Court Opinion

ID: 5648820
Source: CourtListenerOpinion
Date Created: 2022-01-11 20:02:30.305934+00
Date Added: 2024-06-11T08:38:28.742296
License: Public Domain

Filed 1/11/22 Borisoff v. The Pullman Group CA2/1
  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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(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 This opinion has not been certified for publication or ordered published for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

                      SECOND APPELLATE DISTRICT

                                     DIVISION ONE

LEONARD W. BORISOFF,                                            B297162, B298972, B299796

        Plaintiff and Respondent,                               (Los Angeles County
                                                                Super. Ct. No. BC454901)
        v.

THE PULLMAN GROUP, LLC, et
al.,

        Defendants and Appellants.

     APPEAL from orders of the Superior Court of Los Angeles
County, Daniel S. Murphy, Judge. Affirmed.
     AlvaradoSmith, W. Michael Hensley for Defendants and
Appellants.
     Krane & Smith, Jeremy D. Smith, Daniel L. Reback for
Respondent Currency Corp., Successor in Interest to Plaintiff
Leonard W. Borisoff.
            ___________________________________
      Leonard W. Borisoff a successful songwriter, assigned his
royalty rights and his claims against a third party to The
Pullman Group, LLC, Wertheim, LLC, Structured Asset Sales,
LLC, and David Pullman (collectively Pullman) by way of an
assignment agreement that contained an arbitration clause.
      Borisoff later sued Pullman, which in turn filed a motion to
compel arbitration. The trial court granted the motion without
having determined a valid arbitration agreement existed, leaving
that task to the arbitrators. The arbitrators returned an award
for Pullman in the amount of $41,000 plus $67,866.13 in attorney
fees. Pullman moved to confirm the award, which the trial court
granted, again deferring to the arbitrators for the determination
whether a valid arbitration agreement existed. Borisoff appealed
from the resulting judgment.
      In that prior appeal we held that before a matter may be
sent to arbitration a trial court must in the first instance
determine whether a valid arbitration agreement exists.
(Borisoff v. The Pullman Group, et al. (Sept. 1, 2016, B259675)
[nonpub. opn.] (Borisoff I).) We further held that the arbitration
award could not be confirmed because portions of the assignment
agreement were illegal, and the arbitrators made no distinction
between void and non-void provisions in rendering their award.
Accordingly, we reversed the judgment with no directions about
what to do on remand.
      In dicta we observed that the assignment agreement’s
consideration was “patently illusory,” and that in another appeal
involving a virtually identical assignment agreement between
Pullman and a third party, the agreement “as a whole was
unconscionable because it was written in visually dense,
incomprehensible language, heavily favored its author, and was

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obtained under conditions of undue influence.” (Borisoff I,
B259675, at p. *5.)
       On remand, Pullman again moved to compel arbitration,
but this time only as to those provisions of the assignment
agreement that were not illegal. The trial court denied the
motion on the grounds that the agreement lacked consideration
and was procedurally and substantively unconscionable. The
court awarded attorney fees to Borisoff and denied in part
Pullman’s motion to tax costs.
       In three appeals, Pullman appeals the rulings (1) denying
arbitration (appeal No. B298972); (2) granting Borisoff attorney
fees (appeal No. B297162); and (3) denying Pullman’s motion to
tax costs (appeal No. B299796). We consolidated the appeals,
and Borisoff moved to dismiss the first appeal as frivolous.
       We deny the motion to dismiss but affirm the court’s
orders.
                          BACKGROUND
       We set forth the facts in Borisoff I as follows (headings
omitted):
       “Borisoff was a successful vocalist, songwriter and producer
in the 1960’s who as a result of his work owned rights to royalty
income of up to $30,000 per year, payable by such companies as
Broadcast Music, Inc., Universal Music Publishing, Minder
Music, and SoundExchange (collectively BMI). Borisoff used this
royalty stream to obtain loans from Currency Corp., a finance
lender. When a conflict arose between Borisoff and Currency
over Currency’s interest rates and accounting practices, Borisoff
assigned both his assignable and nonassignable claims against
Currency, as well as his music library, to Pullman.

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       “The assignment agreement, which Pullman drafted, is set
forth in 13 visually and verbally dense single-spaced pages with
small typeface and relatively few paragraph breaks. It provided
that Pullman would pay Borisoff $100,000 (later amended to
$50,000) for his music library and all related claims and ‘rights,’
less ‘costs.’
       “The agreement defined ‘costs’ as ‘including, but not limited
to, the cost [of setting up an LLC (which Pullman would own) to
acquire Borisoff’s royalty rights], the costs to secure recognition of
the transfer of the Rights to Pullman by Broadcast Music, Inc.
(“BMI”), Universal Music Publishing, Sounds of Universal, Inc.,
and any Universal related entity, (“Universal”), Minder Music
Publishing and any related entity (“Minder”), MCA, and any
MCA related entity, Universal Records and any Universal related
entity (“Universal Records”) and SoundExchange, Inc. and any
related entity (“SoundExchange”), EMI UNART Catalogue, Inc.,
EMI Group, EMI Music Publishing and any EMI related [sic] and
any and all record labels, record companies, music companies,
worldwide distributors (“Record Companies”), and all
Administrators, Societies, and Publishers worldwide, and the
costs of any necessary lien searches.’ Also to be deducted was the
cost of ‘any liens, claims, encumbrances, judgments or
advances . . . [and] any amounts withheld by Pullman to pay and
discharge any or all of the liens.’
       “The assignment agreement provided that Pullman would
also effectively subtract from the purchase price any funds that
‘Pullman at its sole discretion, shall designate [as] consulting fees
paid to Owner pursuant to a separate Consulting Fee
Agreement.’ Under this provision, if Pullman felt ‘at its sole
discretion’ that it owed Borisoff $10,000 in consulting fees under

                                  4
a separate consulting agreement, for example, it could dedicate
$10,000 of the purchase price as payment of those fees, effectively
subtracting that amount from whatever might be due under
assignment agreement.
       “In addition to $100,000 (later $50,000), Pullman would
pay Borisoff any royalties earned over $50,000 in 2008, $55,000
in 2009, $60,000 in 2010, et cetera, but if the amount earned
equaled less than these amounts, any deficit would carry over to
the next and all following years. For example, if only $30,000
were earned in 2008, Borisoff would receive in 2009 only those
royalties earned in excess of $75,000.
       “Borisoff would be paid when he ‘met all conditions and
requirements’ stated in the agreement, which effectively meant
after ‘Pullman has received a . . . written acknowledgement from
[each of the entities listed above] of their acceptance of the
transfer of the Rights to Pullman,’ although Pullman reserved
the right ‘at its solo option’ to ‘withhold sufficient funds deducted
from the Purchase Price to discharge the claims of any lien
claimant.’
       “In addition to a monetary payment based on royalties,
Pullman offered to pay Borisoff 50 percent of any proceeds from
litigation of Borisoff’s non-assignable claims against Currency.
       “The financial aspect of the assignment’s consideration was
patently illusory, because in the unlikely event that some portion
of the purchase price remained after payment of global ‘costs,’
Pullman could at its discretion designate that portion as
satisfaction of a separate consulting agreement. And because it
is undisputed Borisoff’s royalty stream does not exceed $50,000
per year, he would be entitled to no residual payments in 2008
and following.

                                  5
       “The ‘rights’ Borisoff ceded to Pullman included any claims
against Currency, including ‘assignable claims and non-
assignable claims . . . without limitation, including the right of
filing litigation of the assignable and non-assignable claims, the
right to settle, the right to control and receive the proceeds of any
and all awards and or settlement or compromise from any and all
claims whether assignable or non-assignable.’ The agreement
provided that ‘[a]ll proceeds from any non-assignable claims are
directed to be paid to Pullman and to be under control of Pullman
as well as first right of refusal and matching right in and to
[Borisoff’s] economic interest in the proceeds of any assignable
and nonassignable claims. Pullman shall have sole control and
authority to settle or compromise or litigate any of the assignable
and non-assignable claims and [Borisoff] grants David Pullman
an irrevocable power of attorney with regard to the assignable
and non-assignable claims.’ Borisoff had no ‘right or authority to
settle or in any way compromise the non-assignable claims
(including the assigned proceeds relating thereto) without the
prior written consent of Pullman. Any such action by [Borisoff] to
compromise the non-assignable claims in any way shall be
deemed null and void. Pullman and [Borisoff] shall share all
proceeds of the Currency Corp. Parties non-assignable claims
proceeds equally on a 50/50 basis . . . .’
       “We examined these identical provisions in two appeals in
other cases, where we concluded they were void because they
purported to authorize Pullman to practice law without a license,
commercialized the practice of law, and violated public policy by
granting David Pullman power to veto settlement in any
litigation against Currency. However, we deemed the provisions
to be severable from the remainder of the contract because they

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were collateral to the contract’s central purpose. (Wertheim v.
Currency Corp. (May 22, 2012, B218547 [nonpub. opn.]);
Wertheim v. Omidvar (Oct. 5, 2011, B218021 [nonpub. opn.]).)
We observed in dicta in a third appeal that the assignment
agreement as a whole was unconscionable because it was written
in visually dense, incomprehensible language, heavily favored its
author, and was obtained under conditions of undue influence.
(Currency Corp. v. Wertheim (Sept. 30, 2013, B240444 [nonpub.
opn.]).)
       “The assignment agreement provided that any dispute
arising from it would be settled by arbitration before a panel of
three non-attorney arbitrators in accordance with the rules of the
American Arbitration Association, the arbitration to occur within
60 days of the filing of the demand for arbitration and be
completed in one day.” (Borisoff I, B259675, pp. 2-5.)
       By 2011, Pullman had paid Borisoff only an advance of
$4,000.
       Borisoff filed this lawsuit, seeking declaratory relief and
rescission on the grounds of fraud and failure of consideration.
       Pullman moved to compel arbitration, which the trial court
granted. The arbitration panel entered an award in favor of
Pullman, which the trial court confirmed and we reversed in
Borisoff I.
       On remand, Pullman again moved to compel arbitration.
       The trial court found that as Borisoff I had already
observed, the “financial aspect of the assignment’s consideration
was patently illusory” because “in the unlikely event that some
portion of the purchase price remained after payment of global
‘costs,’ Pullman could at its discretion designate that portion as
satisfaction of a separate consulting agreement.” The court found

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that “[w]here, as here, Defendants can claim various expenses as
‘costs’ and avoid paying Plaintiff altogether, the ‘financial aspect’
of this agreement must be deemed patently illusory.”
       The trial court found that the assignment agreement was
procedurally unconscionable because, “[t]o reiterate the appellate
court’s observation, the . . . agreement consist[ed] of ‘13 visually
and verbally dense single-spaced pages with small typeface and
relatively few paragraph breaks,’ ” and “[o]n top of this, Pullman
was the purchase agreement’s sole drafter, and Plaintiff signed
the purchase agreement while in financial straits.”
       The court found that the agreement’s substantive
unconscionability was “clear from the Court’s foregoing findings”
because the agreement “lack[ed] mutuality” and “heavily
favor[ed] its author, Pullman,” in that it “allow[ed] Pullman to
reap a windfall through collection of Plaintiff’s royalties and
discretionary payments to Plaintiff.”
       Concluding that the assignment agreement lacked
consideration and was unconscionable, the trial court denied
Pullman’s motion to compel arbitration.
       Borisoff moved for an award of $306,426.48 in attorney fees
under Civil Code section 1717, and sought $46,828.88 in
arbitration and court costs. Pullman opposed the fees motion and
moved to tax Borisoff’s costs. The trial court awarded Borisoff
$181,375 in attorney fees and $42,828.88 in costs.
                           DISCUSSION
       We review a trial court’s legal conclusions de novo.
(Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1435.)
To the extent the trial court’s decision is based upon resolution of
disputed facts, we review the decision for substantial evidence.

                                  8
(NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64,
71.)
A.    Appeal No. B298972
      1.     Motion to Dismiss
      Borisoff contends that Pullman’s appeal of the trial court’s
order denying arbitration is frivolous because, he argues, we held
in Borisoff I that the assignment agreement was entirely illegal.
The contention rests on a faulty premise, as we held in Borisoff I
only that portions of the assignment agreement were illegal, not
the entire agreement. Therefore, Borisoff’s motion to dismiss is
denied.
      2.     Merits on the Motion to Compel Arbitration
      Pullman contends the trial court erred in denying
Pullman’s motion to compel arbitration on the ground that the
arbitration agreement lacked consideration and was procedurally
and substantively unconscionable. For reasons stated in Borisoff
I, however, these findings were within the trial court’s discretion.
The court therefore properly denied Pullman’s motion. (See
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
24 Cal.4th 83, 99 [pursuant to “general contract law principles,”
California courts may invalidate arbitration agreements when
they contain provisions that are “unconscionable or contrary to
public policy”].)
B.    Appeals B298972 and B299796
      1.     Attorney Fees and Costs are Awardable
      Pullman contends no attorney fees or costs may yet be
awarded because there is no final judgment or prevailing party.
We disagree.
      “In any action on a contract, where the contract specifically
provides that attorney’s fees and costs, which are incurred to

                                 9
enforce that contract, shall be awarded either to one of the
parties or to the prevailing party, then the party who is
determined to be the party prevailing on the contract, whether he
or she is the party specified in the contract or not, shall be
entitled to reasonable attorney’s fees in addition to other costs.”
(Civ. Code, § 1717, subd. (a).)
       Here, the assignment agreement provides that in any
arbitration proceeding arising from the agreement, “[t]he losing
party shall reimburse the prevailing party for its reasonable
outside attorneys’ fees and costs incurred with respect to such
arbitration proceeding.”
       Because Borisoff successfully forestalled arbitration, he is
the prevailing party, and is entitled to attorney fees and costs.
       Pullman argues no fees or costs may be awarded because
the litigation, which Borisoff filed, did not terminate with the
order denying arbitration. We disagree.
       An order denying a motion to compel arbitration is final for
purposes of that arbitration. (See Marcus & Millichap Real
Estate Inv. Brokerage Co. v. Woodman Inv. Grp. (2005) 129
Cal.App.4th 508, 514-515.) In Marcus, the trial court granted
fees to a party that successfully sought to vacate an arbitration
award, even though the litigation was ongoing. Marcus held that
where no rehearing is ordered, an order vacating an arbitration
award is of necessity final, even if further litigation is possible.
(Id. at p. 515.)
       Here, Borisoff filed this litigation in part to forestall
arbitration. Therefore, the trial court’s order denying arbitration
is final with respect to arbitration proceedings, even if it is not
final for all purposes. The court was therefore entitled to award
attorney fees and costs.

                                 10
       2.    Fees Incurred With Respect to Arbitration
       Proceedings are Recoverable
       Pullman argues that only attorney fees incurred “in”
arbitration itself are recoverable. We disagree. The arbitration
agreement provided that “[t]he losing party shall reimburse the
prevailing party for its reasonable outside attorneys’ fees and
costs incurred with respect to such arbitration proceeding.”
(Italics added.) Fees incurred in litigation concerning an
arbitration award are incurred “with respect to” the arbitration
proceeding.
       3.    Costs Incurred During Arbitration are
       Recoverable
       Pullman argues that only costs incurred outside the
arbitration itself are recoverable, as any other costs would be the
exclusive province of the arbitrator, which awarded costs to
Pullman, not Borisoff. We disagree that costs incurred in
arbitration may be awarded only by the arbitrator. A prevailing
party “is entitled as a matter of right to recover costs in any action
or proceeding.” (Code Civ. Proc., § 1032, subd. (b).) Each party to
an arbitration will pay a pro rata share of the arbitration costs
“[u]nless the arbitration agreement otherwise provides.” (Code
Civ. Proc., § 1284.2.) In other words, parties to an arbitration are
entitled to “reach their own agreement as to how the costs of
arbitration should be awarded,” and to move the trial court for an
award of those costs. (Dickinson v. Kaiser Foundation Hospitals
(1980) 112 Cal.App.3d 952, 955.) Here, the arbitration agreement
“otherwise” provided that the prevailing party was to recover
“attorneys’ fees and costs incurred with respect to [the] arbitration
proceeding” (italics added). We read this provision as enabling a
party to seek costs incurred both in effectuating and prosecuting

                                 11
an arbitration. That being the case, the court was entitled to
award Borisoff costs pursuant to the parties’ arbitration
agreement.
                          DISPOSITION
      Borisoff’s motion to dismiss appeal No. B298972 is denied.
The trial court’s orders are affirmed. Each side is to bear its own
costs on appeal.
      NOT TO BE PUBLISHED

                                                 CHANEY, J.

We concur:

             BENDIX, Acting P. J.

             CRANDALL, J.*

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

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