the merits of the dispute, the sufficiency of the evidence, or
the arbitrator’s reasoning, nor may we correct or review an award because of
an arbitrator’s legal or factual error, even if it appears on the award’s
face.” ’ ” (State Farm Mutual Automobile Ins. Co. v. Robinson (2022)

      5 On August 22, 2023, we granted the application for leave to file an

amicus curiae brief in this matter to several clients whose cases fell within
the ambit of the JVA. While we question their characterization of themselves
as “primary stakeholders” in this dispute, we have reviewed the briefing as
well as the response filed by Liberty and conclude they add nothing to our
determination of the issues before us.

                                         7
76 Cal.App.5th 276, 282.) Indeed, “[a]rbitrators, unless specifically required
to act in conformity with rules of law, may base their decision upon broad
principles of justice and equity, and in doing so may expressly or impliedly
reject a claim that a party might successfully have asserted in a judicial
action.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10–11 (Moncharsh).)
      Section 1286.2 “provide[s] limited grounds for judicial review of an
arbitration award.” (Richey, supra, 60 Cal.4th at p. 916.) Among these
grounds is that “[t]he arbitrators exceeded their powers and the award
cannot be corrected without affecting the merits of the decision upon the
controversy submitted.” (§ 1286.2, subd. (a)(4).) This “excess-of-authority
exception applies, and an arbitral award must be vacated, when a court
determines that the arbitration has been undertaken to enforce a contract
that is ‘illegal and against the public policy of the state.’ ” (Sheppard, Mullin,
supra, 6 Cal.5th at p. 73.)
      Where, as here, a party claims that an award exceeded an arbitrator’s
powers because “the entire [underlying] contract or transaction was illegal,”
the issue of illegality is for the trial court to decide, and it owes no deference
to the arbitrator’s resolution of that issue. (Moncharsh, supra, 3 Cal.4th at
pp. 31–32; Lindenstadt v. Staff Builders, Inc. (1997) 55 Cal.App.4th 882, 892.)
In turn, “ ‘ “ ‘we review the trial court’s order (not the arbitration award)
under a de novo standard.’ ” ’ ” (Roussos v. Roussos (2021) 60 Cal.App.5th
962, 973; see Kahn v. Chetcuti (2002) 101 Cal.App.4th 61, 65 [whether
arbitrator exceeded authority is legal issue independently reviewed on
appeal].)
      2.    Relevant Statutes & Rules Governing Attorney Conduct
      Pursuant to section 6160 of the Business and Professions Code: “A law
corporation is a corporation which is registered with the State Bar of

                                         8
California and has a currently effective certificate of registration from the
State Bar pursuant to the Professional Corporation Act, as contained in
Part 4 (commencing with Section 13400) of Division 3 of Title 1 of the
Corporations Code, and this article. Subject to all applicable statutes, rules
and regulations, such law corporation is entitled to practice law. With
respect to a law corporation the governmental agency referred to in the
Professional Corporation Act is the State Bar.” (See also Corp. Code, § 13404
[with exceptions not relevant here “no professional corporation shall render
professional services in this state without a currently effective certificate of
registration issued by the governmental agency regulating the profession in
which such corporation is or proposes to be engaged”]; State Bar Rules, rule
3.150(A) [“To practice law in California, a corporation must be certified by the
California Secretary of State and registered by the State Bar. These rules
refer to such a corporation as a law corporation.”].)
      The CRPC was adopted by the Board of Trustees of the State Bar and
approved by our Supreme Court with the intent “to regulate professional
conduct of lawyers through discipline.” (CRPC, rule 1.0(a).) They were
promulgated pursuant to Business and Professions Code sections 6076 and
6077 “to protect the public, the courts, and the legal profession; protect the
integrity of the legal system; and promote the administration of justice and
confidence in the legal profession.” (CRPC, rule 1.0(a).) A “willful violation”
of any of the rules “is a basis for discipline.” (Id., rule 1.0(b)(1).)
      Rule 5.4 of the CRPC, titled “Financial and Similar Arrangements with
Nonlawyers” provides in relevant part that “[a] lawyer or law firm shall not
share legal fees directly or indirectly with a nonlawyer or with an
organization that is not authorized to practice law.” And, according to CRPC
rule 1.5.1(a): “Lawyers who are not in the same law firm shall not divide a fee

                                          9
for legal services unless: (1) the lawyers enter into a written agreement to
divide the fee; (2) the client has consented in writing, either at the time the
lawyers enter into the agreement to divide the fee or as soon thereafter as
reasonably practicable, after a full written disclosure to the client of: (i) the
fact that a division of fees will be made; (ii) the identity of the lawyers or law
firms that are parties to the division; and (iii) the terms of the division; and
(3) the total fee charged by all lawyers is not increased solely by reason of the
agreement to divide fees.”
      3.    Validity of Contracts
      Under Civil Code section 1667, a contract is illegal if it is “[c]ontrary to
an express provision of law” or “[c]ontrary to the policy of express law, though
not expressly prohibited.” Although “ ‘questions of public policy are primarily
for the legislative department to determine,’ . . . a contract or transaction
may be found contrary to public policy even if the Legislature has not yet
spoken to the issue.” (Sheppard, Mullin, supra, 6 Cal.5th at p. 73, italics
added.) An administrative regulation may establish a public policy with
which a contract must comply to be lawful. (Ibid., italics added.)
B.    The JVA Is Not Void on Public Policy Grounds
      On appeal, Liberty renews the argument it made before both the
arbitration panel and in the trial court that the JVA is void and
unenforceable as against public policy because Bloom failed to register as a
professional law corporation as required by various statutes, the CPRC, and
the State Bar Rules. Liberty additionally contends, for the first time on
appeal, that the executed client consents in this matter were inadequate and
thus the fee-sharing provision is invalid. We conclude that the JVA as a
whole was not rendered unenforceable due to Bloom’s registration error. We
thus do not reach Liberty’s other claims, as they were decided pursuant to a

                                        10
valid arbitration provision in an enforceable agreement and are thus immune
from judicial review.
      1.    Relevant Precedent
      In Loving & Evans v. Blick (1949) 33 Cal.2d 603 (Loving), the Supreme
Court considered the propriety of a judgment entered upon an arbitration
award in compensation to certain contractors for work performed and
services rendered under a building contract. (Id. at p. 604.) One of the two
contractors (Evans) as well as the partnership (Loving and Evans), however,
had failed to comply with state licensing requirements. The Court concluded
that the award could not “be reconciled with the settled public policy of this
state as expressed in our statutory law.” (Id. at pp. 604-605.) In particular,
the Court reaffirmed that “ ‘a contract made contrary to the terms of a law
designed for the protection of the public and prescribing a penalty for the
violation thereof is illegal and void, and no action may be brought to enforce
such contract.’ ” (Id. at p. 607, italics added.) While the court proceedings
involved confirmation of an arbitrator’s award, “the rules which give finality
to the arbitrator’s determination of ordinary questions of fact or of law are
inapplicable where the issue of illegality of the entire transaction is raised in
a proceeding for the enforcement of the arbitrator’s award.” (Id. at p. 609.)
      In voiding the contract (and thus the corresponding arbitration award),
the Court expressly distinguished two other cases. In Gatti v. Highland Park
Builders, Inc. (1946) 27 Cal.2d 687, “a judgment in favor of plaintiff
contractors was affirmed although no license in the name of the partnership
under which they had been operating had been issued to the two plaintiff
contractors as such.” (Loving, supra, 33 Cal.2d at p. 608.) However, both
partners possessed individual contractor’s licenses, and, during the
performance of the contract, a joint contractor’s license was issued to the two

                                       11
partners and a third party. Under such circumstances, the Court concluded
that “ ‘the legislative scheme in relation to the licensing of contractors,
intended “for the safety and protection of the public,” would become an
unwarranted shield for the avoidance of a just obligation.’ ” (Ibid.; see also
Citizen’s State Bank v. Gentry (1937) 20 Cal.App.2d 415, 418–420.)
      Subsequently, in Moncharsh, supra, 3 Cal.4th 1, an attorney
(Moncharsh) entered into an employment contract with a law firm (Blase)
which included a fee sharing provision pursuant to which, if Moncharsh left
the firm, Blase would receive 80 percent of any fees generated by clients that
left with him. (Id. at p. 6.) Moncharsh subsequently terminated his
relationship with Blase, taking six clients with him (five of whom he had
brought to the firm with him and one that had been recently acquired while
he was still employed by Blase). (Ibid.) After Moncharsh refused to share
fees with respect to these clients, the matter was submitted to arbitration
during which Moncharsh argued that the fee sharing provision of the
employment agreement was unenforceable because it violated public policy
and various provisions of the CPRC. (Id. at pp. 6–7.) The arbitrator
disagreed, noting that, at the time Moncharsh agreed to the employment
contract, he “was a mature, experienced attorney, with employable skills”
who could have negotiated something different if he did not agree with the
80/20 split.” (Id. at p. 7.) The arbitrator upheld the fee-sharing provision
except as it related to the recently acquired client because, with respect to
that client, the split would be unconscionable. (Id. at pp. 7–8.)
      After the trial court confirmed the arbitrator’s award, the Supreme
Court considered whether the award was reviewable. (Moncharsh, supra, 3
Cal.4th at p. 8.) The Court held that judicial review of private arbitration
awards is limited “to those cases in which there exists a statutory ground to

                                        12
vacate or correct the award.” (Id. at p. 28.) And it rejected the notion that
arbitrators “exceed[] their powers” within the meaning of section 1282.6
merely by reaching an erroneous decision. (Moncharsh, at p. 28.) The Court
then considered Moncharsh’s contention that judicial review of an arbitration
award is available “when one party alleges the underlying contract, a portion
thereof, or the resulting award, is illegal or in violation of public policy.” (Id.
at p. 29.) It concluded that a party may avoid arbitration altogether “if an
otherwise enforceable arbitration agreement is contained in an illegal
contract.” (Ibid.) However, when “the alleged illegality goes to only a portion
of the contract (that does not include the arbitration agreement), the entire
controversy, including the issue of illegality, remains arbitrable.” (Id. at 30.)
      Moncharsh was only challenging the fee-splitting provision of the
employment agreement. Nevertheless, relying on Loving, he argued judicial
review was appropriate because the provision was “ ‘illegal’ ” and violative of
“ ‘public policy’ ” as reflected in several provisions of the CRPC. (Moncharsh,
supra, 3 Cal.4th at p. 31.) The Court distinguished Loving as involving the
alleged illegality of the entire agreement. While it acknowledged that
judicial review of an arbitrator’s decision on the facts presented might be
available in exceptional circumstances, given the Legislature’s strong support
for the finality of arbitral awards, the Court concluded such awards should be
immune from judicial scrutiny “[a]bsent a clear expression of illegality or
public policy.” (Moncharsh, at p. 32.) The Supreme Court perceived “nothing
in the Rules of Professional Conduct at issue in this case that suggests
resolution by an arbitrator of what is essentially an ordinary fee dispute
would be inappropriate or would improperly protect the public interest.” (Id.,
at p. 33, italics added.) Accordingly, judicial review of the arbitrator's
decision was unavailable.

                                        13
      In Chambers v. Kay (2002) 29 Cal.4th 152 (Chambers), the Supreme
Court refused to uphold a fee-sharing agreement between two attorneys who
were not partners or associates of each other, or shareholders in the same law
firm where no written client consent had been obtained pursuant to former
CRPC rule 2-200. (Chambers, at p. 148.) Under such circumstances, the
Court opined that if it upheld the fee-sharing agreement “with no indication
that the required client consent was either sought or given, [it] would, in
effect, be both countenancing and contributing to a violation of a rule we
formally approved in order ‘to protect the public and to promote respect and
confidence in the legal profession.’ ” (Id. at p. 158, citing CRPC, former rule
1-100(A) and Bus. & Prof. Code, § 6076; compare MW Erectors, Inc. v.
Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412,
440-441 [construction contract was enforceable where the contractor was
unlicensed when it executed the contract but licensed by the time it
performed the work; noting that the law regulating contractors (CSLL) had
its own enforcement scheme and concluding under the circumstances of the
case that, “[n]o compelling reason exist[ed] to conclude that the public
protective purposes of the CSLL can only be served by deeming such
contracts illegal, void, and unenforceable” based on lack of licensure alone].)
      Two appellate cases from 2003 and 2007 are also instructive. Olson v.
Cohen (2003) 106 Cal.App.4th 1209 (Olson) involved a client class action
under the unfair competition laws seeking disgorgement of legal fees from a
lawyer (Cohen) and his professional corporation for the years the corporation
was not registered to practice law with the State Bar. (Id. at pp. 1211–1212.)
On appeal, the court rejected the argument that, during the period before the
corporation was registered, all services rendered by it were illegal and thus
the related fee agreements were void. (Id. at p. 1214.) It noted that the

                                       14
decision to incorporate as a professional corporation “is typically made to
obtain tax advantages and to avoid personal liability for the corporation’s
debts” and thus is “not undertaken for the protection of clients. The
protections for clients mandated by laws governing incorporation of law
corporations, such as restrictions on who may be a shareholder and
requirements for security for claims against the corporation, protect against
abuses which might otherwise occur from the use of the corporate structure.
Failure to comply with these requirements may result in an order to cease
and desist or suspension or revocation of registration. (Bus. & Prof. Code,
§§ 6168, 6169.).” (Olson, at pp. 1214–1215.) In that case—where Cohen
himself was licensed, there was no allegation of malpractice, the failure to
register was subject to other regulatory penalties, and no evidence was
presented that the clients were harmed by the oversight—requiring
“disgorgement of fees because of a failure to register the corporation . . . [was
deemed] disproportionate to the wrong.” (Id. at pp. 1214–1215.) Put another
way, the object of the fee agreements was the provision of legal services by
Cohen, a licensed attorney, not violation of the law. (Id. at p. 1215; accord,
Steven M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813
(Garber) [relying on Olson, which “took into consideration broad questions of
policy” in determining that “the failure to register as a professional
corporation should not have, and does not have, an impact on attorney fees”].)
      Most recently, in Frye v. Tenderloin Housing, Inc. (2006) 38 Cal.4th 23,
the housing clinic—a nonprofit public benefit corporation—provided legal
services through licensed attorney-employees for low and moderate income
tenants. After the clinic retained a portion of a damages award received in
successful litigation pursuant to a contingency fee agreement, one of the
represented tenants (Frye) argued that the clinic was not entitled to retain

                                       15
the fees because it had failed to register with the State Bar as a law
corporation. (Id. at pp. 29–31.) Although acknowledging a public purpose of
the registration requirement was to protect clients against a profit motive (id.
at p. 38), the Supreme Court disagreed with Frye, concluding that—even if
the nonprofit was engaged in the unauthorized practice of law and should
have registered and complied with the Business and Professions Code—that
failure did not justify disgorgement of statutory attorney fees from the
nonprofit to Frye where Frye was not injured by the nonprofit’s compliance
failures. (Id. at pp. 47–49.) Specifically, since “[u]nder no imaginable
circumstance would Frye have fared better had [the clinic] registered with
the State Bar,” the Court opined that “ ‘[t]o require disgorgement of fees
because of a failure to register the corporation . . . is disproportionate to the
wrong.’ ” (Id. at p. 48, quoting Olson.)
      It is against this backdrop that the Supreme Court decided Sheppard,
Mullin, supra, 6 Cal.5th 59, in 2018. There, a large law firm agreed to
represent J-M Manufacturing Company, Inc. (J-M), as the defendant in
certain litigation brought by a number of public entities; at the same time,
different attorneys within the law firm were representing one of the public-
entity plaintiffs in the J-M litigation, South Tahoe Public Utility District
(South Tahoe), in an unrelated matter. (Id. at pp. 67–69.) Both clients
signed engagement agreements containing purported general waivers of
current and future conflicts of interest. (Id. at pp. 68–69.) Based on these
waivers, the law firm concluded it did not need to disclose to either client that
it was also representing the other. (Id. at pp. 69–70.) However, after
discovering the simultaneous representation, South Tahoe successfully
moved to disqualify the law firm from its representation of J-M in the
litigation between J-M and South Tahoe. The law firm then sued J-M for its

                                        16
unpaid fees and the matter was sent to arbitration over the objection of J-M,
which maintained that the entire agreement was unenforceable given the
conflict of interest. (Id. at pp. 70–71.)
      The arbitrators found in Sheppard, Mullin’s favor, concluding that—
even assuming Sheppard, Mullin’s failure to disclose the conflict constituted
an ethical violation—the violation was not sufficiently egregious to warrant
forfeiture or disgorgement because there was no showing that the dual
representation had damaged J-M. (Sheppard, Mullin, supra, 6 Cal.5th at
p. 71.) After Sheppard, Mullin petitioned to confirm the award, J-M moved to
vacate, contending the attorney engagement agreement was unenforceable
because it violated former CRPC rule 3-310(C)(3), which prohibited an
attorney, without the informed written consent of each client, from
“ ‘[r]epresent[ing] a client in a matter and at the same time in a separate
matter accept[ing] as a client a person or entity whose interest in the first
matter is adverse to the client in the first matter.’ ” (Shepard, Mullin, at
p. 80.) Citing Moncharsh for the proposition that a violation of the CRPC
does not render a retainer agreement unenforceable, the superior court
confirmed the award. (Sheppard, Mullin, at p. 71.) The appellate court then
reversed, finding a violation of the CRPC despite the broad conflict waivers in
place and concluding that this rendered the engagement agreement
unenforceable and disentitled Sheppard Mullin from any fees for
representing J-M. (Sheppard, Mullin, at pp. 71–72.)
      On petition for review, the Supreme Court first reaffirmed the holding
in Loving that “an arbitral award must be vacated, when a court determines
that the arbitration has been undertaken to enforce a contract that is ‘illegal
and against the public policy of the state.’ ” (Sheppard, Mullin, supra,
6 Cal.5th at p. 73, italics added.) The Court rejected the argument that a

                                            17
contract can only be found unenforceable in violation of public policy when
the policy at issue had been declared by the Legislature. (Ibid,, quoting Civ.
Code, § 1667.) Rather, citing Chambers, the Court observed that “California
courts have held that a contract or transaction involving attorneys may be
declared unenforceable for violation of the Rules of Professional Conduct, the
set of binding rules governing the ethical practice of law in the State of
California.” (Id. at p. 73, italics added.) The Court thus confirmed that
“California law holds that a contract may be held invalid and unenforceable
on public policy grounds even though the public policy is not enshrined in a
legislative enactment. (Id. at p. 79.)
      Turning to the merits of the case before it, the Supreme Court opined
that the “limitations in rule 3-310(C)(3) serve to enforce ‘the attorney’s duty—
and the client’s legitimate expectation—of loyalty.” (Sheppard, Mullin,
supra, 6 Cal.5th at p. 84.) “It is for this reason that the rules encompass
simultaneous representation even in unrelated matters where there is no risk
that confidential information will be transmitted.” (Ibid.) Because the
“transaction was entered under terms that undermined an ethical rule
designed for the protection of the client as well as for the preservation of
public confidence in the legal profession,” the Court found the contract as a
whole unenforceable. (Id. at p. 87.) Under the circumstances, the Supreme
Court remanded the matter for a determination of whether the law firm
should recover in quantum meruit for the reasonable value of the legal
services it provided to J-M. (Id. at pp. 88-89.)
      2.    The JVA is not Unenforceable As Against Public Policy
      Having reviewed the case law in this area at some length, we have
discerned several general principles which we conclude determine the
resolution of this matter. First, “ ‘the Legislature has expressed a “strong

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public policy in favor of arbitration as a speedy and relatively inexpensive
means of dispute resolution.” ’ ” (Sheppard, Mullin, supra, 6 Cal.5th at p. 72,
quoting Moncharsh.) Nevertheless, a contract (which includes an otherwise
valid arbitration provision) may be deemed void and unenforceable in its
entirety by the courts if it violates a law, rule, or regulation designed for the
protection of the public. Thus, a number of cases have found contracts
unenforceable where they have violated specific CPRC rules designed for
public protection. (See, e.g, Sheppard, Mullin, at p. 87 [since CRPC conflict
rules are “designed for the protection of the client as well as for the
preservation of public confidence in the legal profession,” contract
unenforceable where firm failed to disclose a known current conflict];
Chambers, supra, 29 Cal.4th at pp. 156–157 [refusing to enforce fee-sharing
agreement where no client consent was obtained in violation of CPRC
because clients are entitled to the protection of knowing how any fees will be
split]; Hance v. Super Store Industries (2020) 44 Cal.App.5th 676, 684, 689
[failure of attorney to disclose lack of professional liability insurance to
clients pursuant to CPRC rule 3-410 rendered consents obtained under fee-
splitting agreement unenforceable; noting “[t]he disclosure would enable the
client to make an informed decision whether to engage an attorney who did
not carry insurance that would protect the client in the event of the
attorney’s negligent or other wrongful conduct that might have an adverse
effect on the client’s case”].)
      Licensing statutes and regulations, however, have been treated
somewhat differently. While licensing schemes obviously serve to protect the
public from “incompetence and dishonesty” (MW Erectors, supra, 36 Cal.4th
at p. 436), not all contracts entered into by unlicensed entities are
automatically void (see id. at p. 440). For instance, while Loving found

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unenforceable an agreement where only one of two partners was a licensed
contractor and the partnership was also unlicensed, it expressly
distinguished cases where (1) a partnership was unlicensed but both
individual partners were licensed; and (2) a contractor’s license expired
during performance of the contract but was renewed in the name of a
corporation bearing the contractor’s name and work was completed by the
corporation. (Loving, supra, 33 Cal.2d at p. 608; see also Brawerman v. Loeb
& Loeb, LLP (2022) 81 Cal.App.5th 1106, 1120 [the unlicensed practice of law
by a firm attorney does not completely invalidate retainer agreement
pursuant to which firm attorneys also engaged in the licensed practice of
law].) This makes sense because, where the safety and protection of the
public was otherwise protected, strict adherence to the licensing regime
“ ‘would become an unwarranted shield for the avoidance of a just
obligation.’ ” (Loving, at p. 608.) Thus, in these situations, the courts look to
facts like the sophistication of the parties, the licensing of the individuals
performing the actual work, whether the client was injured by the compliance
failure, and whether the law provides for other penalties for noncompliance
short of voiding the entire agreement.
      Turning to the merits of this case, we note, as stated above, that the
State Bar Rules were not promulgated just to protect clients, but also to
protect the courts, the legal profession, and the integrity of the legal system.
(CRPC, rule 1.0(a).) And two appellate courts have expressly concluded that
the failure to register a law corporation with the State Bar does not
automatically vitiate a fee agreement because the purpose of the requirement
is not to protect the public but is a decision “typically made to obtain tax
advantages and to avoid personal liability for the corporation’s debts.”
(Olson, supra, 106 Cal.App.4th at pp. 1214–1215.) Further, to the extent

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incorporation implicates other concerns involving misuse of the corporate
structure, such issues may be addressed through administrative penalties.
(Id. at p. 1215.) In addition, the Supreme Court in Moncharsh saw nothing in
the CRPC rules at issue in that case suggesting to it that “resolution by an
arbitrator of what is essentially an ordinary fee dispute would be
inappropriate or would improperly protect the public interest.” (Moncharsh,
supra, 3 Cal.4th at p. 33, italics added.) Similarly, we see nothing in the
current “ordinary fee dispute” that would mandate holding the JVA
unenforceable in its entirety.
      This case does not involve safeguarding a client against a corporate
profit motive as discussed in Frye. Here, the arbitrator simply divided fees in
the eight cases for which client consents existed and distributed the
remainder of the fees under the JVA pursuant to principles of quantum
meruit. Moreover, the JVA was executed by two sophisticated attorneys on
behalf of their respective law corporations with little difference in bargaining
power. One firm’s consideration was largely to fund and administer
operations of the other. And, as mentioned above, the Agreement
presupposed the involvement of the two lead attorneys, Micha Starr and Lisa
Bloom. Had Liberty wanted a different agreement, it could simply have
negotiated it. Further, there is no allegation that Bloom or any of the other
attorneys actually providing legal services under the JVA were not properly
licensed to practice law. Nor does Liberty suggest that the parties were
aware of the compliance issue when they executed the JVA. In addition,
there is no evidence any of the clients were harmed by Bloom’s lack of State
Bar registration. And, as the parties agree, the object of the agreement was
to “collectively and collaboratively prosecute legal matters”, not to violate the
CRPC. Finally, as the arbitrators noted, Bloom is subject to other discipline

                                       21
for failing to register as required. Under these circumstances, we cannot
conclude that the JVA was void and unenforceable in its entirety.
      Having made this determination, Liberty’s other contentions
necessarily fail. We have assumed without deciding that Liberty did not
waive the right to challenge the illegality of the JVA as a whole by
submitting to arbitration and then raising the issue before the arbitrator as
soon as Liberty became aware of it. However, the same cannot be said of its
claims with respect to the inadequacy of the consents obtained in this case.
Rather, as mentioned above, Liberty conceded before the arbitrator that its
only challenge to the consents was that they were illegal based on Bloom’s
failure to register as a law corporation and thus its defense under CPRC Rule
1.5.1 with respect to client consents “[fell] with the law corporation
registration defense.” Under such circumstances, we have no authority to
revisit the arbitration panel’s conclusions with respect to the legality of the
consents that were obtained in this case. (Moncharsh, supra, 3 Cal.4th at
p. 12 [“[I]t is within the power of the arbitrator to make a mistake either
legally or factually. When parties opt for the forum of arbitration they agree
to be bound by the decision of that forum knowing that arbitrators, like
judges, are fallible.”]; Marsch v. Williams (1994) 23 Cal.App.4th 238, 243–244
[citing Moncharsh in concluding that unless one of the enumerated statutory
grounds exists, “a court may not vacate an award even if it contains a legal or
factual error on its face which results in substantial injustice].) Nor would
we at this late hour. (Law Finance Group, LLC v. Key (2023) 14 Cal.5th 932,
958 [citing Moncharsh for conclusion that “challenges going ‘to only a portion
of the contract’ can be forfeited if they are not timely raised”]; Moncharsh at
p. 30 [“[W]e cannot permit a party to sit on [its] rights, content in the
knowledge that should [it] suffer an adverse decision, [it] could then raise the

                                       22
illegality issue in a motion to vacate the arbitrator’s award. A contrary rule
would condone a level of ‘procedural gamesmanship’ that we have condemned
as ‘undermining the advantages of arbitration.’ ”].)
                             III. DISPOSITION
      The judgment is affirmed. Bloom is entitled to its costs on appeal.

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                                         GETTY, J.

WE CONCUR:

HUMES, P. J.

BANKE, J.

A165269


 Judge of the Solano County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.

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