This Route Works If The Parties Agreed In Writing To Binding Arbitration
The MFAA can be a trap for the unwary. The parties need to be aware of the following requirement: “If no action is pending, the trial after arbitration shall be initiated by the commencement of an action in the court having jurisdiction over the amount of money in controversy within 30 days after service of notice of the award.” Bus. & Prof. Code section 6204(c). In the next case, that requirement was at issue. Rosenson v. Greenberg Glusker Fields Claman & Machtinger LLP, 203 Cal.App.4th 688 (2012). What happens if, after receiving an adverse MFAA award, a party serves a demand for binding arbitration instead of initiating a trial de novo?
Plaintiff and Respondent Rosenson obtained an award under the MFAA, requiring his attorney to return of some of the fees he had paid for legal services, Defendant and Appellant Greenberg Glusker. However, Mr. Rosenson and Greenberg Glusker had a retainer agreement providing for binding arbitration. Within 30 days of the service of the MFAA award, Greenberg Glusker filed its demand for arbitration. Rather than participate in binding arbitration, Mr. Rosenson petitioned the superior court – successfully -- to confirm his favorable arbitration award. Greenberg Glusker appealed, arguing its timely arbitration demand prevented the MFAA award from becoming final.
The Court of Appeal, in an opinion authored by Justice Kriegler, agreed with Greenberg Glusker: “If the parties have agreed in writing to binding arbitration, a demand for arbitration within 30 days of service of the MFAA award is a proceeding that prevents finality of the MFAA award.” In reaching its conclusion, the Court of Appeal relied heavily on an earlier California Supreme Court decision, Schatz v. Allen Matkins Leck Gamble & Mallory LLP, 45 Cal.4th 557 (2009) (holding the MFAA does not stand as an obstacle to the enforcement of a valid agreement to arbitrate pursuant to the California Arbitration Act). Thus, “binding arbitration, pursuant to a preexisting agreement, may go forward once the MFAA arbitration process is over.” Schatz, supra, 45 Cal.4th at 57. Saved from The Bear Trap [below]!
The Court of Appeal pointed out that if Greenberg Glusker had filed a superior court action to compel arbitration instead, “it would have run afoul of settled California law prohibiting an action to compel arbitration until the opposing side has refused to arbitrate.” That, by the way, is another trap for the unwary – seeking to compel arbitration prematurely, before the other side refuses a demand to arbitrate.
Snow shoe travelling. The Bear Trap. 1866. Library of Congress.
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