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Soni v. Simplelayers, Inc.

California Court of Appeals, Second District, Fifth Division

November 22, 2019

SURJIT P. SONI, Plaintiff and Respondent,
v.
SIMPLELAYERS, INC., et al., Defendants and Appellants.

          Certified for Publication 12/4/19

          Order Filed Date 12/3/19

          APPEAL from a judgment of the Superior Court of Los Angeles County, No. EC063728 William D. Stewart, Judge. Reversed.

          Akin Gump Strauss Hauer & Feld, Rex S. Heinke, Jessica M. Weisel, for Defendants and Appellants.

          The Soni Law Firm, M. Danton Richardson, Leo E. Lundberg, Jr., for Plaintiff and Respondent.

          MOOR, J.

         This case involves the deadlines to set aside an arbitration award after arbitration of an attorney-client fee dispute under the Mandatory Fee Arbitration Act (MFAA) (Bus. & Prof. Code, § 6200 et seq.)[1] by requesting a trial or filing a pleading to vacate the award. A client filed a request for arbitration under the MFAA with the Los Angeles County Bar Association (LACBA). The attorney objected to the arbitrator that the request for arbitration was untimely, and therefore, the client had waived the right to arbitrate. Arbitration proceedings were held, and the arbitrator issued an award of $2.50 in favor of the attorney. Thirty-three days after the arbitration award was served on the parties by mail, the attorney filed an action in the trial court to recover the full amount of the disputed fees. The client filed a petition in the pending action to confirm the arbitration award on the ground that the award became binding when the attorney did not file an action within 30 days after service of the award. The attorney filed a response to the petition, more than 100 days after service of the award, asserting that the request for trial was timely and the arbitrator lacked jurisdiction. The trial court concluded that the attorney's action was timely, because Code of Civil Procedure section 1013 extended the attorney's time to file by five days for service of the award by mail; the trial court denied the client's petition to confirm the arbitration award. At trial, the court issued an award of $2, 890 in favor of the attorney, and also awarded $79, 898 in attorney fees to the attorney as the prevailing party.

         On appeal, the client contends the trial court erred in concluding that Code of Civil Procedure section 1013 extends the 30-day time to file an action under section 6204, and the attorney's untimely filing means the arbitrator's award must be confirmed. The attorney contends that the trial court's ruling that he had an additional five days to file should be affirmed. Alternatively, the attorney contends a tolling provision in section 6206 means his action was timely. Finally, the attorney contends that even if his time to file an action was not extended, the arbitrator never had jurisdiction over the fee dispute, because the client failed to request arbitration within 30 days of receiving notice of arbitration rights.

         We conclude that under LACBA's Rules for Conduct of Mandatory Arbitration of Fee Disputes Pursuant to Business & Professions Code Section 6200 et seq. (the LACBA rules), service is complete at the time of deposit in the mail and not extended for service by mail. The arbitration award became binding when the attorney did not file an action within 30 days after service. Section 6206 did not extend this 30-day deadline. The attorney is barred under Code of Civil Procedure section 1288 from asserting a ground that supports vacating the award, because the attorney did not file a petition or a response within 100 days of service of the award. Even if the attorney were not barred from raising arbitrability issues, however, the LACBA rules provide that the arbitrator has the authority to determine jurisdiction and the arbitrator's ruling that the fee dispute was arbitrable is not reviewable for errors of law or fact. We reverse, with directions.

         FACTUAL AND PROCEDURAL HISTORY

         Attorney-Client Relationship

         Respondent attorney Surjit P. Soni, doing business as The Soni Law Firm (collectively Soni), operates his legal practice as a sole proprietorship and hires attorneys to work for him. Appellant Timothy Tierney was an acquaintance of attorney Ron Perez, who performed work for Soni. In 2009, Tierney engaged Soni, through Perez, to work on publicity claims and patent prosecution. Tierney and Soni executed an attorney-client agreement. Tierney signed the agreement as an individual and provided an email address at his company Cartograph, Inc.[2]

         Correspondence from the United States Patent and Trademark Office required responses in August and September 2013. On June 18, 2013, Tierney called and learned Perez was no longer working with Soni. Soni offered that Tierney could: (1) keep his legal matters with Soni; (2) terminate the relationship with Soni and engage Perez directly; or (3) find a different law firm for his legal work. Tierney said he would think about it and let Soni know his decision. He instructed Soni to do no further work on Tierney's legal matters until hearing from Tierney.

         Soni asked attorney Michael Long to review Tierney's files and complete the work indicated. On July 17, 2013, Long began reviewing the work performed on Tierney's patent cases over the prior four years. On July 25, 2013, Long wrote an e-mail to Tierney introducing himself as the attorney handling Tierney's patent and trademark matters under Soni's direction. Long analyzed the next steps for Tierney's applications.

         On July 31, 2013, Tierney responded that he planned to stay with Perez for continuity. He confirmed that he would pay the outstanding balance owed to Soni, which he believed was $4, 941. On August 8, 2013, a legal assistant to Soni sent invoices to Tierney by e-mail, which included charges for Long's legal services. On October 8, 2013, Tierney wrote an e-mail to Soni with instructions and asked Soni to adjust the time that Long billed on July 17, 19, and 25, 2013, because Tierney had not authorized the legal services performed by Long.

         On October 14, 2013, Long wrote a letter to Tierney stating, “As I notified you previously, you are entitled to your file. Ron is welcome to coordinate with Cassandra to obtain the file. [¶] I understand that you spoke with Mr. Soni and that you promised to pay $1, 000 by the end of the week and to sign this letter. Please countersign and return signed copy to The Soni Law Firm the following letter [sic]: [¶] I, Timothy Tierney, and the president of Cartograph, Inc. [sic] I acknowledge that The Soni Law Firm has provided services to Cartograph Inc. And that there is an outstanding balance of $7, 211.00 less a check payment of $100.00 which will presumably clear. After discussing the matter, I agree to personally guarantee the debts of Cartograph, Inc. for the full amount owed, less any accommodation The Soni Law Firm may permit, by paying no later than November 30, 2013. By signing below, I agree to the above terms without reservation.” Tierney signed the letter on October 15, 2013, and returned it to Soni.

         On November 18, 2013, Tierney sent a letter to Soni with a check in the amount of $3, 531. He referred to adjustments that he was asking Soni to consider on the basis that he did not authorize Long or Soni to perform legal services on Tierney's behalf after he was told that Perez was no longer employed by Soni.

         On December 18, 2013, Soni prepared a “Notice of Client's Right to Fee Arbitration” for an outstanding balance of $3, 580. The notice of arbitration rights did not list the post office box in Tierney's address. That day, Soni's legal assistant sent an e-mail to Tierney at “tierney@cartograph.com” with the subject line “Tierney - Notice of Arbitration.” The text of the e-mail stated, “On behalf of The Soni Law Firm, please see the attached documents.” The attachment was the notice of arbitration rights.

         Arbitration

         Tierney submitted a petition for fee arbitration under LACBA's attorney-client arbitration services on February 19, 2014. On February 25, 2014, Tierney sent a letter to Soni on letterhead for SimpleLayers, Inc., asking for a tax form. Tierney noted that his company's name had changed, and he provided new contact information. His post office box number was the same, but his new email address was “tim@simplelayers.com.”

         On January 5, 2015, attorney Long sent a letter to the arbitrator stating that he was representing Soni. He requested dismissal of the arbitration on the ground that it was untimely, and therefore waived under section 6201, subdivision (a). Tierney had been given notice of his right to arbitrate on December 18, 2013. Failure to request arbitration within 30 days after receipt of the notice from an attorney was deemed a waiver under section 6201, and Tierney had initiated arbitration more than 30 days after receipt of the notice, thereby waiving his right to arbitration. As a result, the arbitration should be dismissed for lack of jurisdiction.[3]

         On January 16, 2015, Long submitted Soni's reply to the petition for arbitration, stating that Soni was “specially appearing” and reserving jurisdictional objections.

         An arbitration hearing was conducted on January 30, 2015. Tierney challenged billing charges of $3, 720, because he had not authorized Long or Soni to perform legal services on his behalf after being informed that Perez was no longer employed by Soni. Soni and Long testified that although they had not received further directions from Tierney, they believed they had a duty to continue to represent Tierney, including handling his cases with the United States Patent and Trademark Office, until instructed otherwise. In light of the fact that Tierney clearly stated that he needed to think about his legal representation and get back to Soni on the next steps, the arbitrator was not persuaded that Soni had a duty to continue working on Tierney's case until Tierney definitively terminated the attorney-client relationship. Nothing needed to be done in the immediate future on Tierney's matters. Furthermore, Soni or Long could have easily contacted Tierney by telephone or e-mail to inquire whether Tierney was going to continue to be represented by Soni or terminate the relationship. Soni unilaterally proceeded with additional legal work that Tierney had not authorized based on their most recent conversation. Even if the deadlines in Tierney's cases necessitated quick action, waiting a day or two for clear instructions from Tierney would have been reasonable and not jeopardized the pending cases.

         The arbitrator concluded Tierney was not liable for the fees charged by Long under two rationales. First, Tierney had not authorized the fees charged by Long and was not responsible for paying them, regardless of the personal guarantee that Soni had Tierney sign. Second, Long's charges to review Tierney's matters were duplicative billing. When the attorney responsible for the matters left the firm, it was a staffing issue and the costs associated with taking over the case should have been absorbed as a cost of business. The subsequent lawyer's review of the file duplicated work that had been previously performed by the initial lawyer, and the client cannot be billed for the duplicative work. In addition, Soni had attempted to charge fees for collection activities to Tierney, which the arbitrator found should not have been billed to Tierney and were duplicative.

         During the arbitration, Tierney agreed not to dispute charges totaling $380 associated with transferring his file. The parties stipulated that with respect to undisputed fees, Tierney had a credit balance of $140. The arbitrator allocated the initial arbitration fee of $242.50 to Soni and the amended arbitration filing fee of $26 to Tierney. The arbitrator awarded net fees to Soni of $2.50. The arbitrator signed the award on February 11, 2015. The arbitration award was served by mail on February 13, 2015.

         Lawsuit

         On March 18, 2015, attorneys who were associated with Soni, including Long, filed a complaint on Soni's behalf against Tierney for breach of contract, quantum meruit, money had and received, book account, fraudulent and negligent misrepresentation, fraudulent inducement to enter into a contract, and breach of guaranty. Soni sought $3, 580 in fees and $23, 898 for collection expenses.

         Tierney filed an answer. On June 30, 2015, Tierney filed a petition in the pending action to confirm the arbitration award. The petition alleged that no party had rejected the award and requested trial within 30 days after notice of the arbitration award was mailed, and as a result, the arbitration award was binding.

         On July 24, 2015, Soni filed an “opposition” to the motion to confirm the arbitration award, and a request to dismiss the petition, or in the alternative, correct the award to reflect the amount of attorney fees Soni sought in the complaint. Soni's arguments relied on the arbitrator's lack of jurisdiction and Soni's lack of proper notice of the arbitration award. Soni stated that he had objected twice in January 2015 that the arbitrator lacked jurisdiction. He added, “Mr. Tierney's assertion that he did not receive email notice despite the parties' ongoing prior communications amounts to procuring the arbitration by fraud. Nevertheless, Mr. Soni participated in the arbitration proceeding under objection to the arbitration as untimely and fraudulently invoked, and elected non-binding arbitration.”

         Soni argued that the arbitration award was invalid, because there was no evidence that three signed copies of the award were provided to the Arbitration Committee Office, no notice was provided of the parties' post-arbitration rights as required under rule 35 of the LACBA rules, the award failed to decide all of the issues submitted to the arbitration, and the award improperly construed the language of the attorney-client fee agreement.

         Soni also argued that the action was timely, because section 6206 and rule 48 of the LACBA rules tolled the time to file a civil action until 30 days after receipt of the arbitration award. He argued that the time for filing a civil action was based on the date that the arbitration award was received, not the date that the arbitration award was mailed, and Soni had received the award on February 17, 2015. In addition, the time to file an action was extended by five days under Code of Civil Procedure section 1013 based on service of the arbitration award by mail.

         Soni submitted his declaration in support of his opposition. He provided the e-mail sent by his legal assistant on December 18, 2013, with the notice of the right to arbitration. He also submitted Tierney's letter providing new contact information in February 2014. He provided one of his January 2015 letters to the arbitrator objecting that Tierney's request for arbitration was untimely. Soni declared that during the arbitration proceeding in January 2015, Tierney stated that he did not check his old email address and did not receive the notice of his right to arbitration.

         Tierney filed a reply on July 31, 2015, arguing that the arbitration award became binding 30 days after service under section 6204, subdivision (b). In addition, Soni had failed to exercise his opportunity to vacate or correct the arbitration award by raising his claims within 100 days after service of the arbitration award. The arbitration award was served on February 13, 2015, and Soni did not petition the court to vacate or correct the award within the 100-day time limit that expired on May 24, 2015. ...


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