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Perez v. Grajales

December 19, 2008

ISMAEL PEREZ, PLAINTIFF, CROSS-DEFENDANT AND RESPONDENT,
v.
ELVIA GRAJALES, DEFENDANT, CROSS-COMPLAINANT AND APPELLANT.



(Santa Clara County Super.Ct.No. CV804583). Trial Judge: Hon. Joseph Huber.

The opinion of the court was delivered by: Duffy, J.

CERTIFIED FOR PUBLICATION

As we observed three years ago, "The Mandatory Fee Arbitration Act (MFAA), under Business and Professions Code section 6200 et seq., provides a quick and inexpensive method for clients, at their option, to resolve fee disputes with their attorneys." (Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th 1076, 1083, fn. omitted.) In the attorney-client fee dispute before us-which arose out of federal litigation that was settled 10 years ago-the resolution of the dispute has proved neither quick nor inexpensive.

Appellant Elvia Grajales retained respondent Ismael Perez in 1996 to represent her on a contingent fee basis in connection with claims against her former employer. After the employment litigation was resolved in late 1998 with Grajales receiving a substantial settlement payable to Perez's trust account, a dispute arose concerning the amount of net proceeds that were due to Grajales. She ultimately applied with the local county bar association to arbitrate her dispute with Perez under the MFAA. Grajales prevailed and received an arbitration award of $173,715 in December 2001.

Perez timely filed a complaint with the superior court rejecting the arbitration award in accordance with Business and Professions Code section 6204, subdivision (c). Grajales filed a cross-complaint, which was amended on several occasions. More than five years after the filing of the complaint, Grajales moved to dismiss the complaint under the mandatory provisions of the Code of Civil Procedure (Code Civ. Proc., §§ 583.310, 583.360).*fn1 Perez filed his own motion to dismiss Grajales's third amended cross-complaint (Cross-Complaint) under the same statutes. In addition, Grajales moved to confirm the fee arbitration award and to enter judgment on the confirmed award. The court granted both motions to dismiss and denied Grajales's motion to enter judgment on the arbitration award.

Grajales challenges the orders dismissing her Cross-Complaint and denying the motion to confirm and enter judgment on the arbitration award. She claims that the Cross-Complaint was not subject to dismissal under the mandatory provisions of the Code of Civil Procedure because after the periods of time that it was "impossible, impracticable, or futile" to bring the case to trial (§ 583.340, subd. (c)) are deducted, there was less than five years from the filing of the Cross-Complaint to dismissal. Grajales also contends that the court should have confirmed the fee arbitration award, because Perez effectively repudiated his prior request for trial de novo of the arbitration award by failing to diligently prosecute his complaint so that it was involuntarily dismissed. We conclude that the court did not err in dismissing the Cross-Complaint. But we hold further that the court should have granted the motion to confirm the fee arbitration award and enter judgment on that confirmed award. Accordingly, we will reverse the order denying that motion.

FACTS AND PROCEDURAL HISTORY

On April 24, 1996, Grajales entered into a contingency fee agreement with Perez under which he would represent her in connection with "her employment claims against Airtronics." The agreement provided that Grajales would pay Perez a contingency fee of 33 and one-third percent of "all gross recoveries" if the matter settled before the taking of any depositions, and 40 percent of "all gross recoveries" if the case settled after the taking of the first deposition. The agreement did not define the term "all gross recoveries."

According to a settlement agreement signed by Grajales in November 1998, she filed a lawsuit against Airtronics in the United States District Court, Northern District of California, seeking damages related to the loss of her position with Airtronics, injury to her reputation, and mental and emotional distress. After two mistrials, a jury awarded Grajales $441,625. Perez and his co-counsel, Michael Morrissey, filed a posttrial motion for attorney fees and were awarded a total sum of $300,000.*fn2 The case went on appeal before the United States Court of Appeals for the Ninth Circuit. The settlement agreement noted that after the parties had engaged in extensive settlement discussions and mediation supervised by the Ninth Circuit, they had reached a settlement on November 19, 1998, pursuant to which Airtronics agreed to pay a specified sum to Perez's trust account in full settlement of the action.

Thereafter, on or about May 17, 2001, Grajales filed an application with the Santa Clara County Bar Association (SCCBA) to arbitrate a fee dispute with Perez. She alleged that the amount of the dispute was $124,000, plus interest. In her description of the dispute attached to the application, Grajales stated that (1) Perez had refused her request to provide her with a summary of the expenses incurred in the Airtronics litigation; (2) pursuant to her fee agreement with Perez, she was entitled to 60 percent of the gross recovery; and (3) her "portion of the gross recovery [was] short by $124,000.00."

A three-member panel of the SCCBA fee arbitration committee conducted an arbitration on November 14, 2001. As reflected in the subsequent arbitration award, Perez, Grajales, and Morrissey appeared at the arbitration. On December 12, 2001, the three-member panel entered their arbitration award in favor of Grajales in the total sum of $173,715. The panel concluded that under the contingency fee agreement, Perez was entitled to receive 40 percent of "all gross recoveries."*fn3 Because Grajales had already been charged $380,000-rather than the $256,000 owed under the fee agreement-the panel concluded that she was entitled to the difference ($124,000), plus interest and filing fees.

On January 16, 2002, Perez filed an unverified complaint against Grajales to reject the non-binding arbitration award of the SCCBA panel. On February 22, 2002, Grajales answered the complaint and filed a cross-complaint against Perez, Morrissey, and his law firm. In the cross-complaint, she alleged that Perez and Morrissey had falsely represented to her that, contrary to the terms of her fee agreement with Perez, she was entitled to $260,000 of the gross amount of the settlement of the federal action. Grajales alleged claims for fraud, breach of fiduciary duty, and breach of contract. She later dismissed Morrissey as a cross-defendant.

On or about April 9, 2007, Grajales filed a motion to dismiss the complaint pursuant to sections 583.310 and 583.360 for failure to prosecute the case to trial within five years.*fn4 She concurrently filed a motion to confirm the SCCBA fee arbitration award and to enter judgment on the confirmed award. She argued in that motion that Perez, through his dilatory conduct in the prosecution of the complaint, had "effectively repudiated his request for a trial de novo . . . ." The two motions were accompanied by a declaration of counsel attaching some 52 exhibits that Grajales claimed supported her position that Perez had been extremely dilatory in prosecuting the case. Perez filed separate oppositions to the motion to dismiss and the motion to confirm and enter judgment on the fee arbitration award.

Also on or about April 9, 2007, Perez filed a motion to dismiss the Cross-Complaint, on the basis that it had not been prosecuted to trial within five years as required under sections 583.310 and 583.360.*fn5 Grajales opposed the motion. After hearing argument on the three motions, on May 11, 2007, the court granted both parties' motions to dismiss, ordered both the action and cross-action dismissed, and denied Grajales's motion to confirm the fee arbitration award and enter judgment on the award.

Grajales filed a timely notice of appeal from the order.*fn6 An order dismissing an action is a proper subject for appeal, pursuant to sections 581d, and 904.1. (Southern Pac. R. Co. v. Willett (1932) 216 Cal. 387, 390 [dismissal order under former statute requiring action to be brought to trial within five years appealable].)*fn7 We likewise conclude that the order denying Grajales's motion to confirm the arbitration award and enter judgment on the award is appealable, because the MFAA (Bus. & Prof. Code, § 6203, subd. (b)) permits a party to petition to confirm an arbitration award in the same manner that arbitration awards may be confirmed under section 1285 et seq. (See § 1294, subds. (b) [appeal may be taken from "order dismissing a petition to confirm . . . an award"], (c) [appeal may be taken from order vacating arbitration award]; see also Ray Wilson Co. v. Anaheim Memorial Hospital Assn. (1985) 166 Cal.App.3d 1081, 1085, fn. 1 [order denying petition to confirm arbitration award "in effect dismisses the proceeding before the court and is equivalent to an order vacating the award"], disapproved on other grounds in Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 27-28.)

DISCUSSION

I. Issues on Appeal

The issues on appeal are as follows:

1. Whether there was a period in which it was "impossible, impracticable, or futile" to bring the Cross-Complaint to trial under section 583.340, subdivision (c), and if so, whether after subtraction of that period from the time the Cross-Complaint was pending, the cross-action was subject to dismissal under the mandatory five-year provisions of sections 583.310 and 583.360.

2. Whether the court, based upon its dismissal of the complaint for failure to prosecute it to trial, should have confirmed the fee arbitration award and entered judgment on the award.

II. Dismissal of Third Amended Cross-Complaint

Grajales contends that the court erred by dismissing her Cross-Complaint. In asserting that the five-year period for bringing a case to trial under section 583.310 had not expired, she argues that there were four separate periods during which it was "impossible, impracticable, or futile" to bring the Cross-Complaint to trial under section 583.340, subdivision (c).*fn8 After discussing the basic law applicable generally to mandatory dismissal motions brought under section 583.310, we address each of these periods in which Grajales claims that it was "impossible, impracticable, or futile" to bring the Cross-Complaint to trial.

A. Applicable Law

Under section 583.310, an action must be brought to trial within five years after its commencement against a defendant. By statutory definition, "action" includes a cross-complaint (§ 583.110, subd. (a)), and "defendant" includes a cross-defendant (id., subd. (d)). (See also Tomales Bay etc. Corp. v. Superior Court (1950) 35 Cal.2d 389, 393 [cross-complaint is subject to mandatory dismissal under former section 583, where cross-complainant failed to bring it to trial within five years of its filing].) An action not brought to trial within five years "shall be dismissed by the court on its own motion or on motion of the defendant, . . ." (§ 583.360, subd. (a); see also id., subd. (b) ["requirements of this article are mandatory"].) The parties, however, may extend the five-year statute in writing or by a recital on the record in court. (§ 583.330.) Additionally, section 583.340 provides specifically that the five-year period does not include the time that the court's jurisdiction is suspended (id., subd. (a)); the trial or prosecution of the case was stayed or enjoined (id., subd. (b)); or the "[b]ringing [of] the action ...


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