Kling v. Horn CA2/7 ( 2021 )

Filed 12/14/21 Kling v. Horn CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
ANTHONY N. KLING, B305967
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC682318)
v.
STEVEN J. HORN,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, David Sotelo, Judge. Affirmed.
Law Office of David Knieriem and David Knieriem; Kling
Law Firm and Anthony N. Kling for Plaintiff and Appellant.
Valerie F. Horn & Associates and Valerie F. Horn for
Defendant and Respondent.
``
INTRODUCTION
Steven J. Horn, an attorney, represented Anthony L. Kling,
also an attorney, in a lawsuit. A fee dispute arose: Horn wanted
Kling to pay fees he owed, Kling wanted to recover fees he had
paid. Horn filed a demand for arbitration with the American
Arbitration Association (AAA) pursuant to the arbitration
provision in his retainer agreement. Kling, in turn, filed a
demand for arbitration with the Los Angeles County Bar
Association (LACBA) under the Mandatory Fee Arbitration Act
(MFAA), Business and Professions Code section 6200 et seq.1
The AAA stayed its arbitration while Kling and Horn
participated in the LACBA arbitration. Kling partially prevailed
in the latter, obtaining a nonbinding award that required Horn to
repay Kling some of the fees Kling had paid him. But Kling,
apparently believing he could recover more from Horn, rejected
the award and filed an action in the Los Angeles County Superior
Court seeking a trial after the LACBA arbitration.
Meanwhile, back in the AAA arbitration, Horn sought and
obtained an order lifting the stay. Despite receiving notice the
AAA arbitration was no longer stayed, Kling declined to
participate. The AAA arbitrator awarded Horn $192,000.
Horn filed a petition to confirm the AAA arbitration award,
and Kling filed a petition to vacate it. The trial court granted
Horn’s petition, denied Kling’s, and entered judgment. Kling
appeals, and we affirm.
1 Undesignated references are to the Business and
Professions Code.
2
``
FACTUAL AND PROCEDURAL BACKGROUND
A. The Klings Retain Horn
In 2011 Kling and his mother, Mary, retained Horn to
represent them in a lawsuit they had filed, Kling et al. v. Hassid
et al. (Super. Ct. L.A. County, 2014, No. SC098810).2 Horn’s
retainer agreement included a provision requiring the Klings to
submit any dispute “arising from th[e] Agreement,” including
those concerning “fees, costs or the quality of the work,” to
“binding arbitration in accordance with the Commercial
Arbitration Rules of the [AAA].”
B. Horn and the Klings File Arbitration Demands
In November 2013 Horn withdrew as counsel from the
Hassid action after a dispute arose over Horn’s handling of the
case.3 In September 2014 Horn filed with the AAA a demand for
arbitration against the Klings, seeking $84,000 in unpaid fees,
costs, and interest. Horn later added to the proceeding
3123 SMB LLC, Lincoln One Corporation, and Cliffwood, LLC,
entities Kling identified as “successors in interest” to the Klings.
In May 2015 the Klings filed a petition for arbitration with
the LACBA under the MFAA. The Klings alleged that Horn
committed malpractice when he represented them in the Hassid
2 Horn represented Kling in his individual capacity and as
the trustee of his named trust, but represented Mary only as the
trustee of her named trust. All references to the Klings are to
Anthony and Mary in those capacities.
3 A year later the trial court dismissed the Hassid action for
failure to timely bring it to trial.
3
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action and that they were entitled to the return of $648,000 in
attorneys’ fees the Klings claimed they had paid him. The AAA
notified Horn and the Klings it was holding the AAA arbitration
“in abeyance pending the outcome” of the LACBA arbitration.
The Klings and Horn participated in the LACBA
arbitration. In October 2017 the arbitration panel issued a
statement of decision and award. The panel concluded Horn’s
alleged misconduct “was not sufficiently serious under the
circumstances to warrant that [Horn] should not be entitled to
payment for [his] legal services . . . .” The panel ruled, however,
that Horn charged the Klings fees that did “not represent time
reasonably necessary . . . to attain [the Klings’] goals” in the
litigation and that Horn had padded his time entries. The panel
ruled that the reasonable value of Horn’s services and costs was
$380,245 and that the Klings had paid Horn $603,231. The panel
issued an award in favor of the Klings in the amount of $217,986,
representing the difference, minus $5,000 in arbitration costs.
C. The Klings Reject the LACBA Award, and Horn
Proceeds with the AAA Arbitration
The Klings were not satisfied with $217,986. In November
2017 the Klings, 3123 SMB, and Kling Corporation—another
entity that participated in the Hassid action—filed a complaint in
the Los Angeles County Superior Court requesting a trial after
the LACBA arbitration.4 In addition to seeking a return of the
attorneys’ fees they had paid Horn, the Klings and the related
entities asserted several causes of action alleging Horn
4 3123 SMB and Kling Corporation were petitioners, along
with the Klings, in the LACBA arbitration.
4
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committed legal malpractice in the Hassid action. The trial court
eventually sustained Horn’s demurrer to those causes of action,
ruling they were time-barred (a ruling Kling does not challenge
in this appeal).5 The Klings’ only cause of action remaining after
the court’s ruling on Horn’s demurrer was the Klings’ request for
a trial after the LACBA arbitration.
Meanwhile, Horn filed in the AAA arbitration and sent to
the Klings’ counsel of record a document titled “Notice of Revival
of Demand and/or Demand to Compel and/or Proceed with
Contractual Binding Arbitration and To Lift the Stay.” Horn
stated that the LACBA arbitration panel had issued a
nonbinding award and that he was filing the notice in the AAA
arbitration “in order to proceed with contractual binding
arbitration which was stayed pending said award . . . .” Kling,
purportedly acting as counsel for Mary Kling (but not for
himself), filed a motion to dismiss the AAA arbitration. Kling
subsequently sent the arbitrator and Horn a letter stating the
5 This action was neither the first time nor the last time
Kling sued Horn for legal malpractice. Shortly after Horn filed
his demand for arbitration with AAA, Kling, through 3123 SMB,
filed an action for legal malpractice against Horn in the United
States District Court for the Central District of California. The
district court ultimately dismissed that action on the ground that
3123 SMB had obtained diversity through jurisdictional
manipulation. (See 3123 SMB LLC v. Horn (C.D.Cal. May 7,
2018, No. CV 14-8115) 2018 WL 5801875, p. 2.) 3123 SMB filed a
similar malpractice action in the Los Angeles County Superior
Court. The court in that case dismissed the action as time-
barred, 3123 SMB appealed, and Division Three of this court
affirmed. (See 3123 SMB LLC v. Horn (Nov. 22, 2019, B294372)
[nonpub. opn.].)
5
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Klings and their related entities were refusing to participate in
the AAA arbitration because they did not believe the AAA had
“jurisdiction” to hear the dispute.
D. The AAA Arbitrator Issues an Award in Favor of
Horn, Which the Trial Court Confirms
The arbitrator in the AAA arbitration set the matter for a
hearing. Horn participated; the Klings did not. In September
2018 the arbitrator issued an award in favor of Horn and against
the Klings and the related entities in the amount of $193,921.
The award included fees and costs Horn claimed the Klings owed
him, the attorneys’ fees and expert witness fees Horn incurred in
the AAA arbitration, and the AAA arbitration costs and fees
Horn paid.
Horn filed a new action in superior court to confirm the
award. The Klings responded by filing their own new action to
vacate the AAA award under Code of Civil Procedure section
1286.2. The superior court eventually consolidated all three
related actions: Horn’s petition to confirm the AAA arbitration
award; the Klings’ petition to vacate the AAA arbitration award;
and the Klings’ earlier action requesting a trial after the LACBA
arbitration.
In September 2019 the Klings filed a document titled
“request to set a jury trial,” contending they were entitled to have
a jury hear their petition to vacate the arbitration award because
the petition to vacate was both a “fraud lawsuit” and a “contract
dispute.” The trial court denied the request, ruling that Code of
Civil Procedure section 1286.2, which governs petitions to vacate
an arbitration award, does not give the moving party a right to a
jury trial.
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The Klings raised numerous grounds for vacating the
arbitration award. Those relevant to this appeal included that
the AAA award attached to Horn’s petition to confirm was “not a
self-validating document”; that Horn did not comply with the
MFAA because he did not file a new action requesting a trial
after arbitration within 30 days of the LACBA award; that the
AAA proceeding was “void as a matter of law” because Horn did
not give the Klings notice of their right to arbitrate under the
MFAA and never served the Klings with a demand for
arbitration; and that Horn’s retainer agreement contained an
illegal block billing provision that rendered the entire agreement
unenforceable.
The trial court granted Horn’s petition to confirm the AAA
arbitration award against the Klings (but not against the other
entities) and denied Kling’s petition to vacate the award. The
court ruled that Horn’s petition complied with Code of Civil
Procedure section 1285.4, which lists the requirements for
confirming an arbitration award; that Horn complied with the
MFAA by filing a notice of revival and a demand for arbitration
with the AAA; that the Klings waived any objections to service by
making a general appearance in the AAA arbitration; and that
the arbitrator was not required to determine the retainer
agreement was illegal. The court entered judgment in favor of
Horn and against the Klings. Kling timely appealed; Mary Kling
did not.
7
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DISCUSSION
A. Horn’s Petition To Confirm the Award Complied with
the California Arbitration Act
Kling first contends Horn “never introduced any evidence
to suggest the [AAA] award existed” because the copy of the
award Horn attached to his petition was “hearsay.” This
argument is meritless.
The California Arbitration Act (CAA) prescribes the
requirements of a petition to confirm an arbitration award. The
petition must “(a) [s]et forth the substance of or have attached a
copy of the agreement to arbitrate,” “(b) [s]et forth names of the
arbitrators,” and “(c) [s]et forth or have attached a copy of the
award and the written opinion of the arbitrators, if any.” (Code
Civ. Proc., § 1285.4.) “If a petition . . . is duly served and filed,
the court shall confirm the award as made,” unless the court
corrects or vacates the award, or dismisses the petition, pursuant
to one of the statutory grounds. (Id., § 1286; see id., §§ 1286.2,
1286.6, 1287.2.) “The purpose of [the predecessor to Code of Civil
Procedure section 1285.4] is to be sure that the trial judge has
access to the arbitration agreement, the names of the arbitrators
and the award. . . . [S]ubstantial compliance . . . is all that is
required.” (Puccinelli v. Nestor (1956) 145 Cal.App.2d 48, 49-50;
see Horn v. Gurewitz (1968) 261 Cal.App.2d 255, 261.)
There is no question Horn substantially complied with
Code of Civil Procedure section 1285.4. He attached to his
operative amended petition a copy of his retainer agreement,
which contained the arbitration provision, and a copy of the
arbitration award, which contained the name and signature of
the arbitrator. Although it is not entirely clear, Kling appears to
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be arguing that, to avoid a hearsay objection, someone from AAA
had to authenticate the award by testifying the award Horn
submitted with his petition was in fact the award issued by the
AAA arbitrator. Code of Civil Procedure section 1285.4, however,
contains no such requirement; it only required Horn to submit “a
copy of the award.” (Code Civ. Proc., § 1285.4, subd. (c); see
Eternity Investments, Inc. v. Brown (2007) 151 Cal.App.4th 739,
745 [“A petition to confirm need only set forth (1) the names of
the arbitrators, (2) the arbitration agreement (by description or
attached copy), and (3) the award and written opinion of the
arbitrators (by description or attached copy).”]; Accito v. Matmor
Canning Co. (1954) 128 Cal.App.2d 631, 633 [“‘[s]tatutes relating
to arbitration are ordinarily regarded as remedial in nature, and
liberally construed’ . . . in accordance with the object of such
statutes to provide a means of obtaining speedy and final
disposition of disputes by arbitrators”].) Which Horn did. After
that, it was up to Kling to convince the court the arbitration
award Horn submitted was not the actual arbitration award.
(See Rivera v. Shivers (2020) 54 Cal.App.5th 82, 94 [“‘the burden
is on the party attacking the [arbitration] award to affirmatively
establish the existence of error’”].)
B. Kling Was Not Entitled to a Jury Trial on His
Petition To Vacate the Award
Kling argues he was entitled to a jury trial on his petition
because his asserted grounds to vacate the award included fraud
and illegality. Kling relies on the general propositions that
parties to a common law action at law have a right to a jury trial
and that actions to recover damages for fraud and breach of
contract are actions at law. “Whether a party was
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constitutionally entitled to a jury trial is a question of law that
we review de novo.” (Hollingsworth v. Heavy Transport, Inc.
(2021) 66 Cal.App.5th 1157, 1173.)
Kling fundamentally misunderstands the nature of
contractual arbitration and petitions to confirm and vacate
arbitration awards. The CAA does not guarantee (or even
permit) a party to have a jury determine a petition to vacate an
arbitration award. Any petition filed under the CAA, including a
petition to vacate an award under Code of Civil Procedure section
1285, “shall be heard in a summary way in the manner and upon
the notice provided by law for the making and hearing of motions
. . . .” (Code Civ. Proc., § 1290.2; see Department of Human
Resources v. International Union of Operating Engineers (2020)
58 Cal.App.5th 861, 882; Hyundai Securities Co., Ltd. v. Lee
(2013) 215 Cal.App.4th 682, 691 [the Legislature “provided for
the specific summary procedures for compelling, confirming, and
vacating arbitration awards”].) “[T]he facts are to be proven by
affidavit or declaration and documentary evidence, with oral
testimony taken only in the court’s discretion.” (Rosenthal v.
Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394,
413-414; accord, Toal v. Tardif (2009) 178 Cal.App.4th 1208,
1223.) These limited “procedures for judicial review of a private
arbitration award” apply “even absent the specific agreement of
the parties.” (Vandenberg v. Superior Court (1999) 21 Cal.4th
815, 831.) The trial court did not err in denying Kling’s request
for a jury trial on his petition to vacate the AAA arbitration
award.
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C. The Trial Court Did Not Err in Denying Kling’s
Petition To Vacate the Award
1. Applicable Law and Standard of Review
“‘[A]rbitral finality is a core component of the parties’
agreement to submit to arbitration.’” (Richey v. AutoNation, Inc.
(2015) 60 Cal.4th 909, 916; accord, Bacall v. Shumway (2021)
61 Cal.App.5th 950, 957.) “Generally, courts cannot review
arbitration awards for errors of fact or law, even when those
errors appear on the face of the award or cause substantial
injustice to the parties.” (Richey, at p. 916; accord, Soni v.
SimpleLayers, Inc. (2019) 42 Cal.App.5th 1071, 1086-1087.)
“Judicial review of the arbitrator’s award is limited to the
grounds set forth in Code of Civil Procedure sections 1286.2 (to
vacate) and 1286.6 (to correct).” (Soni, at p. 1087; see Moncharsh
v. Heily & Blase (1992) 3 Cal.4th 1, 27-28 (Moncharsh) [“we
adhere to the . . . line of cases that limit judicial review of private
arbitration awards to those cases in which there exists a
statutory ground to vacate or correct the award”].) Kling relies
on Code of Civil Procedure section 1286.2, subdivision (a)(4),
which authorizes the court to vacate an arbitration award if the
“arbitrators exceeded their powers and the award cannot be
corrected without affecting the merits of the decision upon the
controversy submitted.”
“To the extent the trial court made findings of fact in
confirming the award, we affirm the findings if they are
supported by substantial evidence. [Citation.] To the extent the
trial court resolved questions of law on undisputed facts, we
review the trial court’s rulings de novo. [Citation.] [¶] We apply
a highly deferential standard of review to the award itself,
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insofar as our inquiry encompasses the arbitrator’s resolution of
questions of law or fact.” (Cooper v. Lavely & Singer Professional
Corp. (2014) 230 Cal.App.4th 1, 11-12; see Branches
Neighborhood Corp. v. CalAtlantic Group, Inc. (2018)
26 Cal.App.5th 743, 750.)
2. The Arbitrator Did Not Exceed His Powers on
the Ground Horn Did Not Comply with the
MFAA
Section 6204, subdivision (a), provides that where, as here,
the parties to an MFAA arbitration have not agreed in advance to
be bound by the award, “either party shall be entitled to a trial
after arbitration if sought within 30 days . . . .” Section 6204,
subdivision (b), provides: “If there is an action pending, the trial
after arbitration shall be initiated by filing a rejection of
arbitration award and request for trial after arbitration in that
action . . . .” And section 6204, subdivision (c), provides: “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 . . . .”
Kling contends that the arbitrator exceeded his powers in
issuing the award because the notice of revival and demand for
arbitration Horn filed in the AAA arbitration did not comply with
section 6204. This argument, too, is meritless.
First, Kling did comply with section 6204. A client may not
avoid a prior agreement to arbitrate disputes with his or her
attorney by requesting mandatory arbitration under the MFAA
and then filing a request for a trial after the arbitration. “[O]nce
the MFAA arbitration process is validly completed or terminated,
. . . binding arbitration, pursuant to a preexisting agreement,
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may go forward . . . .” (Schatz v. Allen Matkins Leck Gamble &
Mallory LLP (2009) 45 Cal.4th 557, 571; accord, Rosenson v.
Greenberg Glusker Fields Claman & Machtinger LLP (2012)
203 Cal.App.4th 688, 693; Knight et al., Cal. Practice Guide:
Alternative Dispute Resolution (The Rutter Group 2020 supp.)
¶ 5:107.6a [“following nonbinding MFAA arbitration, the attorney
can require that the dispute be submitted to private arbitration
in accordance with the retention agreement (thus ‘trumping’ the
client’s MFAA right to elect a trial de novo in a court of law)”].)
Where the parties have agreed to binding arbitration, “a demand
for arbitration within 30 days of service of the MFAA award is a
proceeding that prevents finality of the MFAA award” under
section 6204. (Rosenson, at p. 692.) Here, within 30 days of the
LACBA award, Horn filed in the AAA arbitration a notice of
revival and demand for arbitration, unequivocally stating he
intended to proceed with the arbitration. That was sufficient.
(See id. at p. 694 [“law firm properly invoked the right to binding
arbitration under the retainer agreement by filing a timely
demand, which prevented the MFAA award from becoming
final”]; see also § 6201, subd. (c) [where an “action or other
proceeding” has been stayed pending resolution of an MFAA
proceeding, “[t]he action or other proceeding may thereafter
proceed subject to the provisions of Section 6204”].)6
6 Kling contends the notice of revival and demand did not
comply with the MFAA because Horn had not previously served
Kling in the AAA proceeding. But Kling is conflating two
separate issues. Section 6204, subdivisions (b) and (c), require
only that the party rejecting the arbitration award and
requesting a trial after arbitration file the rejection and request
within 30 days, which Horn did. Whether Horn properly served
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Second, even if Horn’s filing in the AAA arbitration did not
fully comply with section 6204, the MFAA does not provide Kling
the relief he seeks. The MFAA specifies one (and only one)
consequence for failing to comply with section 6204—the MFAA
award becomes binding, and a court with jurisdiction may
confirm it. (See § 6203, subd. (b) [“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.”].) But that is not what Kling was attempting to do
here. Kling never argued the LACBA award should become
binding, nor did he seek to confirm the LACBA award rather
than the AAA award; to the contrary, Kling rejected the LACBA
arbitration award and requested a trial after the arbitration.
(Cf. Giorgianni v. Crowley (2011) 197 Cal.App.4th 1462, 1478 [“In
the context of judicial arbitration [citation], a party electing to
have a trial de novo by making a timely demand under the
statute . . . wipes the judicial arbitration slate clean . . . ‘putting
the case at large as though no arbitration proceedings had
occurred.’”].) Nothing in the MFAA authorizes a court to deny a
request for a trial after arbitration or to preclude an arbitrator
from hearing an arbitration after an untimely or defective
request under section 6204—at least not where, as here, all
parties to the proceeding agree the MFAA award is not binding.
Kling with the arbitration demand is a different issue, which we
will discuss.
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3. The AAA Arbitration Was Not Void
Kling also contends the AAA arbitrator exceeded his
powers because the AAA never had jurisdiction to hear the
matter and the arbitration was “void ab initio.” Kling has two
theories. First, Kling contends the AAA arbitration was void
because Horn did not give him notice of his right to fee
arbitration, as required by the MFAA. Kling is wrong on the law.
The MFAA does require that, prior to or at the time an attorney
initiates a contractual arbitration proceeding against a client, the
attorney “shall include a statement of the client’s right to
arbitration under” the MFAA and that “[f]ailure to give this
notice shall be a ground for the dismissal of the . . . proceeding.”
(§ 6201, subd. (a).) But even if Horn failed to comply, dismissal
provided under section 6201, subdivision (a), is “discretionary,
rather than mandatory.” (Philipson & Simon v. Gulsvig (2007)
154 Cal.App.4th 347, 366; see Law Offices of Dixon R. Howell v.
Valley (2005) 129 Cal.App.4th 1076, 1088 [a court “may, in its
discretion, dismiss the action for attorney fees where the attorney
fails to give the client the requisite section 6201(a) notice”];
Richards, Watson & Gershon v. King (1995) 39 Cal.App.4th 1176,
1180 [“dismissal for failure to comply with the notice provision of
section 6201, subdivision (a) is discretionary”].) The arbitrator
did not abuse his discretion (and therefore exceed his powers) by
not dismissing the arbitration.
Second, Kling asserts “[t]here was nothing in 2017 for Horn
to revive because no one has ever seen any initiating documents
from AAA or Horn for any so-called arbitration.” If Kling is
arguing he was never properly served in the AAA arbitration, his
argument lacks merit.
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“A demand for arbitration must be served on the other
party,” and the “failure to serve a demand for arbitration on a
person precludes a judgment from being made against that
person in a contractual arbitration proceeding.” (Ikerd v.
Warren T. Merrill & Sons (1992) 9 Cal.App.4th 1833, 1842-1843.)
The trial court, however, found Kling waived any defect in service
by appearing in the AAA arbitration. Substantial evidence
supported the court’s finding that Kling participated to some
extent in the AAA arbitration, even though he chose not to attend
the hearing. For example, approximately one month after Horn
filed his notice of revival and demand for arbitration, the Klings,
through their attorney, filed a document titled “Case/Discovery
Report,” in which the Klings discussed their anticipated expert
testimony, their estimate for the length of the arbitration
hearing, and scheduling issues. Kling does not address this
portion of the court’s ruling, nor does he argue that or how the
court erred in ruling he waived any defect in service. (See
Tanguilig v. Valdez (2019) 36 Cal.App.5th 514, 520 [because “an
‘“order of the lower court is presumed correct,”’” the appellant
“has the burden of affirmatively showing error”].)
4. Horn’s Retainer Agreement Was Not Illegal
a. Applicable Law
Kling also contends the trial court erred in not vacating the
AAA arbitration award because Horn, in the arbitration, sought
to enforce an “illegal” retainer agreement that permitted him to
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block bill his time entries.7 An arbitrator exceeds his powers,
“and an arbitral award must be vacated, when a court determines
that the arbitration has been undertaken to enforce a contract
that is ‘illegal and against the public policy of the state.’”
(Sheppard, Mullin, Richter & Hampton, LLP v. J-M
Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 73 (Sheppard,
Mullin); see Moncharsh, supra, 3 Cal.4th at p. 32.) Any provision
for block billing in Horn’s engagement agreement, however,
hardly made the agreement illegal.
As the Supreme Court has explained, the availability of
judicial review differs depending on whether the entire contract a
party seeks to enforce through arbitration is illegal or whether
only a portion of an otherwise enforceable contract is illegal. “‘If
a contract includes an arbitration agreement, and grounds exist
to revoke the entire contract, such grounds . . . also vitiate the
arbitration agreement. Thus, if an otherwise enforceable
arbitration agreement is contained in an illegal contract, a party
may avoid arbitration altogether.’” (Sheppard, Mullin, supra,
6 Cal.5th at p. 76; see Moncharsh, supra, 3 Cal.4th at p. 29.) If,
on the other hand, “‘the alleged illegality goes to only a portion of
the contract (that does not include the arbitration agreement),
the entire controversy, including the issue of illegality,
[generally] remains arbitrable.’” (Sheppard, Mullin, at p. 76; see
Moncharsh, at p. 30.) Although “‘there may be some limited and
exceptional circumstances justifying judicial review of an
7 “Block billing occurs when ‘a block of time [is assigned] to
multiple tasks rather than itemizing the time spent on each
task.’” (Mountjoy v. Bank of America, N.A. (2016)
245 Cal.App.4th 266, 279.)
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arbitrator’s decision when a party claims illegality affects only a
portion of the underlying contract,’ . . . [i]n light of the legislative
policy in favor of arbitral finality, . . . courts should be reluctant
to invalidate an award on such a ground ‘[w]ithout an explicit
legislative expression of public policy.’” (Sheppard, Mullin, at
p. 77; see Moncharsh, at p. 32.)
b. Analysis
Kling’s entire argument rests on his assertion that block
billing violates section 6148, subdivision (b), which states that
“[a]ll bills rendered by an attorney to a client shall clearly state
the basis thereof” and must state “the amount, rate, basis for
calculation, or other method of determination of the attorney’s
fees and costs.” Kling’s argument is, at best, dubious. While
some commentators have criticized the practice of block billing,8
Kling has not cited any authority suggesting block billing violates
section 6148, is illegal, or is contrary to public policy. To the
contrary, several courts, reviewing awards of attorneys’ fees,
have stated that block billing “is not objectionable ‘per se,’”
although it may justify discounting an attorney’s fee request,
particularly when the court must decide which of several billed
fees are recoverable. (See, e.g., Jaramillo v. County of Orange
(2011) 200 Cal.App.4th 811, 830 [“block billing is not
8 See, e.g., Tuft et al., Cal. Practice Guide: Professional
Responsibility (The Rutter Group 2020 supp.) ¶ 5:920 (Section
6148, subdivision (b) “does not expressly require disclosing the
date upon which services were rendered or that services be
specifically described. . . . [¶] However, block billing may not
adequately explain the services rendered and should be used with
caution.”).
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objectionable ‘per se,’” but “does increase the risk that the trial
court, in a reasonable exercise of its discretion, will discount a fee
request”]; Christian Research Institute v. Alnor (2008)
165 Cal.App.4th 1315, 1325 [“Block billing, while not
objectionable per se in our view, exacerbated the vagueness of
counsel’s fee request.”].)
The provision of the retainer agreement Kling
characterizes as illegal stated: “Attorney [Horn] may group or
block bill for services rendered on a given day rather than
itemizing each individual charge for services.” The agreement,
however, also stated Horn’s hourly rate and required him to
charge his services to the nearest tenth of an hour. Taken
together, these provisions would not necessarily preclude Kling
from understanding the amount, rate, basis, and calculation of
Horn’s fees.
But even if the block billing provision in the retainer
agreement violated section 6148, the trial court still did not err in
denying Horn’s petition to vacate the award. Contrary to Kling’s
assertion, the inclusion in an attorney’s engagement agreement
of one illegal provision does not necessarily render the entire
agreement illegal. (See Sheppard, Mullin, supra, 6 Cal.5th at
p. 79 [“the case law does not establish . . . that an attorney-
services contract may be declared illegal in its entirety simply
because it contains a provision that conflicts with an attorney’s
obligations under [an ethical rule]”].) “It is only when ‘the
illegality taints the entire contract’ that courts may declare ‘the
entire transaction is illegal and unenforceable.’” (Id. at pp. 79-80;
see Koenig v. Warner Unified School Dist. (2019) 41 Cal.App.5th
43, 56 [“‘“If the central purpose of the contract is tainted with
illegality, then the contract as a whole cannot be enforced, [but if]
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the illegality is collateral to the main purpose of the contract, and
the illegal provision can be extirpated from the contract by means
of severance or restriction, then such severance and restriction
are appropriate.”’”].)
For example, in Birbrower, Montalbano, Condon & Frank
v. Superior Court (1998) 17 Cal.4th 119 (Birbrower) the Supreme
Court held a New York law firm’s fee agreement was not
unenforceable in its entirety, even though it permitted the firm to
recover fees for legal services performed in California, in violation
of the prohibition on the unauthorized practice of law. (Id. at
pp. 12-13.) The Supreme Court explained that “the portion of the
fee agreement . . . that includes payment for services rendered in
New York may be enforceable to the extent that the illegal
compensation can be severed from the rest of the agreement.”
(Id. at p. 13.)
In Calvert v. Stoner (1948) 33 Cal.2d 97 (Calvert) the
Supreme Court held a provision in a contingency fee agreement
that prohibited the client from entering into a litigation
settlement without her attorney’s approval, even if illegal, did not
render the entire agreement illegal, where the attorney never
sought to enforce the challenged prohibition. (See id. at pp. 99,
103-105.) And in Shopoff & Cavallo LLP v. Hyon (2008)
167 Cal.App.4th 1489 (Shopoff) the court held a provision in a
contingency fee agreement granting the attorney a lien on the
clients’ recovery did not render the arrangement illegal, even if
the manner in which the attorney acquired the lien violated the
Rules of Professional Conduct. (See id. at pp. 1498, 1524-1525.)
The court in Shopoff stated the violations “may prevent [the
attorneys] from enforcing the liens, but those violations do not
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taint or preclude recovery” under the rest of the agreement. (Id.
at p. 1524, fn. omitted.)
Sheppard, Mullin, supra, 6 Cal.5th 59, in contrast,
illustrates the type of situation where an illegal provision may
render the entire engagement agreement unenforceable. There, a
law firm represented a pipe manufacturer in a qui tam action,
but also represented in other matters one of the public entities
that was adverse to the pipe manufacturer in the qui tam action.
(See id. at pp. 68-70.) The Supreme Court held that, because the
law firm failed to obtain the pipe manufacturer’s informed
consent in violation of the Rules of Professional Conduct, the
entire engagement agreement with the pipe manufacturer was
unenforceable. (See id. at p. 87.)
This case is closer to Birbrower, Calvert, and Shopoff than
Sheppard, Mullin. The object of Horn’s fee agreement, to be
compensated on an hourly basis at an agreed upon rate for work
performed in the Hassid action, was lawful. (See Shopoff, supra,
167 Cal.App.4th at p. 1524 [“The object of the contingent fee
agreements—that is, to compensate [the attorneys] with specified
percentages of the Recovery proceeds—remains entirely lawful.”];
see also Birbrower, supra, 17 Cal.4th at p. 139 [“The object of [the
parties’] agreement may not have been entirely illegal, assuming
[the client] was to pay [the law firm] compensation . . . that did
not amount to the practice of law in California.”].) And unlike
Sheppard, Mullin, where the law firm’s representation of the
client violated a rule of professional conduct, there was nothing
impermissible about Horn’s representation of Kling.
In addition, like the agreements in Birbrower, Calvert, and
Shopoff, the allegedly illegal portion of Horn’s retainer agreement
was severable from the rest of the agreement. (See Civ. Code,
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§ 1599 [“[w]here a contract has several distinct objects, of which
one at least is lawful, and one at least is unlawful . . . the contract
is void as to the latter [but] valid as to the rest”]; Koenig v.
Warner Unified School Dist., supra, 41 Cal.App.5th at p. 56
[“severance” of illegal portions of a contract “is favored in order
‘to prevent parties from gaining undeserved benefit or suffering
undeserved detriment as a result of voiding the entire
agreement’”].) The retainer agreement did not require Horn to
include block billing in his statements; it merely gave Horn the
option of doing so. A court (or, in this case, the arbitrator) could
have reviewed the fees, determined which, if any, Horn
improperly billed, and distinguished those fees from the fees
Horn properly billed. (See Birbrower, supra, 17 Cal.4th at p. 138
[“‘“‘[w]hen the transaction is of such a nature that the good part
of the consideration can be separated from that which is bad, the
Courts will make the distinction’”’”]; Koenig, at p. 56 [“‘California
cases take a very liberal view of severability, [even] enforcing
valid parts of an apparently indivisible contract where the
interests of justice or the policy of the law would be furthered.’”].)
Indeed, even where a statutory violation may prohibit recovery of
fees for “substantial illegal services,” the violation does not
necessarily preclude recovery under the same agreement “for the
limited [permissible] services . . . .” (Birbrower, at p. 139.)
To the extent Kling contends that, even if the entire
retainer agreement was not illegal, the trial court should have
vacated the award because the block billing provision was illegal,
Kling’s argument also fails. First, Kling forfeited the argument
by not making it in the trial court. (See Moncharsh, supra,3 Cal.4th at pp. 30-31 [“[f]ailure to raise the claim” that a portion
of a contract that contains an arbitration agreement is illegal
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forfeits “the claim for any future judicial review”; “we cannot
permit a party to sit on his rights, content in the knowledge that
should he suffer an adverse decision, he could then raise the
illegality issue in a motion to vacate the arbitrator’s award”].)
Second, even if Kling had not forfeited the argument, this
case is not one of the “limited and exceptional circumstances”
justifying judicial review of an arbitrator’s decision where a party
challenges only a portion of a contract as illegal. (Sheppard,
Mullin, supra, 6 Cal.5th at p. 77; see Moncharsh, supra, 3 Cal.4th
at p. 32.) Moncharsh is again instructive. In that case an
attorney left his law firm and continued to represent the firm’s
former clients. A dispute arose over the fees the attorney owed to
the firm, and an arbitrator issued an award in favor of the firm.
(Moncharsh, at pp. 6-7.) The attorney sought to vacate the
arbitration award on the ground the provision in his fee
agreement requiring him to share fees with the firm violated the
Rules of Professional Conduct prohibiting unconscionable fees,
certain fee splitting arrangements, and agreements restricting an
attorney’s right to practice. (Id. at p. 7.) The Supreme Court
held the award was not reviewable, stating that “nothing in the
Rules of Professional Conduct at issue in this case . . . suggests
resolution by an arbitrator of what is essentially an ordinary fee
dispute would be inappropriate or would improperly protect the
public interest.” (Id. at p. 33.) Similarly, no statute or ethical
rule governing attorneys suggests it was improper for the
arbitrator to resolve what was a routine fee dispute between an
attorney and a client over the attorney’s billing practices.
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DISPOSITION
The judgment is affirmed. Horn’s request for sanctions is
denied. Horn is to recover his costs on appeal.
SEGAL, J.
We concur:
PERLUSS, P. J.
FEUER, J.
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