Arbitration Provision Clearly Applied To Litigation, But Not To Earlier Transactional Work.
Nordman Cormany Hair & Compton, formerly in business for 75 years in Ventura County, appealed an order denying its petition to compel arbitration of a legal malpractice lawsuit. Aggeler v. Nordman Cormany Hair & Compton, B253566 (2/6 April 27, 2015) (Gilbert, Yegan, Perren) (unpublished).
The Nordman firm had done transactional work for plaintiffs in 2005 in connection with their ownership of a mobilehome park. After the owners became embroiled in a legal dispute with the residents in 2009, the Nordman firm represented the owners in litigation. The retention agreement for the litigation matter contained an arbitration provision.
In 2013 the owners sued the Nordman firm for malpractice. However, the owners’ alleged malpractice claims involved the Nordman firm’s “drafting of a contract” in 2005. Unfortunately for the law firm, it was not clear that the arbitration provision, prepared in connection with the 2009 litigation, applied retroactively to cover the 2005 transactional work that was the source of the malpractice claim.
COMMENT: The Court explains, “We consider how a reasonable client would interpret the provision as well as the reasons why the client sought the professional services.” The problem here was that the agreement did not explicitly mention legal services provided in 2005, and thus a reasonable client would not necessarily know that the agreement would apply retroactively. Lawyers get saddled with the consequences of poorly drafted retention agreements “because of the fiduciary nature of the relationship.”