California Mediation and Arbitration

Arbitration, MFAA: CCA 1st Dist. Div. 4 Holds That A Malicious Prosecution Cannot Rest On An MFAA Arbitration, Reversing Trial Court

And Because The Malicious Prosecution Plaintiff Cannot Win, An Anti-SLAPP Motion By Defendant Succeeds.

        The holding of Dorit v. Noe, A157433  (1/3  5/26/20) (Brown, Pollak, Tucher) is that a malicious prosecution cause of action cannot be based on a mandatory fee arbitration act (MFAA) arbitration. Along the way to its conclusion, the case teaches about arbitration, MFAA arbitration, malicious prosecution, and anti-SLAPP motions.

        Dorit, an attorney, represented Noe, who was unhappy with his representation and who brought an MFAA fee arbitration against Dorit. Noe did not recover any fees from his attorney, and the arbitrator required Noe to pay the  filing fee. Neither party appealed within 30 days for a trial de novo in the Superior Court, and thus the arbitration award became final. 

        Dorit then sued Noe in Superior Court for malicious prosecution, and Noe brought an anti-SLAPP motion against Dorit, arguing that the MFAA would not support a malicious prosecution  claim. The trial court denied the motion, ruling that, while Noe's MFAA arbitration arose from protected activity, Dorit's claim had more than minimal merit -- the two-pronged analysis that must be made when evaluating anti-SLAPP motions.

        The Court of Appeal agreed that the MFAA arbitration arose from protected activity, because it was an official proceeding established by statute, and once the client chooses the proceeding as an alternative to filing a lawsuit against the attorney, the attorney is required to participate. 

        The attorney reasoned that if the matter is in the nature of an official proceeding, then it should support a cause of action for malicious prosecution. The problem with this argument is that MFAA arbitrations are neither fish nor fowl: they have aspects of litigation, as well a of voluntary arbitration. And so the question whether an MFAA arbitration will support a claim for malicious prosecution, which is a question of first impression, turns out to hinge on policy.

        The interests promoted by a cause of action for malicious prosecution are to prevent baseless lawsuits from being filed, and to prevent injury to the victims of malicious prosecution. In the case of MFAA arbitrations, however, the arbitration is an alternative to  litigation encouraged by the legislature, because it is thought to even the playing field between attorney and client, and to be speedy, cost effective, and efficient. A party unhappy with the outcome of the fee arbitration can proceed de novo to the Superior Court, something that did not happen here. And while the attorney may suffer injury from a meritless fee arbitration, the Court of Appeal explained that the injury is likely to be slight, because the attorneys typically does not go out and hire another attorney. Here, in fact, Dorit represented himself, and the proceeding was confidential.

        Comment: The Court of Appeal also found  a technical and more obscure reason for holding that the MFAA arbitration would not support a claim for malicious prosecution. In order to prove malicious prosecution, the plaintiff must be able to show that the plaintiff prevailed. At first blush, it would appear that Dorit prevailed in the MFAA arbitration, because Noe was denied relief and had to pay filing fees. However, the outcome of the MFAA arbitration cannot be used in court, except for the very limited purpose of establishing whether the party seeking a de novo trial in Superior Court did better or worse than that party did in the fee arbitration, an issue relevant to whether fee shifting can occur. Given that  there was no appeal to the Superior Court here, the evidence of Dorit's success was technically inadmissible, and thus the attorney could not have established that he prevailed -- even though we know he did.

        

 

Arbitration, Waiver: Failure To Affirmatively Seek Stay And Move To Compel Arbitration Results In Waiver Of Right To Arbitrate

A party that wishes to pursue arbitration must take “ ‘active and decided steps to secure that right’ . . ."

        Why? Because an arbitration agreement is not self-executing.

         In Fleming Distribution Company v. Alfons Younan, A157038 (3/1  5/15/20) (Petrou, Fujisaki, Jackson), Defendant/Appellant Fleming appealed from a trial court order denying its petition to compel arbitration, stay proceedings, and vacate a Labor Commissioner award. Fleming's employee Younan had successfully pursued a labor claim before the Labor Commissioner, and all the while, Fleming had asserted that it wanted to arbitrate. However, Fleming did not affirmatively move to stay and to compel arbitration until after  it lost the Labor Commissioner proceeding. Only after seeking a  trial de novo in the Superior Court did Fleming move to compel arbitration, vacate proceedings, and vacate a Labor Commissioner Award.

        The Court of Appeal affirmed the trial court's order denying Fleming's request, on the basis that Fleming had waived its right to arbitrate, based on substantial delay and pursuing litigation before the Labor Commissioner, without taking affirmative steps to compel arbitration and stay proceedings.

        Delaying the motion to compel arbitration denied Younan the benefits of early arbitration, while burdening Younan with Labor Commission proceedings that were wiped clean by a trial de novo.

        California courts readily find prejudice when there is delay moving to stay and compel arbitration while the defendant engages in substantial litigation practice. Perhaps this  demonstrates the wisdom behind such cliches as "you don't get two bites of the apple", "you don't get to have your cake and eat it too", and "you snooze, you lose."

 

Memorial Day: May 30, 1920, Cimetière Américain de Suresnes

Arbitration, Vacatur: CCA 2nd Dist Div 1 Affirms Trial Court, Refusing To Vacate Judgment

The Majority Opinion Is Chiefly A Reminder Of The Court's Limited Ability To Vacate An Arbitration Award.

        VVA-Two LLC v. Impact Development, Case No. B291330 (2/1  5/12/20) (Rothschild, Bendix; Chaney, dsst.), serves chiefly as a reminder of how limited the power of the court is to vacate an arbitration award. The Court of Appeal rejected three arguments by Plaintiff/Appellant VVA-Two LLC: 1) that the arbitrator exceeded his authority by awarding remedies inconsistent with the contract; 2) that the award was incomplete; 3) that the arbitrator's refusal to consider certain evidence and reopen proceedings did not render the arbitration process fundamentally unfair.

        Justice Chaney dissented, believing that the arbitrator exceeded his power: "The effect of the arbitration award is that IDG andVVA [the parties] are suspended in an impregnable dilemma created by an arbitration award that VVA cannot comply with because it cannot force RBC—a nonparty to the arbitration—to consent to the transfer, and that IDG cannot enforce for the same reason." The majority, however, felt that the award was not rendered incomplete by a failure to address the issue of third-party consent, because that was not an issue specifically submitted to the arbitrator, and because, as a workaround, the arbitrator retained jurisdiction in case there was a failure by a third party to consent to a transfer of interest that was required by the  award.