California Court of Appeals, Fourth District, Third Division
Appeal from an order of the Superior Court of Orange County Nos. 30-2009-00303966, 30-2010-00417796, 30-2010- 00417811, Ronald L. Bauer, Judge.
Law Offices of Steven R. Young and Jim P. Mahacek for Plaintiffs and Appellants.
Waxler Carner Brodsky, Andrew J. Waxler and Danielle R. Sokol for Defendants and Respondents.
Plaintiffs settled the underlying case reluctantly, and only after their attorneys – including defendants herein – unsuccessfully attempted to have them declared legally incompetent so that a guardian ad litem could be appointed to cooperate with the attorneys’ efforts. Plaintiffs subsequently elected to file suit against the attorneys based on that attempt, on the alleged inadequacy of the settlement, and on other conduct. Defendants Callahan and Blaine, Edward Susolik and Lee Burrows (collectively “Callahan”) successfully moved to compel arbitration of that suit, based on the arbitration provision contained in the firm’s retainer agreement, and we declined to review that decision when plaintiffs petitioned this court for a writ of mandate.
Plaintiffs, however, contend they are indigent and cannot afford to share in the substantial expense of the arbitration forum, and thus they filed a motion in the trial court seeking an order compelling Callahan to advance the entire upfront cost of the arbitration forum they have insisted upon utilizing. That motion was denied and plaintiffs contest that denial in this appeal. We reverse and remand to the trial court with directions to: (1) calculate the reasonable cost of the arbitration previously ordered; (2) determine whether any of these plaintiffs are financially able to pay their anticipated share of that cost; and (3) if any of them are unable to do so, issue an order specifying that Callahan has the option of either paying that plaintiff’s share of the cost of the arbitration, or waiving its right to arbitrate that plaintiff’s case and allowing the case to proceed in court. If the trial court determines that one or more, but not all, of the plaintiffs are unable to pay their anticipated share of the arbitration cost, and Callahan elects to waive its right to arbitrate those plaintiffs’ claims rather than pay their share of the arbitration cost, then the court is directed to further consider whether the policy of avoiding conflicting rulings on common issues of law or fact supports an order requiring all of the plaintiffs’ claims to be consolidated in the superior court.
Joan and Francisco Roldan, Gail Chudacoff and Jenni Mendoza (plaintiffs) were among a group of plaintiffs in the underlying litigation arising out of toxic mold contamination in the apartment building where they resided. All of these plaintiffs were elderly, of limited financial means, and relied on Section 8 housing subsidies to pay for their apartments. (Section 8 is a federal program providing financial assistance to low-income tenants and is codified as 42 U.S.C. § 1437f.) Plaintiffs were represented in the underlying case by attorney Richard Quintilone, but prior to trial, he informed them by letter that he had associated Callahan as co-counsel in their case, explaining that “[Callahan’s] reputation in solving complex litigation cases is unsurpassed and their partnership will serve as an invaluable opportunity to help bring forth meaningful settlement discussions... as well as assist in the substantial upcoming expert costs.” He then pointed out the clients would find Callahan’s retainer agreement enclosed “for your signature and prompt return, ” and assured them the association would “not affect any recovery on your behalf, they will merely assist in advancing the substantial upcoming costs of your litigation.” Quintilone’s letter did not otherwise explain or discuss any aspect of Callahan’s retainer agreement, which included an arbitration provision on page 8, and did not advise his clients to read it.
The Callahan arbitration provision states, in its entirety, the following: “Any controversy between the parties regarding the construction or application of this Agreement, and all claims for damages or other relief based upon or pertaining to this Agreement or its breach, including without limitation disputes concerning fees, costs, malpractice and professional misconduct, or any combination thereof, shall be submitted to binding arbitration without right of appeal (except as specifically provided by law) upon the written request of either party, with all proceedings conducted pursuant to the California Arbitration Act, California Code of Civil Procedure sections 1280 et seq., before one neutral arbitrator. The arbitrator must be either an attorney licensed in the State of California with at least fifteen (15) years of litigation experience or a retired judge and in either event affiliated with the Judicate West facility located in Orange County, California. In the event the parties for whatever reason fail to reach an agreement on a designated arbitrator within the five day period immediately following mutual acknowledgment to arbitrate or the entry of a [c]ourt order compelling arbitration, whichever first occurs, the selection may be made immediately thereafter by the Judicate West administrative office which shall unilaterally select a panel member with a minimum of 15 years litigation experience or shall be a retired judge. Discovery under the arbitrator’s own rules shall not apply unless both parties so agree in writing. In any such arbitration, the arbitrator must award the prevailing party his arbitration fees. The arbitrator is without discretion and must award these fees. Should the arbitrator fail to do so, the Orange County Superior Court is empowered to review both the facts and the law as to the arbitrator’s denial of arbitration fees to the prevailing party. For the purposes of this section, prevailing party is the party which makes positive net recovery in any amount.” (Bold omitted.)
This arbitration provision is, to say the least, awkwardly incorporated into the nine page retainer agreement. The other provisions of the agreement are contained on pages one through seven, and conclude at the top of page seven which is otherwise blank. Each of those seven pages includes a space for the client to initial. The arbitration provision is contained on page eight, followed only by a space for the signature of a Callahan representative. The client then signs the agreement on page nine, which is devoid of any substance. Thus, the arbitration provision is literally the only page of the agreement neither initialed nor signed by the client.
Apparently the Roldans and Chudacoff, together, met with Burrows, an associate attorney employed by Callahan, to sign the retainer agreements on September 14, 2007. However, Burrows did not sign page eight on behalf of the firm at that time; instead, it was not until four days later, on September 18, that Susolik signed the arbitration provisions on behalf of the firm.
Although Burrows declared under penalty of perjury that the arbitration provision was included within the retainer agreements provided to each of the clients for signature, he made no claim that he explained the provision or its effect to them. Instead, he simply declares that he offered the clients the opportunity to ask him any questions about the agreement, but they “did not ask any questions about the arbitration provision or raise any concerns about [it].”
Apparently, Mendoza signed her retainer agreement without even meeting with Burrows; her signature on the document is not dated, and she did not initial any of the pages. Again, Susolik signed the page containing Mendoza’s arbitration provision on September 18, 2007.
According to the complaints subsequently filed by plaintiffs, after Quintilone associated with Callahan in the underlying case, these attorneys began pressuring plaintiffs to settle the case on unfavorable terms. When plaintiffs resisted, the attorneys (1) sought to withdraw from the representation, and (2) filed motions to have guardians ad litem appointed to take control of plaintiffs’ affairs on the ground of their “inability to assist counsel with the prosecution of the case.” Plaintiffs were forced to incur the ...