Albers v. Naegele CA2/7 ( 2013 )

Filed 11/6/13 Albers v. Naegele 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
RAYMOND H. ALBERS et al., B240455
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. LS018168)
v.
TIMOTHY D. NAEGELE et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los Angeles County, Huey P.
Cotton, Jr., Judge. Affirmed.
Timothy D. Naegele & Associates and Timothy D. Naegele for Defendants and
Appellants.
Law Offices of Lloyd J. Michaelson and Lloyd J. Michaelson for Plaintiffs and
Respondents.
_______________________
Appellants Timothy D. Naegele and his law firm, Timothy D. Naegele &
Associates, appeal from the judgment confirming an attorney-client fee arbitration award
in favor of respondents Raymond H. Albers and Deanna J. Albers.1 Following Naegele’s
representation of the Alberses in a civil action, a fee dispute arose between the parties.
The Alberses invoked their statutory right to arbitrate the dispute pursuant to California’s
Mandatory Fee Arbitration Act (MFAA; Bus. & Prof. Code,2 § 6200 et. seq.), but
Naegele refused to attend the arbitration, claiming the arbitrators lacked jurisdiction over
the dispute based on a forum selection clause in the fee agreement. After the arbitrators
issued an award in the Alberses’ favor, Naegele filed a rejection of the award and request
for trial in a pending federal action that he had brought against the Alberses in the United
States District Court for the District of Columbia. Over the next four years, the federal
court stayed that action at various times without reaching the merits of Naegele’s request
for trial after arbitration or the Alberses’ motion to dismiss for lack of jurisdiction.
Shortly before the expiration of the four-year statute of limitations (Code Civ.
Proc., § 1288), while the federal action was being stayed, the Alberses filed a petition to
confirm the arbitration award in a new action commenced in Los Angeles County
Superior Court. Naegele subsequently filed a motion for judgment on the pleadings in
which he contended that the California action was barred as a matter of law by the
Alberses’ failure to timely serve him with the petition and by the federal court’s exclusive
jurisdiction over the dispute based on the forum selection clause in the fee agreement and
Naegele’s filing of the request for trial in the federal action. The state trial court denied
Naegele’s motion for judgment on the pleadings and thereafter granted the Alberses’
petition to confirm the arbitration award. For the reasons set forth below, we affirm.
1 Appellants Timothy D. Naegele and Timothy D. Naegele & Associates shall be
collectively referred to as Naegele. Respondents Raymond H. Albers and Deanna J.
Albers shall be collectively referred to as the Alberses.
2 Unless otherwise stated, all further statutory references are to the Business and
Professions Code.
2
FACTUAL BACKGROUND AND PROCEDURAL HISTORY3
I. The Alberses Request a Mandatory Fee Arbitration Under the MFAA.
Naegele is an attorney licensed to practice law in California and the Alberses are
California residents. In 1998, the Alberses retained Naegele to represent them in a civil
action filed on their behalf in the United States District Court for the Central District of
California. On December 18, 1998, the Alberses entered into a fee agreement with
Naegele which included the following clause: “This agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and enforced in
accordance with the laws of the District of Columbia; venue for any disputes or litigation
arising out of this agreement shall be in a court of the District of Columbia and/or in the
United States District Court for the District of Columbia; and the [Alberses] hereby
consent to the jurisdiction of such court or courts with respect to any disputes or litigation
arising out of this agreement.” The fee agreement was subsequently amended by three
separate addenda, each of which included the same forum selection clause. After several
years of litigation, the federal district court dismissed the Alberses’ action, and following
an appeal filed on their behalf by Naegele, the United States Court of Appeals for the
Ninth Circuit affirmed the dismissal.
At some point, a dispute arose between the parties over the attorney’s fees owed to
Naegele. Represented by new counsel, Lloyd J. Michaelson, the Alberses invoked their
statutory right to a fee arbitration under the MFAA (§ 6200 et. seq.). On September 25,
2003, the Los Angeles County Bar Association’s (LACBA) Dispute Resolution Services
3 A portion of the procedural history set forth herein is taken from the opinions
of the United States District Court for the District of Columbia in the pending federal
action between Naegele and the Alberses. (See Naegele v. Albers (D.D.C. 2005) 355
F.Supp.2d 129; Naegele v. Albers (D.D.C. 2012) 843 F.Supp.2d 123; Naegele v. Albers
(D.D.C., Apr. 18, 2013, Civ. A. No. 03-CV-2507 (RLW)) 2013 U.S. Dist. Lexis 55288;
Naegele v. Albers (D.D.C., July 18, 2013, Civ. A. No. 03-CV-2507 (RLW) 2013 U.S.
Dist. Lexis 100728.) On the court’s own motion, we take judicial notice of these
opinions. (Evid. Code, §§ 452, subd. (d), 459.)
3
sent a letter to the Alberses, with a copy to Naegele, regarding their pending request for
arbitration and waiver of the associated filing fees.
II. Naegele Files a Federal Action Against the Alberses in the District of Columbia.
On December 8, 2003, prior to the arbitration hearing, Naegele filed a civil action
against the Alberses and their new counsel, Michaelson, in the United States District
Court for the District of Columbia, seeking recovery of attorney’s fees and alleged tort
damages. On January 5, 2004, the Alberses and Michaelson filed notices of automatic
stay of the federal action pending the fee arbitration pursuant to section 6201, subdivision
(c). Rather than submit to mandatory arbitration, Naegele responded with a flurry of
filings in the federal action, including a first amended complaint, a motion to strike the
notices of stay, a motion for entry of default, and two separate motions for sanctions.
While Naegele continued to actively litigate the federal action, the fee arbitration was
scheduled to be held in California in November 2004. As of the scheduled arbitration
date, however, the federal district court had not ruled on whether the federal action
should be stayed pending the California arbitration proceedings.
III. Naegele Fails to Appear at the Arbitration Hearing and the Arbitrators Issue
a Fee Award in the Alberses’ Favor.
On November 17, 2004, the mandatory fee arbitration was held before a three-
member arbitration panel through the LACBA’s Dispute Resolution Services. Prior to
the arbitration hearing, Naegele was served with a notice to appear and produce
documents at the hearing. He also was ordered by the arbitration panel to produce the
Alberses’ case file. Naegele submitted a written memorandum to the arbitration panel in
which he contested the panel’s jurisdiction to hear the fee dispute based on the forum
selection clause in the parties’ fee agreement. However, the presiding arbitrator for the
State Bar’s Office of Mandatory Fee Arbitration rejected Naegele’s argument and ruled
that the arbitration panel had jurisdiction to adjudicate the fee dispute.
4
The Alberses and Michaelson attended the arbitration hearing. Although Naegele
was represented by counsel at the arbitration, he did not personally appear at the hearing
nor did he produce the Alberses’ file. During the proceedings, Naegele’s counsel made
an opening statement and closing argument, cross-examined the Alberses, and presented
documentary evidence including a written statement from Naegele and a copy of the fee
agreement. However, Naegele’s counsel denied knowledge of why his client had failed
to produce to Alberses’ file or to appear at the hearing, except to state that Naegele
continued to contest the arbitrators’ jurisdiction.
On January 14, 2005, the arbitration panel issued a written award in favor of the
Alberses. The panel found that Naegele repeatedly had pursued meritless litigation in
representing the Alberses in the underlying civil action and that the Alberses had paid
Naegele $735,481.32 in attorney’s fees and costs. The panel further found that the total
amount which Naegele reasonably should have charged was $8,500 and that Naegele was
required to refund the Alberses the sum of $726,981.32. Additionally, the panel found
that Naegele willfully had failed to appear at the arbitration hearing and that he should
not be entitled to a trial after arbitration pursuant to the LACBA’s Rules for Conduct of
Arbitration of Fee Disputes and Other Related Matters. The arbitration award was served
by mail on the parties on January 24, 2005.4
IV. Naegele Files a Rejection of the Arbitration Award and Request for Trial in
the Pending Federal Action.
On January 3, 2005, after the arbitration was held but prior to the issuance of
the arbitration award, the federal district court stayed the federal action pending the
completion of the arbitration proceedings. (Naegele v. Albers, supra, 355 F.Supp.2d at
p. 132.) In granting the stay, the federal court reasoned as follows: “The court
4 Following the arbitration, Naegele filed a petition for writ of review with the
California Supreme Court, which was denied on February 16, 2005. (Naegele v. State
Bar (Feb. 16, 2005, S129486) 2005 Cal. Lexis 1863.)
5
recognizes that states are generally responsible for the regulation of lawyers. [Citation.]
The court further recognizes California’s substantial interest in providing clients with
prophylactic tools to deal with attorney-client fee disputes, that is, with an ‘effective
inexpensive remedy . . . which does not necessitate the hiring of a second attorney.’
[Citation.] For litigation to occur simultaneously with such arbitration would not only
frustrate California’s policy reasons for these statutes, but would completely defeat them.
[Citation.] Because the plaintiff is an attorney licensed to practice law in California
and the events that gave rise to this fee dispute and the instant ligation also arose in
California, the court stays the litigation of the attorney-client fee dispute pending the
completion of arbitration in California.” (Id. at p. 141.) The parties were ordered “not to
file any motions in this case until so directed” by the federal court, and within 30 days of
the completion of the arbitration, “to submit a joint status report informing the court of
the outcome of the arbitration proceedings, whether they wish to continue with this case
in this venue, and their proposed briefing schedule and deadlines for how this case will
5
proceed from that point forward, if at all.” (Id. at pp. 141-142.)
On February 22, 2005, Naegele filed a rejection of the arbitration award and
request for trial after arbitration in the pending federal action pursuant to section 6204,
subdivision (b). In a minute order entered on March 10, 2005, the federal court stated
that “[i]n light of the failed arbitration proceedings, the parties are hereby ordered to file a
joint status report, by no later than March 24, 2005, proposing how the parties wish to
proceed in this case and proposing a briefing schedule.” In a March 24, 2005 minute
order, following the parties’ submission of the joint status report, the federal court ruled
that “[u]pon consideration of the parties’ joint status report and in an effort to assist this
5 In addition to granting a stay, the federal court dismissed Michaelson from the
action for lack of personal jurisdiction, denied Naegele’s motion to strike the notices
of stay, and denied both of Naegele’s motions for sanctions. (Id. at p. 132.) The court
also noted in its opinion that “should the parties return to this court, the parties are on
notice that the first matters of inquiry will again be the subject matter jurisdiction of
this court and the real parties in interest.” (Ibid.)
6
case in progressing through a more conventional schedule, the [Alberses] are hereby
ordered to file a responsive pleading by no later than April 25, 2005.” At that time, the
federal court did not make any ruling or set any briefing schedule concerning Naegele’s
request for trial after arbitration.
V. The Alberses File and Then Dismiss, Without Prejudice, a Petition to
Confirm the Arbitration Award in Los Angeles County Superior Court.
On March 28, 2005, the Alberses filed a petition to confirm the arbitration award
in Los Angeles County Superior Court. The petition was served on Naegele and his
counsel in April 2005. On April 15, 2005, Naegele’s counsel sent a letter to Michaelson
demanding that the petition be withdrawn in light of Naegele’s request for trial in the
federal action and threatening to seek sanctions if the Alberses failed to do so. In an
April 19, 2005 response letter to Naegele’s counsel, Michaelson acknowledged the
pending federal action, but noted that the federal district court still had not made any
determination concerning subject matter or personal jurisdiction as to the Alberses.
Michaelson explained that, if the federal court exercised jurisdiction over the action, then
it might be the appropriate court to entertain the petition to confirm the arbitration award;
however, if the federal court dismissed the action for lack of jurisdiction, the proper
venue for the petition would be the Los Angeles County Superior Court. Given the
procedural posture of the case, Michaelson agreed to dismiss the petition without
prejudice pending the federal court’s ruling on the Alberses’ motion to dismiss for lack of
jurisdiction and to re-file the petition in California if the motion was granted.
VI. The Federal District Court Denies Naegele’s Request for Trial Without
Prejudice and Stays the Federal Action.
On April 20, 2005, the Alberses filed their motion to dismiss the federal action.
On August 8, 2005, the federal district court denied Naegele’s request for trial without
prejudice in light of the Alberses’ pending motion to dismiss. Yet over the next year, the
federal court did not make any ruling on the motion to dismiss or otherwise resolve the
issue of jurisdiction. Instead, on June 6, 2006, the federal court granted Naegele’s motion
7
to stay the action pending the outcome of criminal bankruptcy fraud charges that had
been filed against him. On April 14, 2008, following the completion of the criminal
proceedings, the Alberses filed a motion to lift the stay, but the federal court did not take
any action on that motion.
VII. The Alberses Re-file the Petition to Confirm the Arbitration Award in Los
Angeles County Superior Court.
On January 13, 2009, shortly before the expiration of the four-year statute of
limitations (Code Civ. Proc., § 1288), the Alberses re-filed their petition to confirm the
arbitration award in a new action commenced in Los Angeles County Superior Court.
However, the Alberses were unable to locate Naegele to serve him with a copy of the re-
filed petition within the limitations period. According to a declaration submitted by
Michaelson, he attempted to personally serve Naegele with the petition for over a year,
but could not ascertain Naegele’s whereabouts. Michaelson sent a copy of the petition
via first class and certified mail to a post office box in Malibu, California which Naegele
had identified as his address on the State Bar website and his business website, but
Naegele did not sign an acknowledgement of receipt. On four separate occasions,
Michaelson attempted to personally serve Naegele at his last known home address in
Oxnard, California, but no one answered the door. On December 22, 2009, after learning
that Naegele was using a mail box at a private mail box store in Oxnard, Michaelson left
a copy of the petition with the store owner. The following day, he sent a copy of the
petition via first class mail to Naegele’s registered mail box.
VIII. The Federal District Court Lifts the Stay of the Federal Action, But Does Not
Rule on the Alberses’ Motion to Dismiss.
At the time the Alberses re-filed their petition to confirm the arbitration award on
January 13, 2009, the stay of the federal action remained in effect. On January 15, 2009,
two days after re-filing the petition, the Alberses filed a second motion in the federal
action seeking to lift the stay. Six months later, on June 17, 2009, the federal district
court lifted the stay, but did not thereafter rule on the Alberses’ still pending motion to
8
dismiss the action for lack of jurisdiction. On March 31, 2010, following an additional
nine months of inactivity in the federal case, the Alberses renewed their motion to
dismiss. In response, on April 12, 2010, Naegele filed an opposition to the Alberses’
motion to dismiss, along with a separate motion for sanctions and a motion for leave to
file a second amended complaint. Shortly after these filings, however, the federal action
again became inactive without any decision from the federal court on the issue of
jurisdiction.
IX. The State Trial Court Denies Naegele’s Motion for Judgment on the Pleadings.
Back in the California action, Naegele filed an answer to the petition to confirm
the arbitration award on June 1, 2010. Four months later, on October 7, 2010, Naegele
filed a motion for judgment on the pleadings on the grounds that the California action
was barred by (1) the Alberses’ failure to timely serve the petition within the four-year
statute of limitations in Code of Civil Procedure section 1288, and (2) the federal court’s
exclusive jurisdiction over the fee dispute based on the forum selection clause in the fee
agreement and Naegele’s timely filing of a rejection of the arbitration award and request
for trial in the federal action. In connection with his motion for judgment on the
pleadings, Naegele asked the trial court to take judicial notice of certain documents,
including the parties’ fee agreement, the civil docket in the pending federal action, and
the April 19, 2005 letter from Michaelson.
On October 6, 2011, the trial court denied Naegele’s motion for judgment on the
pleadings. In its written order, the court noted that Naegele never filed a response to the
petition to confirm the arbitration award as required by the Code of Civil Procedure, and
even if the motion for judgment on the pleadings could be construed as a response to the
petition, it was not timely filed. With respect to the statute of limitations, the court found
that, under Code of Civil Procedure section 473 and the court’s inherent equitable
powers, the Alberses were entitled to relief from their failure to timely serve the petition.
The court reasoned that Naegele had known of the Alberses’ intent to seek confirmation
of the arbitration award based on their timely filing and service of the prior petition, and
9
that Naegele had taken “steps to delay the litigation and to avoid being served” with the
re-filed petition. With respect to jurisdiction, the court rejected Naegele’s argument that
the petition was barred by his filing of a request for trial in the pending federal action.
The court noted that a party who willfully failed to appear at an arbitration hearing was
not entitled to a trial de novo and that the arbitrators had found that Naegele’s non-
appearance was willful. The court set the matter for an order to show cause as to why the
Alberses’ petition to confirm the arbitration award should not be granted.
X. The State Trial Court Grants the Petition to Confirm the Arbitration Award.
On January 17, 2012, Naegele filed a request for a four-month continuance of the
order to show cause hearing to (1) permit the federal district court to decide whether the
California action should be stayed pending the outcome of the federal action, and
(2) allow Naegele to obtain alternate counsel in the California action following the
withdrawal of his former attorney. In support of his request for a continuance, Naegele
repeated his prior arguments that the federal court had exclusive jurisdiction over the fee
dispute, and that even if the state court had jurisdiction, the statute of limitations for
enforcing the arbitration award had expired. Naegele also requested that the trial court
take judicial notice of the fee agreement, the civil docket in the federal action, and a
recent motion that he had filed in the federal action to stay the California proceedings.
On February 8, 2012, the trial court denied Naegele’s request for a continuance
and granted the Alberses’ petition to confirm the arbitration award. In its written order,
the court stated that it previously had found there was “no jurisdictional issue” and “no
issues with any statute of limitations regarding the enforcement of the arbitration award.”
The court also noted that Naegele had “offered no compelling reason to continue this
hearing another four months nor has he explained the calculation of why four months are
necessary.” On February 24, 2012, the trial court entered a judgment in favor of the
Alberses on their petition to confirm the arbitration award and ordered Naegele to pay the
Alberses a total of $731,831.25, which included the Alberses’ arbitration fees and court
10
costs. Following the entry of judgment in the California action, Naegele filed a timely
notice of appeal.
XI. The Federal District Court Denies Naegele’s Renewed Request for Trial and
Stays the Federal Action Pending the Resolution of This Appeal.
The federal action again became active in December 2011 when, following the
denial of his motion for judgment on the pleadings in the California action, Naegele
returned to the federal district court seeking a stay of the state court proceedings. The
federal court, however, did not take any immediate action on Naegele’s request for a stay.
In February 2012, after the state court granted the Alberses’ petition to confirm the
arbitration award, Naegele again asked the federal court to issue an injunction staying the
state court proceedings. On February 21, 2012, the federal court denied Naegele’s
request for a stay on the grounds that he had failed to show a likelihood of success on the
merits or that he would suffer an irreparable injury. (Naegele v. Albers, supra, 843
F.Supp.2d at pp. 125-126.)
Shortly thereafter, the Alberses filed a motion for a ruling on their still pending
motion to dismiss the federal action. In March 2012, the federal court granted Naegele’s
motion for leave to file a second amended complaint, and denied the Alberses’ motion to
dismiss as moot in light of the filing of a new operative complaint. In April 2012,
Naegele filed a motion for reconsideration of his rejection of the arbitration award and
request for trial, which previously had been denied without prejudice. One year later, on
April 18, 2013, the federal court set the matter for an order to show cause as to (1) why
the federal action should not be stayed pending the resolution of Naegele’s appeal in the
California action, and (2) why the federal court should not find that Naegele willfully
failed to appear at the arbitration hearing within the meaning of section 6204, subdivision
(a). (Naegele v. Albers, supra, 2013 U.S. Dist. Lexis 55288 at pp. *12-*13, *25-*26.)
On July 18, 2013, the federal court denied Naegele’s motion for reconsideration
and request for trial, and ordered that the federal action be stayed in its entirety pending a
final resolution of the California action. (Naegele v. Albers, supra, 2013 U.S. Dist. Lexis
11
100728 at p. *25.) The court found that Naegele was not entitled to a trial de novo from
the arbitration proceedings because he willfully failed to appear at the arbitration hearing,
and thus, the award rendered by the arbitration panel was binding. (Id. at pp. *23-24.) In
making that finding, the court rejected Naegele’s argument that he was not required to
attend the arbitration based on his objection to the arbitrators’ jurisdiction, reasoning as
follows: “Had Naegele simply participated in the arbitration proceedings and appeared
for the hearing notwithstanding--obviously preserving his objections along the way (as he
did)--and thereafter filed a timely request for trial (as he did), it seems he could have
achieved the very result he was seeking: to have the fee dispute and his related claims
adjudicated anew before [the federal court] as though the MFAA arbitration had never
happened. [Citation.] Instead, Naegele doubled down on his obstinance, refusing to
abide by the MFAA’s provisions and willfully failing to appear at the arbitration
hearing.” (Id. at p. *21, fn. 8.) The court further concluded that a stay of the federal
action was proper because the outcome of Naegele’s appeal in the California action likely
would impact how the federal action should proceed. (Id. at p. *24.)
DISCUSSION
In his appeal, Naegele challenges the trial court’s order granting the petition to
confirm the arbitration award on several grounds. He argues that the arbitration award is
unenforceable as a matter of law because the arbitrators lacked jurisdiction to hear the fee
dispute based on the forum selection clause in the fee agreement. He further asserts that
the trial court lacked jurisdiction to confirm the arbitration award based on the same
forum selection clause as well as Naegele’s filing of a rejection of the award and request
for trial in the pending federal action. In addition, he claims that, even if the trial court
had jurisdiction to confirm the award, the Alberses’ action was barred by their failure to
timely serve the petition before the four-year statute of limitations expired.
12
I. The Arbitrators’ Jurisdiction to Hear the Fee Dispute Under the MFAA
Naegele first contends that the arbitration panel lacked jurisdiction to hear the
parties’ fee dispute under the MFAA because the forum selection clause in their fee
agreement vested exclusive jurisdiction over any dispute arising out of the agreement in
the District of Columbia courts. Based on the statutory terms and purpose of the MFAA,
and the applicable case law construing it, we conclude that this claim lacks merit.
A. Relevant Law
Under the MFAA, “when there is a fee dispute between an attorney and a client,
the client may choose to submit the matter to arbitration by a local bar association. If
the client elects such arbitration, the attorney must agree to arbitrate.” (Schatz v. Allen
Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557, 561 (Schatz).) As the
California Supreme Court has explained, “[t]he MFAA was first proposed by the
Board of Governors of the State Bar of California in 1976 when, finding that disputes
concerning legal fees were the most serious problem between members of the bar and the
public, the board sought to create a mechanism for arbitrating disputes over legal fees and
costs. Recognizing the ‘disparity in bargaining power in attorney fee matters which
favors the attorney in dealings with infrequent consumers of legal services’ [citation.],
that many clients could not afford hiring additional counsel to litigate fee disputes in the
civil courts [citation], and that previous schemes that called for voluntary arbitration were
ineffective [citation.], the Legislature enacted the MFAA.” (Aguilar v. Lerner (2004) 32
Cal.4th 974, 983 (Aguilar).)
“The nature of the obligation to arbitrate under the MFAA differs from that under
standard arbitration in two important ways. First, the obligation to arbitrate under the
MFAA is based on a statutory directive and not the parties’ agreement. Thus, a client
may invoke the MFAA and proceed to arbitration despite the absence of any prior
agreement to do so. . . . [¶] Second, section 6200, subdivision (c) provides: ‘[A]rbitration
under this article shall be voluntary for a client and shall be mandatory for an attorney if
commenced by a client.’ In other words, whereas a client cannot be forced under the
13
MFAA to arbitrate a dispute concerning legal fees, at the client’s election an unwilling
attorney can be forced to do so.” (Aguilar, supra, 32 Cal.4th at p. 984.)
The MFAA also “specifies the conditions under which the client can waive its
protections.” (Aguilar, supra, 32 Cal.4th at p. 985.) Where the attorney has provided the
client with the requisite notice of the right to arbitrate under the MFAA, the client may
waive the right to arbitration either by failing to request arbitration within 30 days of
receipt of the notice or by filing an answer in an action commenced by the attorney.
(§ 6201, subds. (a), (b).) The client also may waive the right to arbitration by
commencing an action or filing a pleading seeking either judicial resolution of a fee
dispute or affirmative relief against the attorney for malpractice or professional
misconduct. (§ 6201, subd. (d).) Upon the client’s timely filing and service of a request
for arbitration, any pending action between the parties is automatically stayed until the
arbitration award is issued or the arbitration is otherwise terminated. (§ 6201, subd. (c).)
The finality of an award under the MFAA depends upon the actions of the parties.
“The parties may agree in writing to be bound by the award of arbitrators . . . 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, . . . except that if either party willfully fails to appear at the arbitration hearing in
the manner provided by the rules adopted by the board of trustees, that party shall not be
entitled to a trial after arbitration.” (§ 6204, subd. (a).)6 “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 within 30 days after service of notice of the
award.” (§ 6204, subd. (b).) “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
6 Under section 6204, subdivision (a), “[t]he determination of willfulness shall
be made by the court. The party who failed to appear at the arbitration shall have the
burden of proving that the failure to appear was not willful. In making its determination,
the court may consider any findings made by the arbitrators on the subject of a party’s
failure to appear.”
14
amount of money in controversy within 30 days after service of notice of the award.”
(§ 6204, subd. (c).) To the extent that a party is entitled to a trial after arbitration, such
trial “is conducted de novo, essentially as if no arbitration had occurred.” (Maynard v.
Brandon (2005) 36 Cal.4th 364, 373 (Maynard).)
B. The Alberses Did Not Waive Their Statutory Right to Arbitration
Under the MFAA.
We are unaware of any California case that has addressed whether a pre-dispute
forum selection clause in a fee agreement may preclude a client from invoking his or her
statutory right to arbitration under the MFAA. However, the California Supreme Court
has addressed an analogous issue in considering the relationship between arbitration
under the MFAA and a pre-dispute contractual arbitration agreement. In Aguilar, for
instance, the Supreme Court recognized that “[i]f the client chooses to arbitrate ‘under
this article’ (i.e., pursuant to the MFAA), the client has the right to do so whether or not
the parties had also executed an arbitration agreement. If the client fails to invoke his or
her rights under the MFAA, such rights are waived entirely and . . . the preexisting
arbitration agreement is enforceable against the client, with no residual MFAA
protections standing as an obstacle.” (Aguilar, supra, 32 Cal.4th at p. 989, fn. omitted.)
As Justice Chin similarly noted in his concurring opinion, “[c]lients may, if they wish,
request and obtain nonbinding arbitration under the MFAA. That arbitration may, and
often will, resolve the dispute. But if the client does not request nonbinding arbitration,
or if it is held but does not resolve the dispute, then the MFAA has played its role, and
the matter would continue without it. Either party may then pursue judicial action unless
the parties had agreed to binding arbitration.” (Id. at p. 991 (conc. opn. of Chin, J.).)
Likewise, in Schatz, the Supreme Court explained that the MFAA’s provision for
a trial de novo after arbitration “does not purport to speak to whether the parties to a
nonbinding MFAA arbitration may otherwise agree, or have agreed, on how to resolve
the case if the MFAA arbitration leaves one or both parties dissatisfied.” (Schatz, supra,
45 Cal.4th at p. 572.) Rather, the statute contemplates that, subject to the exception for a
15
willful failure to attend the arbitration hearing, “unless the parties agree to be bound by
the MFAA arbitration, and thus to end the dispute then and there, the case may, following
MFAA arbitration, proceed by normal means. . . . [T]hose normal means may include not
only court litigation, but ‘other proceedings’ such as binding arbitration pursuant to a
predispute agreement between the parties.” (Ibid.; see also Maynard, supra, 36 Cal.4th at
p. 374 [“for the most part a trial following fee arbitration proceeds in the trial court as if
there had been no arbitration at all”].) Therefore, even where the parties have entered
into a pre-dispute contractual arbitration agreement, as in Schatz and Aguilar, the client
retains the statutory right to arbitration under the MFAA. If the client properly invokes
the right to arbitrate, the MFFA arbitration takes place first and any award issued by the
arbitrators is non-binding unless the parties otherwise agree or a party willfully fails to
appear at the arbitration hearing. Once the non-binding MFAA arbitration is completed,
either party is free to seek enforcement of the preexisting arbitration agreement.
Applying similar reasoning to this case, we conclude that the existence of a pre-
dispute forum selection clause in a fee agreement, in which a client agrees to litigate fee
disputes in a designated judicial forum, does not deprive the client of the right to
arbitration under the MFAA. If the client timely requests and maintains a MFAA
arbitration, the forum selection clause only comes into play after the arbitration
proceedings have concluded. Following the MFAA arbitration, to the extent the fee
dispute has not been resolved and a judicial action is commenced, either party may seek
enforcement of the forum selection clause in the fee agreement. However, if a party
willfully fails to appear at the arbitration hearing, as determined by a court with proper
jurisdiction, that party will not be entitled to a trial de novo in the judicial proceedings.
Our conclusion that a client does not automatically waive his or her rights under
the MFAA by consenting to a forum selection clause in a fee agreement is also consistent
with the express provisions and legislative purpose of the MFAA. As discussed, the
MFAA prescribes the specific conditions under which a client may waive the protections
of the statute. A client waives the right to arbitrate under the MFAA (1) by failing to
request arbitration within 30 days of receipt of a notice of the right to arbitrate (§ 6201,
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subd. (a)); (2) by failing to request arbitration before filing an answer in an action by an
attorney who has provided the client with notice of the right to arbitrate (§ 6201, subd.
(b)); (3) by filing an action or other pleading seeking judicial resolution of a fee dispute
with the attorney (§ 6201, subd. (d)(1)); or (4) by filing an action or other pleading
seeking affirmative relief against the attorney for malpractice or professional misconduct
(§ 6201, subd. (d)(2)). While there may be other circumstances where a client’s post-
dispute conduct in unreasonably delaying arbitration can be found to constitute a waiver
of the right to arbitrate (Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th
1076, 1103-1104), nothing in the plain language of the statute supports a conclusion that
a client can effectively waive the protections of the MFAA before a dispute has arisen.
Additionally, the MFAA was enacted to require, at the option of the client, that the
attorney arbitrate any fee dispute. Absent the client’s written agreement, arbitration of
fee disputes “shall be voluntary for a client and shall be mandatory for an attorney if
commenced by a client.” (§ 6200, subd. (c); see also Schatz, supra, 45 Cal.4th at p. 561;
Aguilar, supra, 32 Cal.4th at p. 984.) “The policy behind the mandatory fee arbitration
statutes [was] … to alleviate the disparity in bargaining power in attorney fee matters
which favors the attorney by providing an effective, inexpensive remedy to a client
which does not necessitate the hiring of a second attorney. [Citation.]” (Manatt, Phelps,
Rothenberg & Tunney v. Lawrence (1984) 151 Cal.App.3d 1165, 1174; see also Huang
v. Cheng (1998) 66 Cal.App.4th 1230, 1234 [MFAA’s “purpose and policy . . . are to
ensure the fair resolution of attorney fee disputes”].) If an attorney could require a client
to contractually waive any and all rights to arbitration under the MFAA as a condition of
the parties’ fee agreement, such waiver would seriously undermine the protections of the
statutory scheme. It thus would be contrary to the legislative purpose of the statute to
allow an attorney’s inclusion of a forum selection clause in a fee agreement to trump a
client’s right to mandatory arbitration under the MFAA.
Finally, even assuming that a client could waive his or her right to a MFAA
arbitration in a fee agreement, the Alberses did not do so here. The forum selection
clause in the Alberses’ fee agreement states that the “venue for any disputes or litigation
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arising out of this agreement shall be in a court of the District of Columbia and/or in the
United States District Court for the District of Columbia.” It also states that the Alberses
“consent to the jurisdiction of such court or courts with respect to any disputes or
litigation arising out of this agreement.” Notably, the fee agreement makes no reference
to the Alberses’ statutory right to arbitration under the MFAA or to any purported waiver
of such rights. It simply designates the courts of the District of Columbia as the selected
judicial forum for any disputes or litigation arising out of the agreement. Hence, under
the terms of the fee agreement itself, the Alberses were not precluded from arbitrating
their fee dispute pursuant to the MFAA and from staying any pending judicial action
between the parties until the arbitration proceedings were completed.
In sum, the Alberses did not waive their statutory right to arbitration under the
MFAA by consenting to a forum selection clause in the fee agreement. The arbitration
panel accordingly had jurisdiction to hear the parties’ fee dispute and to issue an
arbitration award in the Alberses’ favor.
II. The Trial Court’s Jurisdiction to Confirm the Arbitration Award
Naegele also contests the state trial court’s jurisdiction to confirm the arbitration
award based on the forum selection clause in the fee agreement and his filing of a
rejection of the award and request for trial after arbitration in the pending federal action.
Based on the specific factual and procedural history surrounding the parties’ fee dispute
and ensuing litigation, we conclude that the trial court did not abuse its discretion in
deciding to exercise its jurisdiction in this case.
A. Relevant Law
The proper judicial forum for adjudicating the Alberses’ petition to confirm the
arbitration award involves consideration of both the forum selection clause in the parties’
fee agreement and the procedural requirements of the MFAA. In California, “forum
selection clauses are valid and may be given effect, in the court’s discretion and in the
absence of a showing that enforcement of such a clause would be unreasonable.” (Smith,
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Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 496 (Smith).) However,
contrary to Naegele’s contention, an agreement to litigate a dispute in a forum outside
California does not deprive California courts of subject matter jurisdiction. It merely
empowers the court to decline to exercise its jurisdiction under the circumstances of the
case. (Miller-Leigh LLC v. Henson (2007) 152 Cal.App.4th 1143, 1149; see also Smith,
supra, at p. 495 [while “parties may not deprive courts of their jurisdiction over causes by
private agreement[,] . . . courts possess discretion to decline to exercise jurisdiction in
recognition of the parties’ free and voluntary choice of a different forum”].)
“California courts will refuse to defer to the selected forum if to do so would
substantially diminish the rights of California residents in a way that violates our state’s
public policy.” (America Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1, 12.)
In addition, because California has a strong interest in ensuring its residents an adequate
forum for the redress of grievances, “the law generally allows only for a stay, and except
in rare circumstances precludes dismissal, of an action filed by California residents.”
(Berg v. MTC Electronics Technologies Co. (1998) 61 Cal.App.4th 349, 356.) The
proper procedure for seeking enforcement of a forum selection clause is not a demurrer
or motion for judgment on the pleadings based on a lack of subject matter jurisdiction.
Rather, it is a motion to stay or dismiss an action on the ground of forum non conveniens
pursuant to Code of Civil Procedure section 410.30 or 418.10. (Miller-Leigh LLC v.
Henson, supra, 152 Cal.App.4th at p. 1149.) The trial court’s ruling on a forum non
convenience motion is reviewed for abuse of discretion. (Trident Labs, Inc. v. Merrill
Lynch Commercial Finance Corp. (2011) 200 Cal.App.4th 147, 154.)
The MFAA also sets forth specific procedures for a party seeking to either contest
or enforce an arbitration award in a judicial forum. As discussed, a party may challenge
a non-binding arbitration award by filing a rejection of the award and request for trial
after arbitration in any pending action between the parties, or if no action is pending, by
commencing a new action in a court having jurisdiction over the amount in controversy.
(§ 6204, subds. (b), (c).) A request for trial after arbitration must be made within 30 days
after service of notice of the award. (Ibid.) A party also may file a petition to confirm,
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correct, or vacate an arbitration award. (§ 6203, subd. (b).) If an action previously
has been filed in any court, the petition “shall be to the court in which the action is
pending. . . . If no action is pending in any court, the award may be confirmed, corrected,
or vacated by petition to the court having jurisdiction over the amount of the arbitration
award. . . .” (Ibid.) A petition to confirm an arbitration award must be filed and served
within four years after service of the award. (Code Civ. Proc., § 1288.)
B. The Trial Court Properly Exercised Jurisdiction Over the Alberses’
Petition to Confirm the Arbitration Award.
At the time the Alberses re-filed their petition to confirm the arbitration award in
Los Angeles County Superior Court, there was a pending action between the parties in
the United States District Court for the District of Columbia. Therefore, irrespective of
any forum selection clause in the fee agreement, the Alberses ordinarily would have
been required to file their petition in the pending federal action pursuant to section 6203,
subdivision (b). However, as discussed in more detail below, this was not an ordinary
case. Due to the tangled procedural history of the federal action, the Alberses were
effectively precluded from seeking enforcement of the arbitration award in that action
within the four-year statute of limitations, and were left with no reasonable alternative
but to re-file their petition to confirm the award in a state court proceeding.
Specifically, when the arbitration panel served the parties with the notice of the
arbitration award on January 24, 2005, a stay of the federal action was in effect. The
federal district court had ordered the parties to submit a joint status report within 30 days
of completion of the arbitration proceedings and not to file any other motions in the case
until directed by the court. On February 22, 2005, within 30 days of service of the notice
of the award, Naegele filed his rejection of the award and request for trial after arbitration
in the federal action. On March 24, 2005, following the parties’ submission of the joint
status report, the federal court decided that the case should progress “through a more
conventional schedule” and ordered the Alberses to file a responsive pleading to
Naegele’s complaint. In response, the Alberses timely filed a motion to dismiss the
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federal action for lack of personal jurisdiction and subject matter jurisdiction. The
federal court then denied Naegele’s request for trial without prejudice in light of the
Alberses’ pending motion to dismiss, but did not thereafter rule on the Alberses’ motion.
Instead, at Naegele’s request, the federal court stayed the action on June 6, 2006, and
despite the Alberses’ subsequent efforts to move the case forward, that stay remained in
effect for the next three years.
On April 14, 2008, prior to re-filing their petition to confirm the arbitration award
in state court, the Alberses moved to lift the stay of the federal action. However, the
federal court did not rule on the Alberses’ motion to lift to the stay or on their still
pending motion to dismiss for lack of jurisdiction. After another nine months passed
without a ruling from the federal court, the Alberses were faced with a procedural
dilemma. The statute of limitations for filing the petition to confirm the arbitration award
was set to expire in late January 2009. The Alberses could not re-file their petition in the
pending federal action because that action was stayed and the federal court still had not
ruled on their motion to lift the stay. The federal court also had not made any ruling on
the motion to dismiss and the Alberses continued to contest the jurisdiction of the federal
court. Under these circumstances, the Alberses properly took action to preserve their
rights by re-filing their petition to confirm the arbitration award in a state court with
jurisdiction over the controversy. The Alberses thus filed the instant petition in Los
Angeles County Superior Court on January 13, 2009, which was within the limitations
period, and two days later, filed a second motion in the federal action to lift the stay.
Furthermore, as of February 8, 2012, when the trial court granted the Alberses’
petition to confirm the arbitration award, it appeared that the federal action was nowhere
close to being adjudicated. Although the federal court had lifted the stay of the action
two and a half years earlier in June 2009, it still had not ruled on Alberses’ motion to
dismiss for lack of jurisdiction or made any further orders in the case. As previously
discussed, the public policy behind the MFAA was to provide clients, at their option,
with an efficient and inexpensive method for resolving fee disputes with their attorneys.
Yet after nine years of litigation in a forum outside California, the resolution of the
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Alberses’ fee dispute with Naegele had proven to be neither efficient nor inexpensive. In
light of California’s substantial interest in regulating the enforcement of MFAA awards
and in ensuring its residents an adequate judicial forum, the trial court reasonably could
find that requiring the Alberses to file their petition in the pending federal action was
unreasonable under the circumstances of the case. The trial court’s refusal to enforce the
forum selection clause in the fee agreement was accordingly not an abuse of discretion.
Naegele also argues that the trial court was precluded from taking any action on
the Alberses’ petition because his filing of a rejection of the arbitration award and request
for trial in the federal action somehow “removed” the California action to federal court.
Given that Naegele commenced his suit against the Alberses in federal court and there
was no California action pending at the time he filed his request for trial in the federal
action, Naegele’s removal argument has no merit. In addition, the federal court denied
Naegele’s request for trial (albeit without prejudice) in August 2005, and Naegele did not
file a motion for reconsideration of that ruling until April 2012, two months after the state
court confirmed the arbitration award. Consequently, there was no request for trial
pending before the federal court at the time the state court granted the Alberses’ petition.
Moreover, Naegele cannot show how he was prejudiced by the trial court’s refusal
to stay the California action pending the outcome of the federal suit. Following the state
court’s order confirming the arbitration award, the federal court denied Naegele’s motion
for a stay of the California proceedings. Shortly thereafter, the federal court also denied
Naegele’s renewed request for trial after arbitration based on a finding that he willfully
failed to appear at the arbitration hearing within the meaning of section 6204, subdivision
(a). The state court previously had made a similar implied finding when it denied
Naegele’s motion for judgment on the pleadings. As a result, regardless of where the
Alberses filed their petition to confirm the arbitration award, both the federal district
court and the state trial court agreed that Naegele was not entitled to a trial de novo after
arbitration and that the award issued by the arbitrators was binding. Under these
circumstances, Naegele has failed to demonstrate any reversible error in the state trial
court’s decision to exercise jurisdiction.
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III. The Statute of Limitations on the Petition to Confirm the Arbitration Award
Naegele next asserts that, even if the state trial court had jurisdiction to hear the
Alberses’ petition to confirm the arbitration award, the petition was time-barred as a
matter of law by the four-year statute of limitations set forth in Code of Civil Procedure
section 1288. While it is undisputed that the Alberses failed to serve Naegele with their
re-filed petition within the limitations period, we conclude that the trial court did not
abuse its discretion in granting equitable relief from the untimely service.
A. Relevant Law
Section 1288 of the Code of Civil Procedure provides as follows: “A petition to
confirm an award shall be served and filed not later than four years after the date of
service of a signed copy of the award on the petitioner. A petition to vacate an award or
to correct an award shall be served and filed not later than 100 days after the date of the
service of a signed copy of the award on petitioner.” Where a party fails to comply with
the time limitations of the statute, a court may exercise its inherent equitable power to
grant relief from the untimely filing or service. (Eternity Investments, Inc. v. Brown
(2007) 151 Cal.App.4th 739, 746; Shepherd v. Greene (1986) 185 Cal.App.3d 989, 994;
De Mello v. Souza (1973) 36 Cal.App.3d 79, 85.)
In particular, a court may grant equitable relief “if, due to the fraud of the
opponent or by his own mistake, the aggrieved party was deprived of a fair adversary
hearing and was prevented from presenting his [or her] claim or defense.” (De Mello v.
Souza, supra, 36 Cal.App.3d at p. 85.) In such a case, the aggrieved party also must
show a satisfactory excuse for not having made the claim or defense earlier and diligence
in seeking relief after discovery of the facts. (Ibid.) Additionally, under the doctrine of
equitable tolling, a court may “suspend or extend the statute of limitations as necessary
to ensure fundamental practicality and fairness.” (Lantzy v. Centex Homes (2003) 31
Cal.4th 363, 370.) Application of the equitable tolling doctrine requires (1) timely notice
of the claim to the defendant within the statutory period, (2) lack of prejudice to the
defendant in gathering and preserving evidence for its defense, and (3) reasonable and
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good faith conduct on the part of the plaintiff in pursuing the claim. (Addison v. State of
California (1978) 21 Cal.3d 313, 316; Downs v. Department of Water & Power (1997)
58 Cal.App.4th 1093, 1100.) We review a trial court’s decision to grant or deny
equitable relief for abuse of discretion. (County of San Diego v. Gorham (2010) 186
Cal.App.4th 1215, 1230.)
B. The Trial Court Properly Granted the Alberses Equitable Relief From
Their Failure to Timely Serve the Petition.
Considering the totality of the record in this case, the trial court acted well within
its discretion in granting the Alberses equitable relief from their untimely service of the
petition. As the trial court observed, the Alberses timely filed and served their original
petition to confirm the arbitration award by April 2005, approximately two months after
service of the award. Therefore, long before the statute of limitations expired, Naegele
was on notice that the Alberses intended to seek enforcement of the arbitration award and
to argue that Naegele was not entitled to a trial de novo based on his willful failure to
appear at the arbitration hearing. After Naegele demanded that the petition be withdrawn
in light of his pending request for trial and further threatened to seek sanctions against the
Alberses if they failed to do so, the Alberses agreed to dismiss their petition without
prejudice pending the federal court’s ruling on their motion to dismiss for lack of
jurisdiction. The Alberses also informed Naegele of their intent to re-file the petition
in California if their motion to dismiss was granted.
For the reasons previously discussed, the Alberses did not re-file the petition to
confirm the arbitration award until January 13, 2009, shortly before the expiration of the
statute of limitations. Although the Alberses timely filed that petition, they were unable
to locate Naegele to serve him with a copy within the limitations period. The Alberses’
attorney submitted a declaration to the trial court in which he detailed his year-long effort
to locate and serve Naegele, and based on such evidence, the trial court reasonably could
find that Naegele had evaded service. On appeal, Naegele insists that he never attempted
to evade service and had no basis for knowing that the Alberses intended to file a second
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petition. However, it was the exclusive province of the trial court to resolve conflicts in
the evidence and to determine the credibility of witnesses, and it is not the role of this
court to second-guess the trial court’s credibility determinations. (Sav-On Drug Stores,
Inc. v. Superior Court (2004) 34 Cal.4th 319, 334; Beck Development Co. v. Southern
Pacific Transportation Co. (1996) 44 Cal.App.4th 1160, 1204.) On this record, there was
substantial evidence to support the trial court’s conclusion that, based on the respective
actions of the parties, the Alberses were entitled to equitable relief from their delayed
service of the petition. The petition accordingly was not time-barred.
DISPOSITION
The judgment is affirmed. The Alberses shall recover their costs on appeal.
ZELON, J.
We concur:
PERLUSS, P. J.

SEGAL, J.

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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