Brawerman v. Loeb & Loeb LLP ( 2022 )

Filed 8/3/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
MARK BRAWERMAN et al., B305802
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC576947)
v.
LOEB & LOEB LLP et al.,
Defendants and Respondents.
APPEAL from judgment of the Superior Court of Los
Angeles County, Timothy Patrick Dillon, Judge. Affirmed.
Law Office of Steven R. Friedman, Steven R. Friedman and
Michael E. Friedman, for Plaintiffs and Appellants.
Jeffer Mangels Butler & Mitchell, Robert E. Mangels and
Andrew I. Shadoff, for Defendants and Respondents.
_________________________________
INTRODUCTION
We are asked to consider whether the trial court erred in
confirming an arbitration award where the obligation to arbitrate
arose from a provision in a law firm retainer agreement and one
of the several law firm attorneys that rendered legal services
pursuant to the retainer agreement did so in violation of
California’s attorney licensing requirements.
There was no error. Birbrower, Montalbano, Condon &
Frank v. Superior Court (1998) 17 Cal.4th 119 (Birbrower)
dictates that the unlicensed attorney’s illegal practice of law
pursuant to the retainer agreement does not render the entire
retainer agreement illegal. Moncharsh v. Heily & Blase (1992)
3 Cal.4th 1, 30 (Moncharsh) holds that an arbitration provision is
severable from an agreement that is not entirely illegal (unless
the arbitration provision itself is illegal). There is no claim here
of any illegality in the retainer agreement’s arbitration provision.
Accordingly, we affirm.
BACKGROUND1
A. Brawerman Builds a Successful Business
Plaintiff and appellant Mark Brawerman founded Turtle
Mountain, Inc. (TMI), the other plaintiff and appellant, for the
purposes of developing and marketing healthy alternative frozen
dessert products. When demand for his products exceeded his
1 The facts recited herein are taken from facts and evidence
in the record and the trial court’s statement of decision. “We
view the facts most favorable to the judgment under the principle
requiring us to presume the lower court’s judgment is correct,
and draw all inferences and presumptions necessary to support
it. [Citations.]” (Chapala Management Corp. v. Stanton (2010)
186 Cal.App.4th 1532, 1535.)
2
capacity to produce them, Brawerman sought venture capital
funds to build a new production facility.
B. Brawerman and TMI Engage Loeb
To that end, Brawerman entered talks with Wasserstein &
Co. (Wasserstein), a venture capital firm. As those talks
progressed, Brawerman sought legal representation from
defendant and respondent Loeb & Loeb, LLP (Loeb). Brawerman
did so on the advice of his father, who was a former partner at
Loeb.
By agreement dated December 28, 2004 (the Retainer
Agreement), Brawerman and TMI retained Loeb to “represent
[them] in a financing transaction with Wasserstein Ventures or
another investor.” The agreement is in the form of a letter from
Loeb attorney Thomas Rohlf, who was a senior partner in Loeb’s
corporate practice and resident in its Los Angeles office. Rohlf
stated in the Retainer Agreement that he “w[ould] be principally
responsible for the representation” and disclosed an hourly rate
of $550. No other attorney was mentioned in the Retainer
Agreement and no other rate was specified therein.
The Retainer Agreement also contained an arbitration
provision stating, in relevant part: “if any dispute between you
and the firm arises out of this Agreement, our relationship with
you or our performance of any current or future legal services, . . .
that dispute will be resolved solely by binding arbitration in Los
Angeles, California, before a retired California superior court
judge under the auspices and the commercial arbitration rules of
the American Arbitration Association. . . . Arbitration will be the
sole means of resolving any such disputes, and both parties waive
their rights to resolve disputes by jury trial or other court
3
proceedings.” Brawerman signed the Retainer Agreement for
himself and TMI and Rohlf signed for Loeb.
In late December 2004, Rohlf asked defendant and
respondent Christopher Kelly, then a Loeb associate, to assist
him in Loeb’s representation of Brawerman and TMI. At the
time, Kelly was not admitted to the California bar. He had
practiced law since 1999 and was admitted to the bars of New
York and New Jersey.
Between late December 2004 and July 2005 when the
transaction closed, Kelly, in collaboration with other Loeb
attorneys that were licensed California attorneys at the time,
negotiated and drafted documents for the transaction with
Wasserstein. In total, Loeb attorneys billed approximately 928
hours, of which Kelly billed approximately 382.
C. Loeb Fails to Protect Brawerman’s Control
One of Brawerman’s objectives in negotiations with
Wasserstein was to retain control of TMI’s business once he and
Wasserstein became joint owners of a new operating company
(LLC). He communicated this objective to Kelly and other Loeb
attorneys. However, their documents failed to achieve this
objective. That failure proved consequential.
Over the course of their joint ownership of LLC, the
Brawerman-Wasserstein relationship soured. In March of 2014,
Wasserstein converted sufficient preferred shares in LLC to take
majority control of LLC and replaced LLC’s Board of Managers
with a Wasserstein majority. Shortly before this, concerned
about where the relationship was headed, Brawerman and TMI
entered into a contingency fee agreement with the law firm of
Steven R. Friedman. They did so to “potentially fend off
litigation which might have been, but was never actually brought
4
against Brawerman” by Wasserstein. In exchange for the
Friedman firm standing at the ready to defend them, Brawerman
and TMI agreed to pay it 15 percent of the gross amount in excess
of $18 million received by TMI from a sale of LLC.
D. The Business Is Sold
LLC was sold in September of 2014. Based on the proceeds
to TMI, the Friedman firm earned a fee of $5.6 million.
Brawerman did not believe that the price received in the sale was
affected in any way by Loeb’s failings nor did he have any reason
to believe that such failings interfered with the sale.
E. Brawerman and TMI Sue Loeb and the Matter Is
Referred to Arbitration
In March of 2015, Brawerman and TMI sued Loeb and
Kelly in California Superior Court, asserting causes of action for
professional negligence and breach of fiduciary duty. They were
represented in that action, as they are here, by the Friedman
firm. The damages sought were the amount that they paid the
Friedman firm to “potentially fend off litigation” with
Wasserstein in connection with the sale of LLC.
Loeb and Kelly moved to compel arbitration pursuant to
the Retainer Agreement and the trial court granted the motion in
November 2015.
F. The Arbitration
In early 2019, shortly before the arbitration hearing was
set to commence, Brawerman and TMI announced that they had
discovered that Kelly was not licensed to practice in California
while he was working on the Wasserstein transaction in 2004 and
2005. Based on this information, they filed a motion to remand
to the trial court or empanel a jury before the arbitrator. This
was warranted, they claimed, because Kelly’s licensure status
5
constituted a fraud that voided the entire Retainer Agreement.
The arbitrator denied the motion, concluding that the arbitration
provision was severable.
The arbitration hearing proceeded in February of 2019.
The arbitrator found that Loeb and Kelly were liable to
Brawerman and TMI for their failure to protect Brawerman’s
control over the business or to disclose to Brawerman such lack of
control. However, the arbitrator found that this conduct did not
harm Brawerman and TMI because they could not show that the
contingency fee paid to the Friedman firm was caused by Loeb
and Kelly’s failings. Nevertheless, the arbitrator ordered
disgorgement to Brawerman and TMI of $138,075 in fees paid for
Kelly’s services while he was unlicensed and $94,933 for
Brawerman and TMI’s fees incurred in the arbitration in
connection with litigating that issue.
G. Post-Arbitration Proceedings in the Superior
Court
Brawerman and TMI moved the trial court to vacate the
Award. They again argued that the Retainer Agreement,
including its arbitration clause, was illegal and unenforceable
because Kelly was unlicensed to practice law when he performed
services for Brawerman and TMI pursuant to that agreement.
The trial court denied the motion and confirmed the
arbitration award. The basis for the trial court’s ruling is
explained in a thorough statement of decision. Judgment entered
and this appeal followed.
6
DISCUSSION
The grounds for vacating an arbitration award are limited
to those specified by statute. (Sheppard, Mullin, Richter &
Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th
59, 72 (Sheppard).)
Brawerman and TMI’s central premise—that the entire
Retainer Agreement is “illegal and void as a matter of public
policy”—implicates Code of Civil Procedure section 1286.2,
subdivision (a)(4). Subdivision (a)(4) provides that a court shall
vacate an award when “[t]he arbitrators exceeded their powers
and the award cannot be corrected without affecting the merits of
the decision upon the controversy submitted.” (§ 1286.2, subd.
(a)(4).)
Arbitrators exceed their powers to make an award where
“the arbitration has been undertaken to enforce a contract that is
‘illegal and against the public policy of the state.’ ” (Sheppard,
supra, 6 Cal.5th at p. 73.) This is because “the power of the
arbitrator to determine the rights of the parties is dependent
upon the existence of a valid contract under which such rights
might arise. [Citations.] In the absence of a valid contract no
such rights can arise and no power can be conferred upon the
arbitrator to determine such non-existent rights.” (Loving &
Evans v. Blick (1949) 33 Cal.2d 603, 610 (Loving).)
The trial court confirmed the arbitration award after
determining, upon its independent review of the evidence before
it, that the Retainer Agreement was legal, even if performance
thereunder was not, such that the arbitration provision remained
enforceable. (See Loving, supra, 33 Cal.2d at p. 609 [trial court
determines legality of agreement in the first instance
7
notwithstanding any determination made by the arbitrator].)
It is this conclusion which we review for error.
I. Standard of Review
Brawerman and TMI contend that our review should be
entirely de novo. Loeb and Kelly disagree to the extent such
rigorous scrutiny is urged for factual issues. Loeb and Kelly’s
point is well taken. “ ‘ “ ‘On appeal from an order confirming an
arbitration award, we review the trial court’s order (not the
arbitration award) under a de novo standard. [Citations.] To the
extent that the trial court’s ruling rests upon a determination of
disputed factual issues, we apply the substantial evidence test to
those issues.’ ” ’ [Citations.]” (Roussos v. Roussos (2021) 60
Cal.App.5th 962, 973 (Roussos).)
Brawerman and TMI offer four reasons that our review
should be entirely de novo. First, they assert that illegality of a
contract may be raised for the first time on appeal, and it
therefore follows that review should be de novo. Even if
Brawerman and TMI were correct that illegality may be raised
for the first time on appeal in the context presented here,2 it
would not turn this court into a trial court. Brawerman and TMI
2 We note authority indicating that illegality of an entire
contract for purposes of avoiding arbitration cannot be raised for
the first time on appeal. Indeed, it must be raised for the first
time in the trial court before the matter is sent to arbitration.
(See Moncharsh, supra, 3 Cal.4th at p. 29-30 [a party contending
the entire arbitration agreement is unlawful generally must raise
the issue at the outset in the trial court].) Loeb and Kelly do not
raise Brawerman and TMI’s failure at the outset to raise
illegality as a ground for resisting arbitration, so we do not
consider it.
8
raised the issue of illegality to the trial court, putting us in our
usual role of reviewing the trial court’s decision. Thus, there is
no reason to deviate from our usual standards of review.
Second, they argue that there are no disputed facts. But
this is plainly incorrect. Brawerman and TMI, on the one hand,
and Loeb and Kelly, on the other, dispute whether any agreement
exists by virtue of the Retainer Agreement. Where the existence
of a contract is at issue and the evidence is conflicting or permits
more than one inference, it is for the trier of fact to determine
whether the contract actually existed. (Bustamante v. Intuit, Inc.
(2006) 141 Cal.App.4th 199, 208.) Relevant to this inquiry are
the parties’ purposes and intents in executing the Retainer
Agreement. “[Q]uestions of ‘intent’ and ‘purpose’ are ordinarily
questions of fact to be determined by the trial court.” (Redke v.
Silvertrust (1971) 6 Cal.3d 94, 103 (Redke).)
Third, they argue that de novo review is appropriate
because the trial court did not hear witnesses, but rather reached
its decision based on the same “written paperwork” that is now
before us. But our deference to factual determinations made by
the trial court in confirming an arbitration award is the same
whether based on live testimony or written submissions: “ ‘We
must accept the trial court’s resolution of disputed facts when
supported by substantial evidence; we must presume the court
found every fact and drew every permissible inference necessary
to support its judgment, and defer to its determination of
credibility of the witnesses and the weight of the evidence.’ ”
(Trabuco Highlands Community Assn. v. Head (2002) 96
Cal.App.4th 1183, 1189.)
Fourth, they argue that the court’s jurisdiction and
authority relating to attorney misconduct warrants independent
9
review. The only citation they offer relating the two issues is
In re Rose (2000) 22 Cal.4th 430. In re Rose involved the
Supreme Court’s exercise of original jurisdiction specifically
conferred by Business and Professions Code section 6082 over a
petition to review a disbarment order of the California State Bar
Court (a non-judicial regulatory body). (In re Rose, at p. 436.)
We are reviewing a lower court’s order confirming an arbitration
award, not conducting attorney discipline proceedings. And our
jurisdiction has been invoked by appeal, not through any original
petition. In re Rose has no application here.
Accordingly, we will review issues of law de novo and issues
of fact for substantial evidence. (Roussos, supra, 60 Cal.App.5th
at p. 973.)
II. Analysis
Brawerman and TMI argue that Sheppard controls the
outcome of this case, whereas Loeb and Kelly contend Birbrower
is dispositive. We thus begin with an analysis of these two
decisions.
A. Sheppard
Sheppard, like this case, concerned the arbitrability of
disputes arising from a law firm engagement agreement.
The agreement was between the Sheppard law firm and J-M
Manufacturing (J-M), whereby Sheppard agreed to defend J-M in
a federal qui tam action brought on behalf of several public
entities. Among those entities was the South Tahoe Public
Utility District (South Tahoe). Undisclosed to J-M at the time of
the engagement was the fact that Sheppard also represented
South Tahoe in unrelated matters. After Sheppard had been
representing J-M for about a year in the qui tam action, South
Tahoe discovered the dual representation and had Sheppard
10
disqualified. At the time of its disqualification, Sheppard’s
unpaid fees for services to J-M stood at more than $1 million.
(Sheppard, supra, 6 Cal.5th at p. 70.)
Sheppard sued J-M in California superior court for the
unpaid fees and moved to compel arbitration pursuant to an
arbitration provision in the engagement letter. J-M opposed,
asserting that the conflict of interest from Sheppard’s
representation of South Tahoe rendered the entire agreement
illegal and unenforceable. The superior court ordered arbitration
and the arbitrators ruled in Sheppard’s favor, awarding it more
than $1.3 million in fees and interest. (Sheppard, supra,
6 Cal.5th at p. 71.)
J-M thereafter petitioned the superior court to vacate the
award, again arguing that the engagement agreement was illegal
and unenforceable due to Sheppard’s simultaneous
representation of adverse interests in violation of rule 3-310(C)(3)
of the Rules of Professional Conduct. The superior court
confirmed the award and J-M appealed. The Court of Appeal
reversed and the Supreme Court granted Sheppard’s petition for
review. (Sheppard, supra, 6 Cal.5th at pp. 71-72.)
In relevant part, the Sheppard court concluded that a court
may invalidate an arbitration award on the ground that the
agreement containing the arbitration agreement violates the
public policy of the state as expressed in the Rules of Professional
Conduct. The court recognized that Civil Code section 1667
makes “a contract unlawful, and therefore unenforceable, if it is
‘[c]ontrary to an express provision of law’ or ‘[c]ontrary to the
policy of express law, though not expressly prohibited.’ (Civ.
Code, § 1667.)” (Sheppard, supra, 6 Cal.5th at p. 73.) The Rules
of Professional Conduct, it reasoned, are an expression of public
11
policy, and “an attorney contract that has as its object conduct
constituting a violation of the Rules of Professional Conduct . . . is
therefore unenforceable.” (Id. at p. 74.) Importantly, it was
insufficient that the contract merely contained an unlawful
provision. The court had previously held in Moncharsh, supra,
3 Cal.4th at page 30, that where “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, remains arbitrable.” An agreement to arbitrate
thus becomes unenforceable only where the entire contract is
invalid and unenforceable as violative of public policy.
(Sheppard, supra, 6 Cal.5th at pp. 71-72.)
The court then turned to the question of whether the
Sheppard/J-M engagement agreement was entirely void. It
concluded that it was. This conclusion rested on three points:
(1) at the time Sheppard agreed to represent J-M Manufacturing
in the qui tam action, it also represented J-M’s adversary, South
Tahoe, in unrelated matters; (2) Sheppard failed to obtain J-M’s
informed consent to the conflict as required by the Rules of
Professional Conduct; and (3) the conflict “affected the whole of
its engagement agreement with J-M, rendering it unenforceable
in its entirety.” (Sheppard, supra, 6 Cal.5th at pp. 80–81.) The
first two points established Sheppard’s ethical violation, which
was different than Loeb’s and Kelly’s established violations here,
leaving only the third point relevant to our analysis.
Sheppard’s ethical violation served to invalidate the entire
engagement agreement because the object of the agreement was
itself the ethical breach. The court reasoned that the object of the
engagement agreement was the representation of J-M in the qui
tam action—“a representation that violated rule 3-310(C)(3).”
12
(Sheppard, supra, 6 Cal.5th at p. 87.) Importantly, it was the
wrongfulness of its very formation that rendered the contract
unenforceable. The court explained: “[V]iolation of a Rule of
Professional Conduct in the formation of a contract can render
the contract unenforceable as against public policy. That is what
happened here when [Sheppard] agreed to represent J-M in the
qui tam action, while also representing South Tahoe on other
matters, without obtaining J-M’s informed consent. . . . [T]he
agreement itself is contrary to the public policy of the state. The
transaction was entered under terms that undermined an ethical
rule designed for the protection of the client as well as for the
preservation of public confidence in the legal profession. The
contract is for that reason unenforceable.” (Ibid.)
B. Birbrower
Birbrower does not address the enforceability of an
arbitration provision in an engagement agreement. Rather, as
relevant for our purposes, it addresses whether a violation of
Business and Professions Code section 6125 rendered a fee
agreement between a law firm and its client wholly
unenforceable. (Birbrower, supra, 17 Cal.4th at p. 126.)
The Birbrower law firm was a New York firm. None of its
attorneys were licensed to practice law in California. Its client,
ESQ, was a California corporation involved in a contract dispute
governed by California law with another California domiciliary.
(Birbrower, supra, 17 Cal.4th at p. 124.) Nonetheless, the
Birbrower attorneys undertook the matter and traveled
repeatedly to California to advise ESQ, negotiate with ESQ’s
counterparty, and interview arbitrators that might resolve the
dispute. They also performed work in New York. The dispute
13
eventually settled and the fee agreement called for payment from
ESQ to Birbrower of more than $1 million. (Id. at pp. 125–126.)
Dissatisfied with the result, ESQ sued Birbrower and
Birbrower counterclaimed for unpaid fees. ESQ won summary
judgment on Birbrower’s fee claims on the ground that, by
practicing law in California without a license, Birbrower violated
Business and Professions Code section 6125, rendering the fee
agreement unenforceable. The Court of Appeal affirmed,
“reason[ing] that the agreement was void and unenforceable
because it included payment for services rendered to a California
client in the state by an unlicensed out-of-state lawyer.”
(Birbrower, supra, 17 Cal.4th at p. 135.)
The Supreme Court disagreed that the unlicensed work
pursuant to the fee agreement invalidated the entire agreement.
Acknowledging that the fee agreement “became illegal when
Birbrower performed legal services in violation of section 6125,”
it recognized that illegal contracts “will be enforced under certain
circumstances, such as when only a part of the consideration
given for the contract involves illegality. In other words,
notwithstanding an illegal consideration, courts may sever the
illegal portion of the contract from the rest of the agreement.”
(Birbrower, supra, 17 Cal.4th at p. 138.)
A lack of clarity regarding the terms of the Birbrower fee
agreement made severance by the Supreme Court impossible, but
it provided a framework for the trial court to apply on remand.
The remand instructions made clear that a violation of Business
and Professions Code section 6125 pursuant to a fee agreement
does not render that agreement void. The court explained, “ESQ
was to pay money to Birbrower in exchange for Birbrower’s legal
services. The object of their agreement may not have been
14
entirely illegal, assuming ESQ was to pay Birbrower
compensation based in part on work Birbrower performed in New
York that did not amount to the practice of law in California.
The illegality arises, instead, out of the amount to be paid to
Birbrower, which, if paid fully, would include payment for
services rendered in California in violation of section 6125.”
(Birbrower, supra, 17 Cal.4th at p. 139.)
It continued, “the Court of Appeal erred in determining
that the fee agreement between the parties was entirely
unenforceable because Birbrower violated section 6125’s
prohibition against the unauthorized practice of law in
California. . . . [¶] . . . [T]he 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.” (Birbrower, supra, 17
Cal.4th at p. 139.) The Supreme Court remanded to take new
evidence relevant to severance and determine whether any
amount remained owing for services Birbrower rendered in New
York. (Id. at pp. 139-140.)
C. Sheppard and Birbrower Compel Affirmance Here
We agree with the trial court that, read together, Sheppard
and Birbrower required confirmation of the Award in this case.
The arbitration provision in the Sheppard/J-M engagement
agreement was unenforceable only because the ethical violation
rendered the entire agreement unenforceable. (Sheppard, supra,
6 Cal.5th at pp. 76–77, 87.) Birbrower makes clear that the
unlicensed practice of law by firm attorneys does not completely
invalidate an agreement pursuant to which firm attorneys also
engaged in the licensed practice of law. (Birbrower, supra, 17
Cal.4th at p. 139.)
15
Here, the central misconduct that Brawerman and TMI
contend invalidates the Retainer Agreement is the same as the
misconduct at issue in Birbrower: an attorney licensed in other
states but not in California3 engaged in the practice of law in
California. Brawerman and TMI allege that this conduct
resulted in a number of related violations, including failure to
disclose “Kelly’s criminal lack of licensure,” holding Kelly out as
attorney, and “permitt[ing] Kelly to deceive third parties and
their own clients” regarding his license status. But none of this
creates a meaningful distinction from Birbrower.4 Whether the
lack of licensure was withheld or disclosed was irrelevant in
Birbrower. (Birbrower, supra, 17 Cal.4th at pp. 125, 136
[acknowledging factual dispute concerning client’s knowledge
about Birbrower attorneys’ lack of license].) So too was the fact
that the unlicensed practice was criminal. (Id. at p. 127
[acknowledging that unlicensed practice of law is a
misdemeanor].)
3 While Kelley’s licensure status in other states does not
excuse his violation of California law, Brawerman and TMI’s
repeated references in briefing to Kelly as “not an attorney” and
“not licensed to practice law” are inaccurate and misleading.
4 In addition, the trial court noted that Brawerman and TMI
failed to timely raise these asserted related violations below,
waiting until their reply in support of their motion to vacate to
suggest them to the trial court. As a result, they are waived here
as well. (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537
(Mahaffey) [issues not timely raised below not ordinarily
considered on appeal].)
16
The circumstances that saved the fee agreement in
Birbrower are also present here. Although the Birbrower
attorneys did “substantial” unlicensed work in California, they
also did licensed work in New York. Here, though Kelly illegally
did substantial work under the Retainer Agreement, other Loeb
attorneys who were licensed in California also performed work for
Brawerman and TMI under the same agreement. Brawerman
and TMI met with and retained Rohlf and his firm, and the
Retainer Agreement contains no reference to Kelly. Under these
circumstances, we are bound to follow Birbrower and conclude
that Kelly’s illegal work did not invalidate the entire Retainer
Agreement, and we are further bound to follow Sheppard and
Moncharsh and conclude that the Retainer Agreement’s
arbitration provision therefore remains enforceable.
Brawerman and TMI finally address Birbrower for the first
time on the 79th page of their reply brief.5 Their primary attack
on the decision is nothing short of disingenuous. They represent
that reliance on Birbrower “is improper” because it “ ‘was
promptly overruled by the California legislature’ by the passage
5 We note that, despite Brawerman and TMI’s primary
reliance on Birbrower before the arbitrator, and despite both the
arbitrator and the trial court relying on Birbrower in rendering
decisions adverse to them, Brawerman and TMI failed to cite
Birbrower in their opening brief. As a decision of our Supreme
Court, Birbrower is binding on this court. We remind counsel
that rule 3.3(a)(2) of the Rules of Professional Conduct states:
“A lawyer shall not . . . fail to disclose to the tribunal[] legal
authority in the controlling jurisdiction known[] to the lawyer to
be directly adverse to the position of the client and not disclosed
by opposing counsel . . . .”
17
of CCP §1282.4.” (Quoting Prudential Equity Group, LLC v.
Ajamie (S.D.N.Y. 2008) 538 F.Supp.2d 605, 608 [New York law].)
They continue, “CCP §1282.4 expressly mentions that it is a
‘response to the holding of Birbrower’ and is designed to overrule
Birbrower.” What Brawerman and TMI fail to mention is that
Code of Civil Procedure section 1282.4 does not address
Birbrower’s holding relevant to this case—the severability of an
agreement between attorneys and their clients where a portion of
the attorney performance thereunder violated Business and
Professions Code section 6125. Instead, Code of Civil Procedure
section 1282.4 rejects a Birbrower rule having no relevance here,
i.e., that non-California attorneys violate Business and
Professions Code section 6125 by appearing before an arbitrator
in California. (Prudential Equity Group, LLC v. Ajamie,
supra, 538 F.Supp.2d at p. 608.) Code of Civil Procedure
section 1282.4 has no bearing on the issues before us.
Brawerman and TMI’s other efforts to distinguish
Birbrower are similarly unavailing. First, they say that
Birbrower was a “fee dispute with attorneys who were New York
residents and worked exclusively for a New York firm” and this
case is not. But they fail to say why this is relevant to
severability where both cases involved facially legal agreements
pursuant to which some performance was legal and some
performance violated Business and Professions Code
section 6125.
Next, they say “Birbrower did not make findings regarding
the enforceability of an arbitration provision, nor did it permit
severance of just an arbitration provision.” But they fail to
explain how arbitration provisions are somehow less severable
than other provisions of contracts. If anything, the strong public
18
policy favoring arbitration weighs in favor of severance. (Cf.
Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4th 1138,
1144. [“In keeping with California’s strong public policy in favor
of arbitration, any doubts regarding the validity of an arbitration
agreement are resolved in favor of arbitration”].)
Next, Brawerman and TMI say that Birbrower is
distinguishable because there was no “bait and switch”
concerning the attorneys’ qualifications. Without citation, they
claim that the attorneys in Birbrower “were forthcoming both as
to their lack of licensure and as to who handled the matter.”
This is a gross misrepresentation of Birbrower. The Birbrower
court specifically stated “Birbrower asserts, and ESQ disputes,
that ESQ knew Birbrower was not licensed to practice law in
California.” (Birbrower, supra, 17 Cal.4th at p. 125.) The
Birbrower court found the issue of disclosure or non-disclosure
irrelevant. (Id. at p. 136.) Thus, the Birbrower decision neither
relies upon nor references any finding that the attorneys there
were “forthcoming” about their lack of licensure.
Brawerman and TMI continue that severance was
practicable in Birbrower because the court “was able to identify
two separate agreements within the single retainer agreement,
the first was for legal services in New York by licensed New York
attorneys, and the second agreement was for the unlicensed
practice of law in California.” Again, not so. There were two
agreements in Birbrower but they were successive agreements for
the same services, the second modifying the terms of the first.
(Birbrower, supra, 17 Cal.4th at p. 139 & fn. 6 [“[T]he parties
entered into a contingency fee agreement followed by a fixed fee
agreement. ESQ was to pay money to Birbrower in exchange for
legal services.”; “The parties apparently do not dispute that they
19
modified the original contingency fee arrangement to call for a
fixed fee payment of over $1 million”].) Nowhere in Birbrower
does the court suggest that the California and New York services
were separately contracted; indeed, the fact of its remand to the
trial court to determine the feasibility of severance is conclusive
that they were not.
We now turn to Brawerman and TMI’s specific arguments
against the enforcement of the arbitration provision.
1. Sheppard Required More than the Fact of an
Ethical Violation to Invalidate the Engagement
Agreement
According to Brawerman and TMI, Sheppard reflects the
rule “that when an attorney violates the Rules of Professional
Conduct in the performance of the legal services contracted for
under a retainer agreement, that retainer agreement is entirely
unenforceable as against public policy and any arbitration
provisions contained in such an agreement cannot be enforced[.]”
This reading of Sheppard completely misrepresents its holding.
In Sheppard, entry into the engagement agreement itself
was an ethical violation because Sheppard represented J-M’s
litigation adversary in another matter. (Sheppard, supra,
6 Cal.5th at p. 87.) Put another way, it was impossible for
Sheppard to enter into the engagement agreement with J-M
without committing an ethical breach. As a result, the entire
object of the engagement agreement was an engagement that
Sheppard was prohibited to take on. (Id. at p. 86.)
20
Here, in contrast, there was nothing inherently illegal
about the Retainer Agreement, and Loeb was capable of
performing it legally.6 The object of the agreement, as found by
the trial court, was not Kelly’s representation, but rather
“[Loeb’s] representation of [Brawerman and TMI] in the
Wasserstein transaction.”
Particularly in their reply brief, Brawerman and TMI
ignore this finding and urge a different object purportedly
harbored by Loeb: “to secretly disregard [Brawerman’s and
TMI’s] expressed object [to obtain the best legal counsel to
represent them] and provide Kelly, an unlicensed, untested, and
legally incompetent person.” But we are not free to rewrite a
trial court’s factual findings. A contract’s object is a function of
the parties’ intent. (Houge v. Ford (1955) 44 Cal.2d 706, 713
[“The object . . . of the parties’ contract must be determined by
their intent at the time of its execution . . . .”].) We therefore
review the trial court’s determination of the Retainer
Agreement’s object for substantial evidence. (See Redke, supra,
6 Cal.3d at p. 103 [“questions of ‘intent’ and ‘purpose’ are
ordinarily questions of fact to be determined by the trial court”].)
6 In their reply brief, Brawerman and TMI attempt to better
align their facts with those of Sheppard by asserting that Loeb
and Kelly’s representation of Brawerman and TMI constituted an
undisclosed conflict of interest. They failed to raise this
argument below and provide no justification for holding it until
their reply brief. As such, it is doubly waived and we decline to
consider it. (Lambert v. Carneghi (2008) 158 Cal.App.4th 1120,
1135 [“Having failed to raise this argument with the trial court or
in their opening brief, appellants have ‘doubly waived’ the
argument”].)
21
Substantial evidence supports the trial court’s findings regarding
the object of the Retainer Agreement.
The parties executed the Retainer Agreement because
Brawerman and TMI required legal services in negotiating a
financing transaction and Loeb is a law firm that provides such
services. As Brawerman explained, he sought out Loeb because
he needed legal help and wanted the best representation in
connection with the Wasserstein transaction. The Retainer
Agreement is a typical form retainer agreement and is signed on
Loeb’s behalf by Rohlf, whose status as a California bar licensee
at the time is undisputed. The Retainer Agreement provides that
Rohlf would be “principally responsible for the representation,”
and assisted by “lawyers, law clerks and legal assistants” in
carrying it out.
There is nothing unlawful about this arrangement. Kelly is
not a signatory to the Retainer Agreement. The Retainer
Agreement is not conditioned on his participation in the
representation. Indeed, he is not even mentioned in it. Had Loeb
not involved Kelly, there would be no complaint that the
agreement was unlawful. At the time it entered into the
Retainer Agreement, Loeb had a stable of California attorneys
and was surely capable of representing Brawerman and TMI
without violating any laws or public policy. Thus, the illegality
lay not in the entry into the agreement but in its performance.
This is insufficient to invalidate the Retainer Agreement.
The precise illegality in performance here was also present in
Birbrower. Despite such illegality, the Supreme Court found that
the Birbrower fee agreement remained enforceable to the extent
of the work legally performed in New York pursuant to a valid
license. We therefore must do the same here.
22
In a similar vein, Brawerman and TMI argue that we must
find the arbitration provision invalid because the criminal nature
of Kelly’s violation is “[f]ar more egregious than the conduct in
Sheppard.” The question of legality or illegality of the agreement
is a binary one: is or is not the object of the agreement a violation
of law or some other expression of public policy? (See Sheppard,
supra, 6 Cal.5th at pp. 73–74.) The Sheppard court invalidated
the engagement agreement because it was entirely illegal, not
based on its assessment of how “bad” the violation was. It simply
concluded that the agreement called for Sheppard to do
something it could not do without committing an ethical
violation. Likewise, the Birbrower court did not uphold the fee
agreement because it was unconcerned that the Birbrower
attorneys had engaged in the criminal unlicensed practice of law
in California. It simply concluded that the agreement was also
for services that could be performed legally.
As the Retainer Agreement had a lawful object, the
“egregiousness” of Loeb’s and Kelly’s illegal conduct in
performing the agreement is of no moment.
2. Brawerman and TMI’s Other Authorities
Concerning Contracts in Violation of Public Policy
Are Inapposite
Continuing to operate from the premise that the Retainer
Agreement is inherently violative of public policy, Brawerman
and TMI cite a number of other cases where California courts
have refused to enforce such agreements. Each of these cases is
distinguishable because the object of each was inherently
unlawful. Estate of Molino (2008) 165 Cal.App.4th 913, 923;
Estate of Butler (1947) 29 Cal.2d 644, 651; and Estate of Collins
(1968) 268 Cal.App.2d 86, 89, 90, each involved “heir hunters”
23
whose agreements with potential heirs called for the non-lawyer
heir hunter named in the agreement to perform legal services.
These agreements were invalidated as against public policy.
In contrast, the heir hunter agreement in Estate of Wright (2001)
90 Cal.App.4th 228, 235, was found to be legal because it did not
require the non-lawyer heir hunter to perform legal services.
Chambers v. Kay (2002) 29 Cal.4th 142, 156–161, and
Altschul v. Sayble (1978) 83 Cal.App.3d 153, 165–166, each
concerned attorney fee sharing agreements that were,
themselves, violations of the California Rules of Professional
Conduct. The courts refused to enforce them as violative of
public policy.
In All Points Traders, Inc. v. Barrington Associates (1989)
211 Cal.App.3d 723, 727, 734, 738, the court invalidated an
agreement to broker the sale of a business because the named
broker lacked the statutorily required license to engage in such
brokerage. Similarly, in Franklin v. Nat C. Goldstone Agency
(1949) 33 Cal.2d 628, 631–633, the Supreme Court remanded for
a determination of whether individuals that sought payment on a
contract for painting and decorating services were duly licensed
contractors before a judgment enforcing their contract would
enter. In each case, the court refused to enforce a contract to the
extent the named party promising a service could not legally
perform that service.
In sum, in each case where the agreement was invalidated,
the agreement could not be performed without violating a law or
public policy. Accordingly, none is like the Engagement
Agreement, a facially legal agreement that only took on an illegal
character as a result of Loeb’s decision to perform the agreement
in a partially illegal way.
24
In their reply brief, Brawerman and TMI discuss at length
Union Collection Co. v. Buckman (1907) 150 Cal. 159. This case,
too, involved a contract that was inherently illegal: prohibited
gambling activity. When a gambling debt was settled through
notes that were subsequently replaced and/or renewed with new
notes, the Supreme Court refused to enforce the notes because
they were all premised on the initial illegal gambling: “Merely
repeating a promise based on an illegal consideration cannot give
it validity.” (Id. at p. 162.) The notes in Union Collection Co.
thus bear no similarity to the Retainer Agreement, which is the
first and only iteration of an inherently legal agreement by a law
firm to provide legal services.
3. The Trial Court Properly Limited Its Analysis to
Whether the Formation of the Contract Itself Was
Illegal or Contrary to Public Policy
Brawerman and TMI claim that the trial court’s analysis
focusing on conduct at the time of formation was error and
unsupported by Sheppard. Again, they misapprehend Sheppard.
Brawerman and TMI cite Haas v. Greenwald (1925) 196 Cal. 236,
246–247 (Haas) as illustrative of an analysis that purportedly
considered post-contracting violations as sufficient to render a
contract “invalid due to illegal performance which occurred well
after the formation of the contract.” But Haas involved a contract
that could not be performed without violating an express
provision of law. (Id. at p. 247.)
Specifically, the defendant in Haas, a prospective real
estate buyer, entered into an agreement with three men to
provide him with real estate brokerage services. Two of the men
held the licenses statutorily required to provide such services; the
third did not. (Haas, supra, 196 Cal. 236 at pp. 240–241.)
25
Nevertheless, all three had jointly obligated themselves to
provide the real estate brokerage services specified in the
contract. The Supreme Court found the entire agreement
unenforceable because the unlicensed broker’s performance was
expressly made an indivisible part of the consideration. (Id. at
p. 247.) Thus, it was not the performance of the contract that
rendered it illegal. Rather, it was illegal on its face because it
expressly called for illegal conduct: one of the parties to the
agreement had bound himself to provide services that he was
prohibited by statute to provide. No similar facts are present in
this case.
Brawerman and TMI’s reliance on Maryland Casualty Co.
v. Fidelity & Casualty Co. of New York (1925) 71 Cal.App. 492,
497, is similarly unavailing. Despite the broad language they
quote explaining the rationale for invalidating illegal contracts,
it is qualified by the following statement, which they fail to quote:
“The power to invalidate agreements on the ground of public
policy is so far-reaching and so easily abused that it should be
called into action only in cases where the dangerous tendency
clearly and unequivocally appears from the contract itself.” (Ibid.,
italics added.) The court then proceeded to consider the subject of
the agreement, as opposed to its performance, and found no
violation of public policy. (Id. at p. 498.) The trial court did the
same here and properly concluded that a law firm’s agreement to
provide legal services to its client is not violative of public policy.
In two different sections of their reply brief, Brawerman
and TMI offer new arguments that simply evaluating the terms
of the Retainer Agreement is inadequate to determine its legality.
Rather, “an analysis of all facts [is required] to reach a
determination as to whether the circumstances render the
26
agreement invalid.” Whether required or not, the trial court did
look beyond the four corners of the Retainer Agreement and still
concluded that its object was legal. It considered evidence of
Brawerman’s intention in entering into the agreement, and
particularly whether Kelly’s involvement was significant in his
decision. It considered evidence concerning the authorship of the
agreement. It considered Brawerman’s testimony about when
Kelly “became the point person on the transaction.” It considered
Loeb’s performance of the agreement through Kelly as well as
numerous California licensed attorneys. After weighing this
evidence, including inconsistencies noted, it found it inadequate
to establish that Brawerman and TMI engaging Kelly was the
object of the Retainer Agreement.
4. Kelly’s Work Before, and Purported Drafting of,
the Retainer Agreement Do Not Render the Retainer
Agreement Illegal
Brawerman and TMI next argue that the Retainer
Agreement was illegal from the start because (i) Kelly and Loeb
started working on December 26, 2004, “weeks before the
retainer [wa]s signed,” and (ii) after Loeb created a draft of the
retainer on December 28, 2004, Kelly later negotiated and
redrafted the retainer.
As a preliminary matter, these asserted facts are contrary
to the trial court’s findings supported by substantial evidence.
The trial court found that the Retainer Agreement “was effective
as of December 28, 2004.” The signed Retainer Agreement is
dated December 28, 2004. Brawerman and TMI assert that the
agreement was “backdated” but, as the trial court observed,
Brawerman never testified to when it was actually signed.
Brawerman and TMI asserted in briefing below, and again here,
27
that it was signed on January 11, 2005. But the record cite
offered in support is merely a letter of transmittal which does not
reference a signing date. Moreover, the trial court observed that
Brawerman did not dispute the signing date in testimony before
the arbitrator, and billing entries Brawerman and TMI say show
ongoing revisions to the Retainer Agreement after December 28,
2004 could not have referred to the Retainer Agreement.
Specifically, the trial court noted that Loeb time entry
references—which were variously to “Finders Fee Agreement,”
“Engagement Letter,” “Engagement Letter Re Finder for Equity
Investment in Turtle Mountain,” and “Finder’s Engagement
Letter”—continued through January 18, 2005, a full week after
Brawerman and TMI argue Brawerman signed the Retainer
Agreement. Brawerman and TMI cite exactly the same time
entries to establish that Kelly drafted the Retainer Agreement.
For the same reason that these time entries cannot be used to
establish a signing date, they cannot be used to establish
authorship.
Fact issues aside, Brawerman and TMI fail to explain how
work prior to the execution of the Retainer Agreement, or Kelly’s
preparation of a form engagement letter for Rohlf’s signature,
render a facially legal and valid agreement between Loeb and
Brawerman/TMI illegal as a matter of law. They cite no
authority and assert only that we should “conclude that Kelly’s
illegal conduct permeates the entire agreement as it began before
the retainer was executed and it was Kelly’s own illegal conduct
which created the retainer.” The fact remains that the trial court
found the object of the Retainer Agreement to be the engagement
of Loeb and substantial evidence supports that conclusion.
Moreover, Loeb’s partially illegal performance of the agreement is
28
analogous to the performance in Birbrower. Birbrower is
controlling.
5. Kelly’s Involvement Did Not Render the
Agreement Unenforceable
Brawerman and TMI’s next argument is largely duplicative
of arguments already addressed. They assert that “Kelly’s
central role and Loeb’s participation renders the entire
agreement unenforceable because the taint of illegality
permeates the entire relationship, transaction, performance, and
contract.”
Brawerman and TMI cite Kashani v. Tsann Kuen China
Enterprise Co. (2004) 118 Cal.App.4th 531, 542 (Kashani), for
dicta broadly describing when a bargain might be declared
illegal—including where “ ‘no illegal performance is either
promised or executed as the consideration for a promise.’ ” But
Kashani, like Sheppard, involved a contract that promised illegal
performance. The Kashani contract was for the establishment
and financing of a computer factory in Iran in violation of
executive orders prohibiting certain trade with Iran. (Id. at pp.
547–548.) Thus, Kashani is yet another case where legal
performance of the contract was impossible. Brawerman and
TMI cannot use Kashani to overcome Birbrower where the
illegality in performance arising here did not invalidate the
entire agreement because legal performance was also rendered
under the agreement.
6. Illegal Consideration for Kelly’s Services Is
Severable from Services Provided by Licensed
Attorneys
Brawerman and TMI argue that, “because the
consideration provided under the agreement is illegal, the entire
29
contract is void and unenforceable as violative of public policy.”
Birbrower is again fatal to their argument. There, the Supreme
Court found that, to the extent there was a practicable way to
sever fees for licensed legal work from those payable for
unlicensed legal work, the fee agreement remained viable and the
fees for the licensed work remained recoverable. (Birbrower,
supra, 17 Cal.4th at pp. 139–140.) Here, because Loeb charged
hourly, the fees for Kelly’s work are easily severable from the
work that Loeb’s licensed attorneys did. Indeed, they were
severed by the arbitrator in ordering disgorgement.7
Instead of acknowledging Birbrower, Brawerman and TMI
return to Haas. They mischaracterize it as holding that “where
the law requires a license to perform a contracted for service,
everyone performing the service must hold the license and if even
one person does not hold the required license, the entire
agreement is ‘void’ as violative of public policy.” Again, the Haas
real estate brokerage services contract was void because the
contract required a non-licensee, named in the agreement, to
illegally perform brokerage services. (Haas, supra, 196 Cal. at
p. 247.) In contrast, the Retainer Agreement did not require
Kelly’s participation for Loeb to perform it. Loeb could have
7 In their reply brief, Brawerman and TMI argue that Loeb
and Kelly’s reliance on the license status of other Loeb attorneys
on the matter “sounds in the doctrine of substantial compliance”
(though Loeb and Kelly made no such argument), and then assert
that such argument is waived. As Loeb and Kelly argued and the
trial court found, the license status of the other California
attorneys is relevant to severability under Birbrower.
Brawerman and TMI’s responses to an imagined substantial
compliance argument are irrelevant.
30
performed under the agreement legally by assigning only
California licensed attorneys to the matter. That it did not does
not render the agreement void. (Birbrower, supra, 17 Cal.4th at
pp. 139–140.)
7. Brawerman and TMI Forfeited Their Arguments
That Claimed Violations by Other Loeb Attorneys
Invalidated the Retainer Agreement
Brawerman and TMI argue that “every single attorney who
assisted Kelly in representing appellants violated numerous
ethical rules, thereby invalidating the entire agreement.”
Brawerman and TMI raised this argument before the trial
court for the first time on reply. The trial court declined to
adjudicate whether other Loeb attorneys had committed ethical
violations because, “[i]f Plaintiffs believed that [Loeb] committed
these ethics rule violations, then Plaintiffs unquestionably should
have raised them in their moving papers to attempt to show the
illegality of the Retainer Agreement. In failing to do so, Plaintiffs
deprived Defendants of an opportunity to respond to these
separate and specific purported ethics rule violations.” Having
found no justification for Brawerman and TMI’s failure to timely
raise the purported violations, the trial court properly declined to
consider them. We will not consider the asserted ethical
violations for the first time on appeal, and the absence of a record
establishing the asserted violations makes any such review
impossible.8 (Environmental Law Foundation v. Beech-Nut
8 For example, Brawerman and TMI assert that every
attorney working on the matter improperly aided Kelly in his
unlicensed practice of law in violation of rule 5.5 of the Rules of
Professional Conduct; failed to disclose this fact in violation of
31
Nutrition Corp. (2015) 235 Cal.App.4th 307, 325 [appellate
review ordinarily limited to issues timely raised and decided
below].)
In any event, even if such violations were found in the
performance of the agreement, they would not render the entire
agreement illegal because the object of the agreement was not
illegal. Further, it appears that all of the attorneys involved in
the matter in Birbrower committed statutory violations but the
Supreme Court found this insufficient to render the entire
agreement invalid. (Birbrower, supra, 17 Cal.4th at pp. 125,
139.)
8. The Trial Court Independently Considered the
Legality of the Arbitration Agreement
Brawerman and TMI argue that “contract enforceability is
determined by the court not the arbitrator. No deference is given
to any such determination by the arbitrator.” They are correct.
But despite their detailed articulation of the trial court’s
obligation to independently evaluate the evidence and determine
a contract’s legality, Brawerman and TMI do not claim that the
rules 1.4 and 8.4; failed to create a system to prevent such ethical
violations in violation of rule 5.1; and shared fees with a non-
attorney in violation of rule 5.4. But key facts necessary to
support the claimed violations are not in the record. Brawerman
and TMI do not explain nor provide record citations establishing
that each attorney working with Kelly (i) had knowledge of his
bar status; (see Rules Prof. Conduct, rule 5.5(a)(2)); or (ii) had
managerial authority within the Loeb firm (see id., rule 5.1(a)).
Nor do they show that Kelly was compensated for his work on the
matter directly from fees paid by LLC as opposed to from Loeb’s
general revenues. (See id., rule 5.1, cmt. 1.)
32
trial court failed to follow the rule. It plainly did. The trial court
stated that it “evaluated, considered, and weighed all the
evidence submitted by the parties in connection with [the motion
to vacate], including Plaintiffs’ reply. The Court . . . reached its
own findings and conclusions as to the legality of the Retainer
Agreement and the enforceability of the provision to arbitrate.
The Court is not relying on, and has not relied on, [the
arbitrator’s] finding of legality.”
This argument does not suggest, much less establish, any
error.
9. Arguments that Brawerman and TMI Relied on
False Representations by Loeb and Kelly in
Executing the Retainer Agreement Are Improper at
This Stage
Brawerman and TMI argue that Loeb and Kelly “cannot
meet their burden of demonstrating the existence of a valid
contract because, in addition to their unethical conduct,
[Brawerman’s] signature was obtained by fraud.” Without record
citations, they continue that Loeb and Kelly “both concede that
they informed Brawerman that Kelly was an attorney when he
was not a licensed attorney.” This argument is not addressed in
the trial court’s decision so it is unclear whether Loeb and Kelly
raised it to the trial court. But even if they had, it would not
have been successful. They did raise the argument to the
arbitrator and the arbitrator correctly observed that the claim
was one for fraud in the inducement.
Our Supreme Court in Rosenthal v. Great Western Fin.
Securities Corp. (1996) 14 Cal.4th 394 (Rosenthal) held that
claims for fraud in the inducement are arbitrable. As explained
in that case, “California law distinguishes between fraud in the
33
‘execution’ or ‘inception’ of a contract and fraud in the
‘inducement’ of a contract. In brief, in the former case ‘ “the fraud
goes to the inception or execution of the agreement, so that the
promisor is deceived as to the nature of his act, and actually does
not know what he is signing, or does not intend to enter into a
contract at all, mutual assent is lacking, and [the contract] is
void. In such a case it may be disregarded without the necessity
of rescission.” ’ [Citation.] Fraud in the inducement, by contrast,
occurs when ‘ “the promisor knows what he is signing but his
consent is induced by fraud, mutual assent is present and a
contract is formed, which, by reason of the fraud, is voidable.
In order to escape from its obligations the aggrieved party must
rescind . . . .” ’ [Citation.] ” (Id. at p. 415.)
Here, there is no allegation that Brawerman was unaware
that he was signing the Retainer Agreement. He alleges only
that he relied on false representations in doing so. This is a
claim for fraud in the inducement that was arbitrable and
properly determined by the arbitrator. (Rosenthal, supra,14 Cal.4th at p. 417 [“In the absence of a contrary agreement,
parties to a predispute arbitration agreement are presumed to
have intended arbitration of controversies, including allegations
of fraud in the inducement of the contract generally, that may
allow rescission or reformation of the contract or part of it”].)
It is not reviewable on appeal. (Moncharsh, supra, 3 Cal.4th at
p. 11; [courts cannot review the merits of the controversy, the
validity of the arbitrator’s reasoning, or the sufficiency of the
evidence supporting an arbitrator’s award].)
34
10. The Arbitration Clause Is Severable from the
Rest of the Retainer Agreement
Brawerman and TMI argue that “[n]o part of the contract,
including the arbitration clause, can be saved by the application
of severance because every single attorney at Loeb who worked
on this matter violated ethics rules.” As already noted,
Brawerman and TMI’s claim that every attorney at Loeb violated
ethics rules was forfeited by their failing to timely assert this
before the trial court. In any event, they fail to acknowledge,
much less distinguish, Birbrower, where the attorneys involved
in the matter had committed the same offense that serves as the
core violation complained of here. As the Supreme Court found
the Birbrower fee agreement severable, we also find the Retainer
Agreement severable. The Retainer Agreement’s arbitration
provision therefore remains enforceable.
11. Brawerman and TMI Fail to Show How the Trial
Court’s Finding that Rohlf Supervised Kelly Could
Be Prejudicial
Brawerman and TMI argue that the trial court erred in
concluding that Rohlf supervised Kelly. However, they fail to
explain how this finding is relevant to the enforceability of the
Retainer Agreement’s arbitration provision. Absent any such
explanation, Brawerman and TMI fail to show the possibility of
prejudice. We therefore decline to consider whether substantial
evidence supports the trial court’s conclusion. (In re Marriage of
McLaughlin (2000) 82 Cal.App.4th 327, 337.)
35
12. Brawerman and TMI Fail to Show that Kelly was
Not Entitled to Enforce the Arbitration Provision of
the Retainer Agreement
Brawerman and TMI argue that “[t]he trial court
committed an error of law by not weighing the rights of the
plaintiff as to Kelly, separate from the rights of Loeb. The law
does not permit Kelly to enjoy the benefits of the contract.”
Brawerman and TMI did not present this argument to the trial
court. We therefore deem it forfeited. (Mahaffey, supra, 218
Cal.App.4th at p. 1537.)
Even if we did not, we would find it waived for failure to
support it with reasoned argument or authority. (United Grand
Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 153
(Malibu Hillbillies) [appellate courts entitled to disregard
assertions that are unsupported by argument or authority].)
In particular, Brawerman and TMI fail to acknowledge that an
employee or agent is ordinarily entitled to compel arbitration
pursuant to an agreement between his or her employer or
principal and the claiming party. (Jones v. Jacobson (2011) 195
Cal.App.4th 1, 18, fn. 9 [non-signatory may compel arbitration if
a “sufficient ‘identity of interest’ exists” between the non-
signatory and a party to the agreement, such as a “principal and
agent” or “employer and employee” relationship].)
Finally, the argument is based on the false premise that
“Kelly’s illegal and fraudulent activity of practicing law without a
license is the sole basis for compelling Appellants’ malpractice
claims against Kelly into arbitration.” This is incorrect. The
basis for compelling arbitration is the arbitration provision in the
Retainer Agreement, which is a legal contract for the reasons
already discussed.
36
13. Appellants Forfeited Their Arguments
Concerning Public Perception and Alleged
Procedural Irregularities in the Arbitration by
Failing to Raise them to the Trial Court
Brawerman and TMI conclude their opening brief by
arguing that “[t]he important public policies of preserving the
public respect for the courts and its officers call for this court to
set this matter for trial before the court.”
Brawerman and TMI did not present this argument to the
trial court. We therefore deem it forfeited. (Mahaffey, supra, 218
Cal.App.4th at p. 1537.)
Even if we did not, we would find it waived for failure to
support it with reasoned argument or authority.9 (Malibu
Hillbillies, supra, 36 Cal.App.5th at p. 153.) In particular,
Brawerman and TMI fail to acknowledge that permissible
grounds for setting aside an arbitration award are limited to
those specified by statute (Sheppard, supra, 6 Cal.5th at p. 72)
and they reference no statutory basis on which their argument
relies.
9 The sole authority that Brawerman and TMI cite in
support of their argument is as follows: “The Arbitrator
prohibited Appellants from responding [to an objection to an
interim award of interest filed by Loeb and Kelly] in violation
of Conservatorship of . . . Maria B. (2013) 218 Cal.App.4th 514,
534 . . . .” It is unclear what Brawerman and TMI cite this case
for, as it does not discuss the right to respond and does not
involve an arbitration.
37
DISPOSITION
The judgment is affirmed. Costs are awarded to
Respondents.
CERTIFIED FOR PUBLICATION
*
HARUTUNIAN, J.
We concur:
GRIMES, Acting P. J.
WILEY, J.
* Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
38