California Mediation and Arbitration

Arbitration/Employment/Enforcement/ Construction: Signed Acknowledgment of Employee Guidebook Failed to Establish Employee Was Bound By Arbitration Provision in Guidebook

 

Guidebook Disclaimers Were Self-Destructing

     In the next case, the Court of Appeal would not let the employer “have its cake and eat it too.”  On the one hand, the employee Guidebook provided for arbitration.   On the other hand, the employee Guidebook contained disclaimers that relieved the employer of contractual obligations.  The employer could not have it both ways.

      In an employment lawsuit between Plaintiff Tamayo and her employer, a golf club, the golf club moved to compel arbitration, based on the employee’s signed acknowledgment that she received the employer Guidebook with an arbitration provision.  The trial court denied the employer’s motion to compel arbitration, and the employer appealed.  Tamayo v. Cordevalle Golf Club, LLC, H037983 (6th Dist. April 26, 2013) (Bamattre-Manoukian, J., author 3:0) (unpublished). 

     One key disclaimer in the Guidebook provided that it “does not constitute a contract of employment.”  The Court of Appeal concluded, “the parties did not enter into a binding agreement to arbitrate because no document contained in the record can be reasonably construed to manifest the mutual assent of the parties to an agreement to arbitrate.”

     Query whether the result would have been different if, instead of the self-destructing language that there was no contract of employment, the Guidebook had only said that the employer could unilaterally modify, revoke, suspend, terminate, or change the policies and procedures in the Guidebook.  Under those circumstances, might the Court of Appeal have reached into its toolkit, and pulled out the implied covenant of good faith and fair dealing to conclude that the contract was not unilateral and illusory, because it had to be interpreted reasonably so as not to frustrate its purpose?  See my April 28, 2013 post on Serpa v. California Surety Investigations, Inc., Case No. B237363 (2nd Dist. Div. 7 April 19, 2013; mod’d April 26, without changing judgment) (Perluss, J., author 3:0) (published) (applying covenant of good faith and fair dealing to save arbitration clause from “illusory” interpretation).

Arbitration/Construction of Agreement: Agreement Providing Alternative of Arbitration Did Not Require Binding Mediation

Sometimes “May” Means “Shall” and Sometimes “May” Means “May”

     When does an ADR provision that provides for arbitration require arbitration?

     Truplug, the inventor of a product used as an emergency plug for boat leaks, sued Forespar, which had exclusive rights to market the product, for misrepresentation and negligence in marketing the Truplug product.  After the trial court denied Forespar’s motion to compel arbitration, Forespar appealed.  Truplug v. Forespar Products Corp., Case No. G046983 (4th Dist. Div. 3 April 2, 2013) (O’Leary, P.J., author  3:0) (unpublished).

      The problem presented by the ADR provisions was that they were a mish-mash.  Thus, one sentence read, “the parties shall try in good faith to settle the dispute by mediation . . . before resorting to arbitration, litigation, or some other dispute resolution procedure.”  Another sentence read:  “In the event . . . mediation does not resolve the dispute, either party may deliver a copy thereof to the American Arbitration Association . . . “   Yet another sentence read, “Whenever a party desires to institute litigation proceedings against the other party concerning this Agreement, it shall provide written notice . . . “  And another sentence provided that actions shall be brought in the County of Orange.

     Appellant Forespar argued that the use of the word “may” meant that a party had the option to arbitrate, and that arbitration was triggered by a party’s choice to arbitrate.  In fact there are cases holding that mandatory arbitration will be triggered when a party “may” arbitrate and opts to arbitrate.

      However, looking “at the arbitration language in the context of the entire Agreement,” the Court of Appeal concluded that there was no “clear agreement to arbitrate any and all controversies between the parties,” sinking Forestar’s argument.

      The Merrimac sinks the Cumberland.  1862.  Library of Congress.

      The order of the trial court was affirmed.

     TIP:  If you are arguing in favor of arbitration, emphasize “contractual arbitration being a favored method of resolving disputes, every intendment will be indulged to give effect to such proceedings.”  Titan Group, Inc. v. Sonoma Valley County Sanitation Dist., 164 cal.App.3d 1122, 1127 (1985).  If you are opposing arbitration, argue that there is no clear and unequivocal agreement to waive the right to a court trial of controversies between the parties.   Wolschlager v. Fidelity National Title Ins. Co., 111 Cal. App.4th 784, 789 (2003).

Mediation/Condition Precedent/Arbitration/Construction of Agreement: Fifth District Refuses To Compel Mediation And Agrees Arbitration Clause Is Unenforceable

Arbitration Clause Did Create Unilateral Right To Compel Arbitration, And There Was No Precedent To Compel Mediation

     Members of an LLC ended up in a business dispute leading to a lawsuit followed by defendants’ motion to compel mediation and arbitration.  The trial court construed an arbitration agreement as insufficient to allow one party to unilaterally compel arbitration, and further found that it was without jurisdiction to enforce a mediation provision.  After defendants lost their motion to compel mediation and arbitration of their disputes, they appealed.  Angelakis v. Hennigan, Case No. F064956 (5th Dist. March 12, 2013) (Levy, Acting P.J., author 3:0) (unpublished).

     The Court of Appeal acknowledged that there is support, under some circumstances, for construing an arbitration clause as creating a unilateral right to compel arbitration.  But not here.  The problem for defendants/appellants was that here, the arbitration clause also provided the dispute could be resolved by arbitration “if all parties to the dispute agree to arbitration.”  Here, however, all parties did not agree to arbitration, leaving defendants/appellants stuck with the Court’s construction of the plain language of the arbitration clause.

     The parties’ operating agreement also provided, “if the members cannot resolve the dispute to their mutual satisfaction, the matter shall be submitted to mediation.”  Also, there is a strong policy in favor of promoting mediation.  So why wouldn’t the Court require mediation? 

     The Court agreed that encouraging mediation meant that courts will uphold a sanction, such as denying attorney’s fees, where mediation is a precondition to obtaining attorney’s fees.  But the Court refused to force the parties to mediate because mediation is voluntary.  Jen-Weld, Inc. v. Superior Court, 146 Cal.App.4th 536, 543 (2007) (an order compelling mediation is antithetical to the entire concept of mediation).

     The order denying the defendants’ motion to compel mediation and arbitration was affirmed.

Arbitration/Unconscionability/Arbitrability: Sixth District Rules Tort Claims, Including Battery, Are Arbitrable

Decision Reversing Trial Court’s Findings of Unconscionability and Non-Arbitrability of Tort Claims is Very Fact Specific – But Ruling On Tort Claims Is Worth Noting

      Bigler v. The Harker School, Case No. H037450 (6th Dist. February 6, 2013) (Elia, J., author 3:0) (published) is a reminder judicial determinations of unconscionability and arbitrability are often nuanced and fact specific, and the burden of proof may tip the balance in reaching an outcome.  Here, the Court of Appeal signaled the outcome twice, by emphasizing that the party opposing arbitration “had the burden of proving the defense of unconsionability”, and the burden to “demonstrate than an arbitration clause cannot be interpreted to require arbitration of the dispute.”  The superior court thought the plaintiff, who sued her private school, met the burden for opposing arbitration, but the Court of Appeal held otherwise.

     Plaintiff Shivani, enrolled as a student in The Harker School, sued the school alleging she had been wrongfully accused of an honor code violation, and that a teacher who humiliated her, had pushed her to the ground.  The school petitioned to compel arbitration, under a broad-based arbitration clause.  The superior court denied the petition, finding the contract unconscionable, and finding that it was “highly unlikely” that the plaintiffs agreed to arbitrate, expecting tort claims would be included in the process.

     On the issue of unconscionability, here are examples of what I mean by “nuanced” and “fact specific”:  The Court of Appeal agreed that the failure to attach AAA rules is “of minor significance”; was “less convinced than the superior court that the other circumstances indicate procedural unconscionability” and was “not as troubled as was the superior court” by a carve-out of tuition disputes from arbitration.  Put this all on a scale and weigh it, and it is the burden of proof that tips the scale against plaintiff.

      What probably made this case worthy of publication is the Court of Appeal’s effort to distinguish other cases, holding that tort claims were not arbitrable, Victoria v. Superior Court, 40 Cal.3d 734 (1985) and RN Solution, Inc. v. Catholic Healthcare West, 165 Cal.App.4th 1511 (2008):  “In each of these cases, the lawsuit focused on conduct that was so removed from the professional relationship between the parties that it could not have been contemplated when they executed their agreement to arbitrate disputes.”  Here, however, alleged battery, negligent infliction of emotional distress, defamation, and negligent hiring, took place on the school campus, with students present, and/or related to the student’s relationship with the school.  Indeed, the plaintiffs were somewhat hoist by their own pleading, having alleged that torts were committed by persons “acting in the course and scope of their employment and agency . . . “

     And if that’s not enough, there is always the burden of proof.

     The Court of Appeal opinion ends:  “Harker may well be found liable under the parties’ contract, on a tort theory, or both, but it is the arbitrator who must resolve the questions presented in Shivani’s complaint.”  “Well”?  Is that an oblique caution, or what?

    

    

Arbitration/Construction of Agreements: Fourth District, Division 2 Concludes Subcontract Arbitration Clause Does Not Permit Contractor to Compel Arbitration of Payment Dispute

Result Here Depends Entirely On Contract Construction Of Prime And Subcontracts

     Our next case is entitled American Water Jetting, Inc., Plaintiff and Respondent, v. Highland Construction, Inc. et al., Defendants and Appellants, Case No. E054004 (Fourth Dist. Div. 2 January 25, 2013) (McKinster, J.) (unpublished).  I don’t usually restate the full caption of a case.  Here, however, I did so, because I find it curious that the Court of Appeal states:  “The trial court denied the motion to compel arbitration, and AWJ filed a timely notice of appeal.”  Why would the respondent, AWJ, file a timely notice of appeal, after successfully defeating Highland’s motion to compel arbitration in the trial court?  Whatever.  Let’s move on.

     This case is filled with red herrings.

    

    Red herrings.  Creative Commons Attribution 2.0 Generic license.  misocrazy, author.

    

       AWJ, a subcontractor retained by Highland, performed some of the work under a contract between Highland and Caltrans.  Evidently, Caltrans paid Highland for AWJ’s work, but AWJ did not get fully paid by Highland under the subcontract.  So AWJ sued.  Highland moved to compel arbitration, and AWJ successfully opposed the motion, contending that its subcontract with Highland gave it an option to arbitrate or litigate, and alternatively, that Highland had waived arbitration.  Let’s just say an appeal followed.

     AWJ relied on a provision in the subcontract allowing it to sue or pursue arbitration in the event that Caltrans rejected AWJ’s claims for additional payment.  But the Court of Appeal rejected that argument.  Here, the dispute was between AWJ and Highland, not between AWJ and Caltrans, and the provision relied upon by AWJ “does not answer the question raised in this case, i.e., whether Highland can compel arbitration of AWJ’s claim that Highland breached the contract.”

      Next, the Court of Appeal turned to Highland’s argument that the subcontract incorporated in its entirety the prime contract between Highland and Caltrans, and the prime contract required arbitration.  But the Court of Appeal rejected the wholesale incorporation argument, because the incorporation language was expressly limited to “work to be performed by the Subcontractor,” and did not reference provisions of the prime contract pertaining to payment or to arbitration of disputes – the issues involved here.

     In the end, the resulting contractual confusion did not help respondent Highland, because an agreement to arbitrate must be “clear and unmistakable.”  Badie v. Bank of America, 67 Cal.App.4th 779, 894 (1998).

     Because the conclusion that the subcontract did not permit Highland to compel arbitration of a payment dispute hinged on contract interpretation, the Court did not have to address respondent AWJ’s waiver argument.  I know, I know, the Court says AWJ appealed.  In any case, because the order below was affirmed, AWJ, the respondent, won its timely appeal.   Got that?

    

Arbitration/Construction/Burden of Proof: Fourth District, Division 3 Affirms Contractor’s Right To Arbitrate In Decision That Hinges On The Word “Involves”

Disneyland of Construction:  Involvement In Project Versus Involvement In Dispute Is The Issue Here

Carol M. Highsmith, photographer.  Between 1980 and 2006.  Library of Congress.

     Subcontractor Pacific Westline, Inc. sued contractor C.W. Driver, alleging Driver refused to pay for additional work on a hotel at Disneyland.  Driver successfully petitioned to compel arbitration, and Pacific appealed the order granting Driver’s petition.  Pacific Westline, Inc. v. C.W. Driver, Inc., Case No. G046357 (4th Dist. Div. 3 January 9, 2013) (Bedsworth, J.) (unpublished).

     The subcontract between Pacific and Driver, which incorporated ADR procedures adopted in the “prime contract” between Disney and Driver, mandated arbitration “for disputes not involving the acts, omissions or otherwise the responsibility of [Disney].”  Thus, the requirement to arbitrate hinged on whether the dispute “involved” Disney, because if Disney was involved, then Pacific did not have to arbitrate.

      Justice Bedsworth, a wordsmith himself, noted that “involve” has several meanings.  But that was no help to Pacific, because “the burden must fall upon the party opposing arbitration to demonstrate that an arbitration clause cannot be interpreted to require arbitration of the dispute.”  (citing Coast Plaza Doctors Hospital v. Blue Cross of California, 83 Cal.App.4th 677, 686-687).  Here, the clause could be interpreted to require arbitration of the dispute.

    Besides, involvement in the project was not the key to arbitration:  “the clause speaks instead of involvement in the claim or the dispute.”  And the evidence showed only Disney’s involvement in the project, not in the dispute with Driver.

     Affirmed.

Arbitration/Employment/Enforceability/FAA/CCP 1281.8: Second District, Div. 1 Reverses Order Denying Motion To Compel Arbitration – Mutuality Of Employer/Employee Provisions Is Key

“In particular, we do not find unconscionable a provision in the arbitration agreement allowing either party to seek provisional remedies . . . “

     For the practitioner, Baltazar v. Forever 21, Inc., Case No. B237173 (2nd Dist. Div. 1 Dec. 20, 2012) (Mallano, J.) (published), is worth reading because it provides employers and employees with an example of a “final and binding” arbitration provision that survives various challenges and passes muster with the Court of Appeal.

     Maribel Baltazar sued her former employer, Forever 21, Inc., for racial and sexual harassment and other employment-related wrongs.  Employer and two employees filed a motion to compel arbitration, which motion the employee opposed, arguing the arbitration agreement was unconscionable.  The trial court denied defendants’ motion, and defendants appealed.

     Agreeing that the “take it or leave it” employment contract was one of adhesion, the Court of Appeal nevertheless held that it was not substantively unconscionable. 

     Preliminarily, the Court of Appeal concluded that the agreement was governed by the California Arbitration Act, not the Federal Arbitration Act, because no evidence was offered that the employment or any pertinent transaction involved interstate commerce.  This preliminary conclusion supported the Court’s analysis that carving out provisional equitable relief from the arbitration agreement was entirely permissible.

     Because California Arbitration Act applied, Cal. Code of Civ. Proc. section 1281.8 necessarily applied to the agreement.  And section 1281.8 allows either party to the arbitration provision to apply to the court for a provisional remedy in connection with an arbitrable controversy.  (We note in passing that sometimes other contractual arbitration provisions include carve-outs for provisional relief.  Seeking provisional relief from an arbitrator may be unwieldy, because it must be enforced quickly and through a court.  For example, the standard California Association of Realtors contracts for the purchase and sale of real estate typically have ADR provisions requiring mediation and arbitration with a carve-out for provisional remedies, allowing recourse to the court).

      The Court also rejected the employee’s argument that the carve-out for provisional remedies did not result in a lack of mutuality.  Here, the carve-out did not exempt claims more likely to be brought only by the employer.  For example, of the employee’s nine claims, virtually all could be a source of injunctive relief.  Thus, while ‘[a]n arbitration agreement is substantively unconscionable if employees are required to submit their disputes to arbitration while the employer remains free to pursue its claims in any forum,” such was not the case here.

     The employee also argued that a provision allowing for all necessary steps to be taken to protect trade secrets and proprietary and confidential information from public disclosure was unduly harsh and one-sided.  One-sided, perhaps, but not unreasonable.  After all, the provision was limited to protecting trade secret or similar provision, “consistent with the duties imposed by the Uniform Trade Secrets Act (Civ. Code, sections 3426-3426.11)”.  Besides, “courts have upheld confidentiality and nondisclosure agreements of general application,” allowing the Court to invoke the maxim that “the greater contains the less.”

     Concluding that the agreement to arbitrate was not unconscionable, the Court of appeal reversed the order denying arbitration, ordering the trial court on remand to enter a new order granting the motion to compel arbitration.

Arbitration: Second District Division 1 Construes 3 Separate Agreements And Concludes Parties Did Not Agree To Arbitrate

Incorporation By Reference Argument Fails

     Freedom Films, LLC sued Nu Image, Inc., and M3 Media, Inc. for breach of contract, accounting, and fraud, adding doe defendants later as alleged alter egos.  Defendants moved to compel arbitration under an arbitration provision.  The trial court denied the motions on the ground that the parties had not agreed to arbitrate Freedom Film’s rights as to the picture entitled The Mechanic.  The original named defendants and the doe defendants appealed. Freedom Films, LLC v. Nu Image, Inc., et al., Case Nos. B236216, B236765 (2nd Dist. Div. 1 August 30, 2012) (Rothschild, J., author) (unpublished.).

     The problem for defendants was that there were three different agreements knocking about, rather than working smoothly together – and because an agreement to arbitrate the rights at issue could not be incorporated by reference, both the trial court and the Court of Appeal concluded that there was no agreement to arbitrate. 

      Freedom Films sued upon a January 23, 2009 letter agreement entered into with Nu Image and Home of the Brave Productions.  But the letter agreement did not contain an arbitration provision.

     A 2006 distribution agreement between MGM, and Nu Image did contain a dispute resolution provision.  Furthermore, a February 10, 2009 settlement agreement entered into by MGM, Nu Image, Home of the Brave Productions, and Freedom Films, incorporated the dispute resolution provision in the distribution agreement.  So why didn’t that result in a binding agreement to arbitrate?  Two problems here.

     First, Freedom Films sued on the letter agreement, not the settlement agreement, and the settlement agreement did not exist at the time of the letter agreement. 

     Second, though the letter agreement did refer back to audit rights in the 2006 distribution agreement, it failed to clearly incorporate the 2006 arbitration provision that was incorporated in the February 2009 settlement agreement.  See Amtower v. Photon Dynamics, Inc., 158 Cal.App.4th 1582, 1608 (2008) (“subject document must contain some clear and unequivocal reference to the fact that the terms of the external document are incorporated”)..

     Defendants made the additional argument that it was for the arbitrator to decide whether the dispute was subject to arbitration.  Here the court distinguished between deciding whether there was an agreement to arbitrate (decision for the court) and whether the dispute was within the scope of the arbitration provision (maybe a decision for the arbitrator, but not at issue).

     The orders denying motions to compel arbitration were affirmed.

     Comment:  the lesson for practitioners is that one must be very careful with incorporations by reference.  The incorporation should be clear and unambiguous to be effective.  A further problem arises when the document one would have liked to incorporate doesn’t yet exist.

     Blawg Bonus:  “Hollywood accounting (also known as Hollywood bookkeeping) refers to the opaque accounting methods used by the film, video and television industry to budget and record profits for film projects.”  Wikipedia entry, “Hollywood accounting.”

Arbitration/Employment/Waiver/Burden of Proof/Construction: Because Collective Bargaining Agreement Did Not “Clearly And Unmistakably” Waive Plaintiffs’ Right to Bring Statutory Claims In Judicial Forum, Employees Did Not Waive Their Rig

Denial of Motion to Compel Arbitration Hinges on Burden of Proof and Existence of Statutory Rights

     One of the “hot topics” we have posted about is whether the right to sue in court can be waived when the rights at issue are statutory rights.  See our June 5, 2012 post on Iskanian v. CLS Transportation Los Angeles, LLC, Case No. B235138 (2nd Dist. Div. 2 June 4, 2012) (certified for publication) (interpreting AT&T Mobility v. Concepcion broadly to hold that the Federal Arbitration Act “conclusively invalidates the Gentry test” for finding that a statutory right is unwaivable and cannot be arbitrated); and our June 14 post on Hoover v. American Income Life Insurance Company, Case No. E052864 (4^th Dist. Div. 2 May 16, 2012) (certified for publication) (underscoring a split in the law, concerning the arbitrability of state statutory labor claims). Ordinarily arbitrability turns on contractual interpretation and contract defenses. 

     Our next case, however, is important because of its particular focus on the burden of proof.  In Bartoni v. American Medical Response West, A130333 (1st Dist. Div. 2 August 24, 2012) (Kline, P.J.) (unpublished), the trial court refused “to compel arbitration of plaintiffs’ wage and hour claims, where it determined the collective bargaining agreements (CBAs) between the union and defendant did not contain a ‘clear and unmistakable’ waiver of plaintiffs’ right to a judicial forum for their statutory claims.”   The employer appealed.

     The opinion is notable for its extensive review of cases applying the “clear and unmistakable” standard to determine whether there has been a waiver of a judicial forum.   Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998) established the standard.  In Wright, though the CBA contained an arbitration provision, a longshoreman filed suit in district court under the Americans With Disabilities Act of 1990.  The district court dismissed the case because the employee failed to pursue grievance procedures in the CBA, the Fourth Circuit Affirmed, and the Supreme Court reversed, because the CBA did “not contain a clear and unmistakable waiver of the covered employees’ rights to a judicial forum for federal claims of employment discrimination.” Id. at 82.  The rationale for the “clear and unmistakable” standard is that where the employee’s rights are created by statute, the ultimate question for the arbitrator will not be contractual interpretation, but an interpretation of what federal law requires – an issue for judicial determination, unless there is a “clear and unmistakable” waiver of the right to have a judge decide.

     The court explains in Bartoni:  “In applying the Wright analysis to determine whether there has been a sufficient explicit waiver, courts look to the generality of the arbitration clause, explicit incorporation of statutory requirements, and the inclusion of specific statutory provisions.”

     Applying the Wright analysis in Bartoni, the Court of Appeal found that the arbitration provision was “too general”, ambiguous, and failed to incorporate specific statutory provisions regarding wage and hour disputes.  It treated the use of the word “dispute” as too general in context, and borrowed the scorn heaped upon the ambiguous phrase “and/or” by legal writer Bryan A. Garner:  “A legal and business expression dating from the mid-19th century, and/or has been vilified for most of its life – and rightly so.” (Bartoni, footnote 3).

     The court’s extensive review of federal and state cases analyzing a CBA waiver of a statutory right led it to observe few cases hold a CBA waiver of a statutory right was clear and unmistakable, whereas, “numerous California cases have concluded CBAs failed to clearly and unmistakably require arbitration of statutory claims.”

     The order denying the motion to compel arbitration was affirmed.

      

Labor strategists confer. 1937. From the left: Sidney Hillman, member of the CIO; Homer L. Martin, President of the U.A.W.; Leo Pressman, CIO General Counsel; John L. Lewis, President of the United Mine Workers; and John Brophy, Director of the CIO.

Arbitration/Fees/Construction: Fifth District Agrees Attorney’s Fees Clause Provided For Recovery Of Fees Only In Arbitration, Not In Superior Court

 

Parties’ Agreement To Litigate In Superior Court Proved Fatal To Prevailing Party’s Fee Recovery

     Plaintiff Mari sued Defendant Hawkins for professional negligence in connection with a survey, and prevailed in the trial court. However, the trial court denied Plaintiff’s request for attorney’s fees, because the fee provision was part of an arbitration provision stating, “[t]he arbitrator will award attorney’s fees to the prevailing party” -- and the parties agreed to proceed in superior court rather than to arbitrate. Mari v. Hawkins, Case No. F062563 (5^th Dist. June 25, 2012) (Kane, J., author) (unpublished). Plaintiff appealed the adverse fee ruling.

     The contract between the parties contained three separate fee provisions. However, the broadly worded fee provision, quoted above, applied only to arbitration. Plaintiff argued that the provision applied, and the parties simply substituted a judge for an arbitrator. Nope, that didn’t work.

     The second fee provision provided, “[i]f any proceeding is brought to enforce or interpret the provisions of this Agreement, the prevailing party therein shall be entitled to receive from the losing party therein, its reasonable attorney’s fees . . . “ Plaintiff ingeniously argued that prevailing on the claim for professional negligence required interpreting the contract. Nope, that didn’t work either. Suing for professional negligence is different than suing to enforce or interpret the provisions of a contract.

     The third fee provision provided, “[i]n the event [plaintiff] institutes a proceeding against [defendants], either directly or by way of cross-complaint, including a claim for . . . alleged negligence . . . wherein [defendants prevail], [plaintiff] agrees to pay [defendants] immediately following the proceedings all costs of defense, including . . . reasonable attorneys’ fees . . . .” Nope, that too didn’t work. The problem here is that the clause is not reciprocal – it provides recovery to a prevailing defendant, but not to a prevailing plaintiff. But I thought attorney’s fees provisions were reciprocal? Well might you ask. Attorney’s fees provisions are reciprocal when the action is on a contract (Civ. Code section 1717). Here, you will recall that Plaintiff prevailed on a cause for professional negligence, not for breach of contract. Therefore, the third provision is valid, despite the fact that it is not reciprocal.  However, because that fee provision is not reciprocal, the prevailing Plaintiff derived no benefit from it here.  Too late for tears . . . .

     The order of the trial court was affirmed.

     Comment: Consider the economics of this case. The parties went to trial, filed post-trial briefs, and went through an appeal. At trial, Plaintiff was found to be damaged in the amount of $155,134, but the damage amount was reduced by the trial judge to $50,000, due to a contractual fee limitation. Then, because the parties had agreed to litigate in superior court, Plaintiff was denied fees. The opinion does not tell us how much the fees were, but you can guess.

     Practice Tip: When confronted with a choice of an arbitral or judicial forum, consider the fee implications.  Also, consider whether agreeing to litigate in one forum rather than another forum means the attorney’s fees provisions ought to be revisited and revised.