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Sands & Associates v. Martin Juknavorian

October 10, 2012

SANDS & ASSOCIATES, PLAINTIFF AND RESPONDENT,
v.
MARTIN JUKNAVORIAN, DEFENDANT AND APPELLANT.



(Los Angeles County Super. Ct. No. SC097326) APPEAL from a judgment of the Superior Court of Los Angeles County, Cesar C. Sarmiento, Judge.

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

CERTIFIED FOR PUBLICATION

Reversed.

The question on appeal is whether a law firm can recover attorney fees under a "prevailing party" clause when the firm is a successful litigant represented by "of counsel." Our analysis is based on two well-settled principles. First, when a law firm is the prevailing party in a lawsuit and is represented by one of its partners, members, or associates, it cannot recover attorney fees even though the litigation is based on a contract with a prevailing party clause. (See Carpenter & Zuckerman, LLC v. Cohen (2011) 195 Cal.App.4th 373, 375, 385 (Carpenter); see also Trope v. Katz (1995) 11 Cal.4th 274, 277, 292 (Trope).)

Second, the relationship between a law firm and "of counsel" is "'close, personal, continuous, and regular.'" (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1153 (SpeeDee Oil), italics omitted.) "'[T]o the extent the relationship between [an attorney] or law firm and another [attorney] or law firm is sufficiently "close, personal, regular and continuous," such that one is held out to the public as "of counsel" for the other, the . . . relationship must be considered a single, de facto firm for purposes of [avoiding the representation of adverse interests].'" (Id. at p. 1154, italics added, citing Rules Prof. Conduct, rule 3-310.)

Similarly, because the relationship between a law firm and "of counsel" is close, personal, regular, and continuous, we conclude that a law firm and "of counsel" constitute a single, de facto firm, and thus a law firm cannot recover attorney fees under a prevailing party clause when, as a successful litigant, it is represented by "of counsel."

I

BACKGROUND

In 1990, Attorneys Leonard Sands and Heleni Suydam began working together in the area of civil litigation. In March 1999, the law firm of Sands & Associates (Sands firm or firm) was established by Attorney Ada Sands, who, for many years, had been practicing in the areas of family law and estate and probate law. When the Sands firm was founded, Leonard Sands and Heleni Suydam became affiliated with the firm as "of counsel." In that capacity, they "represent[ed] the firm in its collection and appeal matters and the firm's clients when they required civil litigation expertise." (We refer collectively to Leonard Sands and Heleni Suydam as Of Counsel.)

In 2002, Martin Juknavorian retained the Sands firm in a marital dispute. The retainer agreement, dated August 8, 2002, recited that any dispute concerning billing, the agreement, or the representation of Juknavorian would be submitted to binding arbitration. The agreement informed Juknavorian of his right under the Mandatory Fee Arbitration Act (MFAA) (Bus. & Prof. Code, §§ 6200-6206) to require that an attorney fee dispute be arbitrated in accordance with a program established by a local bar association. The agreement also provided: "The arbitrator(s) shall have the discretion to order that . . . reasonable attorney's fees[] shall be borne by the losing party."

A dispute arose between the Sands firm and Juknavorian over attorney fees. Juknavorian invoked his right to arbitration under the MFAA. The Sands firm requested that Of Counsel handle the matter, and they agreed. The parties did not stipulate to a binding award. The arbitration was conducted under the auspices of the Beverly Hills Bar Association. A panel of three arbitrators rendered an award in favor of the firm in the amount of $24,250.95. The award was served by mail on Juknavorian on May 29, 2007.

On June 27, 2007, Juknavorian filed a legal malpractice action against the firm (Juknavorian v. Sands & Associates (Super. Ct. L.A. County, 2009, No. SC094392)). The firm filed a demurrer, contending the action was barred by the statute of limitations. The superior court concluded the action was time-barred and dismissed it. On appeal, Division Seven of this district affirmed (Juknavorian v. Sands & Associates (Apr. 22, 2009, B207759) [nonpub. opn.]).

Meanwhile, on March 5, 2008, the firm, through Of Counsel, filed a petition in this case to confirm the arbitration award. On May 21, 2009, the firm filed a memorandum of points and authorities, arguing (1) the arbitration award was binding under the MFAA because Juknavorian had not sought a trial de novo in the superior court within 30 days after service of the award, and (2) the trial court should confirm the award under the California Arbitration Act (CAA) (Code Civ. Proc., §§ 1280-1294.2) because Juknavorian had not filed a timely petition to vacate or correct the award.

Juknavorian opposed the petition, contending the MFAA did not require that he file a complaint seeking a trial de novo within 30 days after service of the arbitration award or, for that matter, at any time. According to Juknavorian, under the MFAA, the arbitration award never became binding and was unenforceable. On June 4, 2009, the trial court, Judge Elizabeth A. Grimes presiding, granted the petition and entered judgment in favor of the firm. Juknavorian appealed. Of Counsel represented the Sands firm on appeal.

In an unpublished opinion, we affirmed the trial court, explaining: "Juknavorian contends that, in accordance with the MFAA, the arbitration award did not become binding and was therefore not subject to confirmation under the CAA. The firm counters that, under the MFAA, the arbitration award became binding when Juknavorian failed, within 30 days after service of the award, to commence a civil action seeking a trial de novo [of the attorney fee dispute]. Further, after the award became binding, it was subject to confirmation, vacatur, or correction under the CAA. The firm contends it filed a timely petition to confirm the award under the CAA; Juknavorian did not file a petition or response to vacate or correct the award, timely or otherwise. . . . [¶] . .

". . . [P]rior to the arbitration, the parties did not stipulate that the award would be binding. The arbitrators acknowledged this, stating: 'The award is advisory but will become binding unless the attorney or client rejects it in accordance with the provisions of . . . [the MFAA].' [Business and Professions Code] Section 6203 of the [MFAA] provides: 'Even if the parties to the arbitration have not agreed in writing to be bound, the arbitration award shall become binding upon the passage of 30 days after service of notice of the award, unless a party has, within the 30 days, sought a trial after arbitration pursuant to Section 6204.' . .

"[Business and Professions Code] Section 6204, in turn, states: 'The parties may agree in writing to be bound by the award of arbitrators appointed pursuant to this article at any time after the dispute over fees, costs, or both, has arisen. In the absence of such an agreement, either party shall be entitled to a trial after arbitration if sought within 30 days . . . . [¶] . . . [¶]

"'. . . 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. After the filing of such an action, the action shall proceed in accordance with the provisions of . . . the Code of Civil Procedure, concerning civil actions generally.' . . .

"To commence 'an action,' a party must file a complaint. . . . [T]he Judicial Council form, 'Rejection of [Arbitration] Award,' . . . expressly states, 'This Rejection of Award and Request for Trial is being filed with a complaint commencing a new action. (A request for trial must be filed in a pending case or with a complaint commencing a new action.)' . . . .

"The arbitration award was served on May [29], 2007. Within 30 days thereafter, Juknavorian filed a complaint for legal malpractice only. He did not seek a trial de novo of the attorney fee dispute at issue in the arbitration. . . .

"The MFAA states that a binding arbitration award is subject to confirmation, vacatur, or correction under the CAA. . . . The CAA provides that a petition or response seeking to vacate or correct an award must be brought within 100 days after the award is served. . . . Failure to comply with the 100-day period precludes an attack on the award. . . . In contrast, a petition to confirm an arbitration award may be brought within four years after service of the award. . .

"Juknavorian never filed a petition or response to vacate or correct the award. As a result, the trial court had no choice but to grant the firm's petition to confirm." Accordingly, we affirmed the judgment (Sands & Associates v. Juknavorian (July 30, 2010, B218019)).

On remand, the firm, through Of Counsel, filed a motion for attorney fees pursuant to the prevailing party clause in the retainer agreement.*fn1 In a supporting declaration, Heleni Suydam stated: "I am an attorney and of counsel to [the] law firm of Sands and Associates. . . . [¶] . . . [¶] . . . I was requested by Sands & Associates to represent it in connection with the Petition to Confirm the Arbitration Award proceedings, subsequent appeal and post-appeal proceedings. Leonard Sands was also requested to perform limited services with the foregoing. My normal hourly rate is $350.00 per hour and Leonard Sands's is $400.00 per hour. I spent 72.1 hours on these matters, including the preparation and filing of this motion and Leonard Sands spent 7.5 hours. [¶] . . . Sands & Associates has incurred $28,322.50 in attorney fees and expenses of $1,605.16. This includes all attorneys' fees and costs attributable to Heleni Suydam and Leonard Sands to date, plus $2,975.00 in fees for preparing this motion . . . ." (Italics added, fn. omitted.)

The motion did not provide a breakdown or description of the services provided by Of Counsel, nor were any billing statements or time records submitted. There was no evidence of an agreement or understanding between the Sands firm and Of Counsel as to how Of Counsel would be or were compensated. Although the motion was brought on behalf of the firm, it did not indicate whether the firm or Of Counsel would receive the entire award of attorney fees or whether the award would be apportioned.

In his opposition papers, Juknavorian argued that Of Counsel were actually members of the Sands firm and that because the firm was self-represented in the litigation, it could not recover attorney fees.

The firm filed a reply, and, two months later -- after the hearing on the motion had been continued -- it filed a "supplemental brief." In support of the supplemental brief, Heleni Suydam filed a declaration stating, "From time to time [Leonard Sands and I] required the assistance of Sands & Associates employees, including attorney associates and support staff, but the fees to be recovered [by the motion for attorney fees] do not include any charges for Sands & Associates employees."

Juknavorian filed a "supplemental opposition," and attached undated excerpts from the Martindale Hubble Law Directory indicating Heleni Suydam was employed by the Sands firm "as a junior partner, senior attorney, senior associate, or a similar position"; the directory indicated Leonard Sands had a "counsel" or "of counsel" relationship with the firm.

The firm filed a reply to Juknavorian's supplemental opposition. Heleni Suydam submitted a declaration stating that the Martindale Hubble Law Directory mistakenly described her relationship with the firm. She attached an excerpt from the 2008 Parker Directory indicating she was "of counsel" to the Sands firm. In her declaration, she stated: "The Sands & Associates letterhead has consistently, since the inception of the firm, listed Leonard Sands and Heleni Suydam as 'of counsel.'" Attached to the declaration were letters dated June 9, 2003, and March 24, 2010, on firm letterhead, showing Leonard Sands and Heleni Suydam as "of Counsel." The letterhead had a single telephone number and a single telefacsimile number for the firm and Of Counsel. The telephone number on the firm's letterhead was the same number listed in the Parker Directory for Suydam.

In total, Heleni Suydam submitted four declarations in support of the motion for attorney fees. Each declaration contained a sentence stating in one way or another that she and Leonard Sands were "of counsel" to the firm.

Heleni Suydam's current listing at Martindale.com indicates she is "of counsel" to the Sands firm. (Martindale.com, Lawyer Profile [as of Oct. 10, 2012].) The listing states that Suydam is "Currently Employed At Sands & Associates, A PLC, 9606 Santa Monica Blvd., 3rd Fl., Beverly Hills, CA 90210." (Ibid.) Martindale.com does not indicate Leonard Sands's relationship to the firm but does state he is "Currently Employed At Sands & Associates, A PLC, 9606 Santa Monica Blvd., 3rd Fl., Beverly Hills, CA 90210." (Martindale.com, Lawyer Profile [as of Oct. 10, 2012].) Thus, both attorneys have the same address, which is also the address of the Sands firm, as shown on its letterhead.
At Lawyers.com, the firm is listed with the same address: "9606 Santa Monica Blvd., 3rd Fl., Beverly Hills." (Lawyers.com, All Attorneys and Law Firms for Beverly-Hills, California [as of Oct. 10, 2012].) The Lawyers.com listing also indicates that the "People at This Firm" include Leonard Sands as "Counsel," and Heleni Suydam as "Of Counsel." (Ibid.)

The motion for attorney fees was heard on March 3, 2011. The trial court, Judge Cesar C. Sarmiento presiding, issued a written tentative ruling granting the motion. After argument, the trial court took the matter under submission. Later that day, the trial court adopted the tentative ruling as the order of the court. The order stated that the Sands firm was not self-represented even though it litigated the case through "Of Counsel." According to the order, Heleni Suydam did "not represent[] her own interests [in the litigation], but merely those of her employer . . . ."

On April 14, 2011, the trial court entered judgment in favor of the firm, awarding attorney fees in the amount of ...


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