Court Of Appeals Also Distinguishes Between Arbitrator's Power To Deny Attorneys' Fees To Prevailing Party And Court's Error In Denying Attorneys' Fees Incurred In Postarbitration Proceedings.
The Court of Appeal has done something very useful in this 57-page slip opinion concerning arbitration proceedings, and we like that. The Court has summarized its holding up front: "(1) an attorney does not have standing to petition to compel arbitration of his clients’ claims; (2) a signatory to an arbitration agreement can compel a nonsignatory parent company of a signatory subsidiary on an agency theory where (a) the parent controlled the subsidiary to such an extent that the subsidiary was a mere agent or instrumentality of the parent and (b) the claims against the parent arose out of the agency relationship; (3) the arbitrator did not exceed his authority by substituting the attorney’s clients as the real parties in interest in the arbitration; and (4) the arbitrator did not exceed his authority by denying attorneys’ fees to a party that prevailed in the arbitration. The last holding requires us to part company with DiMarco v. Chaney (1995) 31 Cal.App.4th 1809 (DiMarco) and agree with Safari Associates v. Superior Court (2014) 231 Cal.App.4th 1400." Cohen v. TNP 2008 Participating Notes Program, LLC, and TNP 2008 Participating Notes Program, LLC v. Mark Cohen, B266702 (7/2 1/29/19) (Segal, Perluss, Feuer).
COMMENT: This case involved an attorney, his law firm, his clients, a parent company used for a real estate investment program, two subsidiaries, and a real estate investment plan that went south. The case is interesting for two reasons. First, some of the persons or entities had signed arbitration agreements, others had not. Therefore, the Court of Appeal delves in depth into when a signatory can bind a nonsignatory, when a principal can bind an agent, when an agent can bind a principal, and when a subsidiary can bind a parent corporation. Second, as Justice Segal explains, the Court parts company with DiMarco v. Chaney on the issue of attorney's fees. The Court holds that the arbitrator, acting in equity, need not award attorney's fees under a prevailing attorney's fees clause, unless the agreement is stated in mandatory terms that limit the arbitrator's discretion. However, post-arbitration fees are a different matter. Cal. Code of Civ. Proc., section 1293.2, provides, "The court shall award costs upon any judicial proceeding under this title as provided in Chapter 6 (commencing with Section 1021) of Title 14 of Part 2 of this code." Under the Code of Civil Procedure, costs must be awarded to the prevailing party, and attorney's fees may be costs. There is a nice blog post on the attorney's fees aspect of the case in the California Attorney's Fees blog today.
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