“Manifest Disregard of the Law” Doctrine Inapplicable to Arbitrator’s Decision Concerning Attorney’s Fees Dispute Between Law Firm and Client
Appellant Fuchs & Associates, Inc. (Law Firm) sued former client, Elke Lesso, for unpaid attorney’s fees of $647.688.13. An arbitrator found Law Firm was not entitled to recover additional fees, and its attorney fee lien was invalid. On appeal, the Law Firm attacked the arbitration award – unsuccessfully. Fuchs & Associates, Inc. v. Lesso, Case No. B239246 (2nd Dist. Div. 2 January 8, 2013) (Doi Todd, Acting P.J., author) (unpublished).
The Court of Appeal rejected arguments that the Arbitrator exceeded his powers by rewriting the fee agreement, failing to decide issues submitted, or deciding issues not submitted. The Court also rejected an argument that the arbitration hearing should have been continued, because the Law Firm did not identify what additional evidence it wished to present that it was precluded from presenting, or how it was prejudiced.
The Law Firm also argued that the arbitration award should be vacated because of the Arbitrator’s “manifest disregard of the law.” This is a basis for rejecting an award in federal cases, but in state cases, a strict review standard for legal error “does not include a ‘manifest disregard’ exception, while at the same time leaving open the possibility of greater judicial review . . . in the case of rulings inconsistent with the protection of statutory rights.” (citing Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665, 679, n. 3 (2010)).
Evidently, however, the Court of Appeal viewed this attorney-client fee dispute as a private affair that did not trigger protection of statutory rights and heightened scrutiny, for it observed: “[Law Firm] has not cited any authority showing than an arbitrator’s decision on a law firm’s action for attorney fees has ever been reviewed on the merits by a trial court under the exceptional circumstances involving a statutory or public policy decision.”
Is it possible that the Court’s view of the case was somewhat colored by Law Firm’s failure to “advise Lesso to seek independent legal counsel before she signed the loan” (to make possible the payment of in pendente lite attorney fees); by Law Firm’s concession “that it did not inform Lesso that it would be taking the position that the [attorney’s fees] lien would attach to all of her assets”; or by the fact that at the time of the arbitration, the attorney had been disciplined by the State Bar three times? See Fuchs & Associates, Inc., n. 3.