Nakahara v. Cohen CA2/2 ( 2024 )

Filed 10/29/24 Nakahara v. Cohen CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
PATRICIA NAKAHARA, B321385
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 21STCV18608)
BRUCE COHEN, Individually and
as Trustee, etc.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Bruce Iwasaki, Judge. Affirmed.
BMCA Law Group, Julia Machai Cohen and Bruce M.
Cohen for Defendants and Appellants.
Reed & Reed and Darren G. Reed for Plaintiff and
Respondent.
__________________________________
Patricia Nakahara sued her attorney, Bruce Cohen, for
allegedly failing to repay a loan she made to him in 2017. Cohen
petitioned to compel arbitration and stay the lawsuit, citing a
2018 contingent fee agreement. (Code Civ. Proc., § 1281.2.)1 The
trial court denied Cohen’s petition. On de novo review, we affirm.
The arbitration clause in Cohen’s engagement letter solely
applies to his contingent fee representation of Nakahara in a
lawsuit against Coldwell Banker. It does not apply to a side deal,
such as a personal loan to Cohen, or to disputes over hourly bills
Nakahara incurred in other legal matters. Arbitration of a loan
or hourly fee dispute cannot be ordered merely because the
parties agreed to arbitrate a different matter.
FACTS AND PROCEDURAL HISTORY
Allegations in Nakahara’s Lawsuit
In her unverified second amended complaint (SAC),
Nakahara alleges that Cohen has been her attorney for many
years. In 2017, Cohen asked to borrow money from Nakahara,
who felt pressured to agree because he represented her in
pending legal matters. She loaned him $111,902 to pay his rent;
he promised to repay her within one year. The loan was not
memorialized in writing.
The SAC alleges that Cohen failed to repay the loan and
continued to charge Nakahara for legal services. He had her sign
a contingent fee agreement in 2018. She did not want to rock the
boat by asking for repayment, for fear he would cease
representing her.
1 Undesignated statutory references are to the Code of Civil
Procedure.
2
In 2019, the controller for Nakahara’s business asked
Cohen about the debt. Cohen remained silent, which Nakahara
“interpreted as meaning he acknowledged the debt and was still
intending to pay it back.” In 2021, after Cohen “made it clear
that he did not intend to pay back the loan,” Nakahara sued him
individually and as trustee for a family trust.2 The SAC asserts
claims for money lent; breach of an oral contract; and breach of
fiduciary duty for entering a loan transaction with a client that
created a conflict of interest.
Attached as exhibits to the SAC are copies of two checks,
one for $56,052.45 dated May 18, 2017, and one for $55,850 dated
July 13, 2017. They are payable to “Douglas Emmett.” It is
undisputed that Douglas Emmett was Cohen’s landlord. Each
typewritten check has a handwritten note at the bottom reading
“Bruce Loan—1801 Rent.”3
The Parties’ Arbitration Agreement
On October 31, 2018, Cohen sent Nakahara a contingent
fee agreement (Agreement). The Agreement is in a letter titled,
“Re: Legal Representation of Patricia Nakahara in the matter of
Nakahara v. Coldwell Banker Residential Brokerage Co. et al.,
Los Angeles Superior Court Case No. SC128079.” The “Scope of
Representation” states, “Our responsibility is to represent you in
connection with your affirmative claims” in the Coldwell case.
Nakahara signed the Agreement.
The Agreement has a “Dispute Resolution” clause. It reads:
2 We refer to defendants collectively as “Cohen.”
3 Cohen’s office was located at 1801 Century Park East in
Los Angeles.
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“In the unlikely event of any dispute between us arising out
of or related to our legal representation, including disputes over
bills or the quality of representation, the matter will be resolved,
to the extent permitted by California law, not by a Court
proceeding, but by arbitration, in California, pursuant to the
California Code of Civil Procedure. The result of arbitration will
be binding and judgment may be entered in any Court having
jurisdiction.”
Cohen’s Petition to Compel Arbitration
Cohen petitioned for arbitration, arguing that Nakahara
agreed to arbitrate “any dispute” between them “arising out of or
related to” his legal representation. In his view, this covers
Nakahara’s “purported ‘loan’ ” to him in 2017.
Cohen invoked the California Arbitration Act (CAA) and
the Federal Arbitration Act (FAA), which favor arbitration of
disputes. Nakahara refused to honor her agreement to arbitrate.
Cohen asked the court to order arbitration and stay the lawsuit.
Nakahara’s Opposition
Nakahara wrote that Cohen has been her attorney for over
20 years, mainly for her business. He performed legal services
and billed her without a formal agreement. In early 2017, Cohen
became delinquent on his rent and borrowed $111,902.45 from
Nakahara, whose checks were made payable to Cohen’s landlord.
The loan terms were not documented in writing.
Nakahara did not dispute signing the Agreement in 2018,
long after she loaned money to Cohen. She declared that the
Agreement was “strictly for” her case against Coldwell and had
“absolutely nothing to do with the loan I gave to BRUCE COHEN
in 2017.” She noted that “defendant’s petition to compel
arbitration is strangely quiet as to why the defendant believes an
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arbitration clause in a 2018 contingency fee retainer agreement
can somehow apply to a transaction that occurred in 2017.”
Nakahara asked the court to deny the petition because the
arbitration clause has nothing to do with this lawsuit.
Cohen’s Reply
Cohen reiterated his longstanding attorney-client
relationship with Nakahara. He claimed she consented, in the
Agreement, to arbitrate “ ‘any dispute’ ” arising out of his legal
representation. He pointed to unsworn allegations in the SAC
stating that Nakahara signed the Agreement when Cohen sought
to repay his debt to her by performing services on a contingent
fee basis. He opined that her breach of fiduciary duty claim arose
in the context of his performance under the Agreement. He
denied taking a loan from Nakahara or any obligation for
repayment.
Cohen asserted that the checks attached to the SAC are
altered. The originals did not have handwriting about a loan. He
wrote that the handwriting was “a later addition, created for the
purposes of fabricating the appearance of a ‘loan.’ ”
Cohen declared that the checks were payment for legal
services, “making this, at most, a billing dispute.” When she
disbursed the checks in 2017, Nakamura owed Cohen’s law firm
$141,883. The firm applied the checks as payment toward her
debt for legal services. It asked Nakahara to make the checks
payable to its landlord, Douglas Emmett, to serve as payment for
the firm’s $56,000 monthly rent.
Cohen wrote, “The entire $111,902.45 was applied to
multiple client invoices in several legal matters” for services
performed in 2016–2017. The firm’s custodian of records, Julia
Machai Cohen, declared that the checks were applied to “legal
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work performed on [an] hourly fee basis and costs incurred in and
prior to 2017.” At the time, “the firm was continuing to perform
significant amount of legal work and incur costs on behalf of
Plaintiff and/or Morita Produce. In all but one specific
contingency matter (the Coldwell Banker litigation), our work
was performed on [an] hourly basis.” The charges Nakahara
incurred “do not include the work performed on [a] contingent fee
basis in the Coldwell Banker litigation.”
The Trial Court’s Ruling
The court denied Cohen’s motion to compel arbitration. In
summarizing the SAC’s allegations regarding the 2017 loan to
Cohen, the court observed that the Agreement was signed in
2018. It noted Cohen’s view that the arbitration clause
encompasses legal services rendered before 2018.
The court wrote that attorney-client arbitration agreements
are strictly scrutinized due to the parties’ fiduciary relationship.
The loan alleged in the SAC “does not arise out of or relate to
Cohen’s legal representation of Nakahara” in the Coldwell case.
The Agreement “did not exist” when Nakahara made the loan
giving rise to her lawsuit and Cohen “fails to explain how an
agreement executed after the alleged incident would be
retroactive.”
Nakahara did not dispute signing the Agreement relating
to her case against Coldwell, but it did not mention her loan to
Cohen. The court concluded, “I simply do not believe that this
arbitration provision could conceivably have involved this alleged
loan.”
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DISCUSSION
1. Appeal and Review
The denial of a motion to arbitrate is an appealable order.
(§ 1294, subd. (a).) “The party seeking arbitration bears the
burden of proving the existence of an arbitration agreement, and
the party opposing arbitration bears the burden of proving any
defense.” (Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC (2012) 55 Cal.4th 223, 236.)
Whether parties must arbitrate is an issue for judicial
determination: Arbitration may be ordered “only where the court
is satisfied that the parties agreed to arbitrate that dispute.”
(Granite Rock Co. v. Int’l Bhd. of Teamsters (2010) 561 U.S. 287,
296, 297 [130 S.Ct. 2847, 177 L.Ed.2d 567]; Moritz v. Universal
City Studios LLC (2020) 54 Cal.App.5th 238, 246 (Moritz).) We
examine the Agreement and the parties’ sworn declarations, not
the unverified pleading, to resolve the issue. (Hotels Nevada v.
L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 762.)
Review is de novo. (Mayhew v. Benninghoff (1997) 53
Cal.App.4th 1365, 1369 (Mayhew).)
2. Cohen Did Not Show that the FAA Applies
Cohen contends that the FAA governs this dispute. Under
the FAA, a provision to arbitrate controversies is “valid,
irrevocable, and enforceable” absent legal or equitable grounds to
revoke the agreement. (9 U.S.C. § 2.) The FAA applies to
contracts “evidencing interstate commerce.” (Perry v. Thomas
(1987) 482 U.S. 483, 489 [107 S.Ct. 2520, 96 L.Ed.2d 246]; Nixon
v. AmeriHome Mortgage Co., LLC (2021) 67 Cal.App.5th 934,
945.) “The party asserting the FAA applies to an agreement has
‘the burden to demonstrate FAA coverage by declarations and
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other evidence.’ ” (Evenskaas v. California Transit, Inc. (2022) 81
Cal.App.5th 285, 292.)
Cohen cited the FAA in his petition, but did not declare
that the Agreement involves interstate commerce; further, the
arbitration clause does not mention the FAA. Cohen did not
carry his burden of demonstrating that the FAA applies.
Accordingly, we analyze this dispute under the CAA, and do not
discuss cases that rely on the FAA.
3. General Principles
“On petition of a party to an arbitration agreement alleging
the existence of a written agreement to arbitrate a controversy
and that a party to the agreement refuses to arbitrate that
controversy, the court shall order the petitioner and the
respondent to arbitrate the controversy if it determines that an
agreement to arbitrate the controversy exists.” (§ 1281.2.) Public
policy favors arbitration as an expedient means of dispute
resolution. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125;
Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.)
The policy favoring arbitration does not extend to all
controversies. “Because the obligation to arbitrate arises from
contract, the court may compel arbitration only if the dispute in
question is one which the parties have agreed to arbitrate.”
(Weeks v. Crow (1980) 113 Cal.App.3d 350, 352; Goldman v.
Sunbridge Healthcare, LLC (2013) 220 Cal.App.4th 1160, 1169.)
Arbitration should be denied if “ ‘it may be said with positive
assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.’ ” (AT&T Techs.,
Inc. v. Communs. Workers of Am. (1986) 475 U.S. 643, 650 [106
S.Ct. 1415, 89 L.Ed.2d 648]; City of Los Angeles v. Superior Court
(2013) 56 Cal.4th 1086, 1096.)
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Attorney-client agreements “ ‘are evaluated at the time of
their making and must be fair, reasonable and fully explained to
the client. Such contracts are strictly construed against the
attorney.’ ” (Severson & Werson v. Bolinger (1991) 235
Cal.App.3d 1569, 1572 (Severson) [hourly fee agreement];
Alderman v. Hamilton (1988) 205 Cal.App.3d 1033, 1037
[contingent fee agreement].) Ambiguities in an engagement
agreement “are to be resolved ‘in favor of the client and against
the attorney.’ ” (M’Guinness v. Johnson (2015) 243 Cal.App.4th
602, 617–618.) “[I]n any transaction in which the attorney is
charged with obtaining an advantage from or of the client, the
advantage is presumed to have been obtained without adequate
consideration and because of undue influence.” (Mayhew, supra,53 Cal.App.4th at p. 1369.)
4. The Parties Did Not Agree to Arbitrate This
Dispute
Nakahara concedes that she signed the 2018 contingency
Agreement containing an arbitration clause but declares that it
governs the specific lawsuit listed in its title and does not apply
to a transaction arising in 2017. We agree.
Nakahara’s alleged loan is evidenced by two 2017 checks
payable to Cohen’s landlord. “The entire $111,902.45 was applied
to multiple client invoices in several legal matters,” Cohen
asserts. Julia Cohen declared that Nakahara was paying for
“legal work performed on [an] hourly fee basis and costs incurred
in and prior to 2017.” Specifically, it did not “include the work
performed on [a] contingent fee basis in the Coldwell Banker
litigation.”
The Cohens have access to Nakahara’s billing records. If,
as they claim, her checks were applied to bills for legal services in
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hourly legal matters in 2016–2017, then the Agreement cannot
apply. The Agreement’s “Scope” is Cohen’s work in Nakahara v.
Coldwell Banker. Checks Nakahara wrote before the Coldwell
case began are not within the scope of the Agreement. Cohen is
impermissibly attempting to rewrite the Agreement to
retroactively include transactions outside its scope.
We cannot construe the Agreement as applying to disputes
over legal services or loans outside the Coldwell case. Given his
fiduciary relationship with Nakahara and his drafting of the
Agreement, any uncertainty is construed against Cohen.
(Severson, supra, 235 Cal.App.3d at p. 1572.) If he wanted the
Agreement to apply to non-Coldwell loan and/or fee disputes, he
had to explicitly write that and explain it to his client. (Mayhew,
supra, 53 Cal.App.4th at p. 1370.) There is no evidence he did so.
No client reading the Agreement would understand that it
applies to any matter except the Coldwell case.
Employment cases cited by Cohen at pages 56–58 of his
brief are inapposite. Instead, we follow the reasoning in Mayhew,
supra, 53 Cal.App.4th at pages 1370–1371, in which the court
held that a broad arbitration clause in an attorney’s engagement
letter to handle a client’s divorce did not apply to the attorney’s
alleged misconduct in a separate investment deal with the client.
The dispute alleged in the SAC does not have “ ‘its real
source’ ” in the Agreement. (Moritz, supra, 54 Cal.App.5th at
p. 246.) Courts cannot order arbitration “simply because the
same parties agreed to arbitrate a different matter.” (Ibid.) The
parties agreed to arbitrate disputes arising from the Coldwell
contingent fee case. Cohen admits that the charges Nakahara
incurred—allegedly paid for with checks attached to the SAC—
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does not include the work performed on a contingent fee basis in
the Coldwell litigation.
The arbitration clause does not apply to a dispute over a
2017 loan or hourly legal fees. This reasoning applies with equal
force to Nakahara’s cause of action for fiduciary duty, which is
not directed at legal services provided in the Coldwell case but
assails Cohen for entering a loan transaction with a client that
created a conflict of interest.
We express no opinion on the merits of the case. A fact
finder must determine if Nakahara’s checks were a loan (as
Nakahara alleges), or if they were payment on an outstanding
balance for hourly legal services rendered in 2016–2017 (as
Cohen claims). We decide only that the Agreement’s arbitration
clause strictly applies to disputes arising in the Coldwell case.
The money at issue in this lawsuit involves either a loan or legal
services rendered before the Coldwell case was filed; therefore,
the dispute is subject to litigation, not arbitration.
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DISPOSITION
The order denying the arbitration petition is affirmed.
Nakahara is entitled to recover her costs on appeal.
NOT TO BE PUBLISHED.
LUI, P. J.
We concur:
ASHMANN-GERST, J.
CHAVEZ, J.
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