Ponist Law Group v. Nationwide Biweekly Admin. CA1/4

Filed 6/1/22 Ponist Law Group v. Nationwide Biweekly Admin. CA1/4
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not
been certified for publication or ordered published for purposes of rule 8.1115.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
FIRST APPELLATE DISTRICT
DIVISION FOUR
PONIST LAW GROUP, P.C.,
et al.,
Plaintiffs and A160798
Respondents,
v. (San Francisco County
Super. Ct. No. CPF 18-
NATIONWIDE BIWEEKLY 516384)
ADMINISTRATION, INC., et
al.,
Defendants and
Appellants.
Nationwide Biweekly Administration, Inc. (NBA); Loan
Payment Administration LLC (LPA; together with NBA,
“Nationwide”); and Daniel S. Lipsky appeal from a trial court
order denying their petition to vacate an arbitration award and
the trial court’s judgment confirming that award. The
arbitration resolved a claim for unpaid legal fees by Ponist Law
Group, P.C. and Sean E. Ponist (together, Ponist), who were
formerly counsel to Nationwide and Lipsky. Nationwide and
Lipsky contend the trial court erred in ruling that they were
properly served with Ponist’s petition to appoint the arbitrator.
Lipsky also argues the trial court erred in failing to vacate the
1
award against him because Ponist’s fee agreement with him was
void for violating public policy. We conclude the trial court
properly denied Nationwide and Lipsky’s petition to vacate the
award and will affirm the judgment.
BACKGROUND1
In 2014, NBA hired Ponist, a two-person law firm, to
represent it in connection with certain government suits against
it. (See, e.g., Nationwide Biweekly Administration, Inc. v.
Superior Court (2020) 9 Cal.5th 279, 294.) Lipsky, who was
NBA’s founder, president, sole officer, and sole shareholder,
signed Ponist’s fee agreement for NBA. (Nationwide Biweekly
Administration, Inc. v. Owen (9th Cir. 2017) 873 F.3d 716, 721,
fn. 1; Consumer Financial Protection Bureau v. Nationwide
Biweekly Administration, Inc. (N.D.Cal., Sept. 8, 2017, No. 15-cv-
02106-RS) 2017 U.S. Dist. LEXIS 145923, at *1.) The fee
agreement includes an arbitration clause that states, “The
parties shall arbitrate any dispute using American Arbitration
Association and the arbitration shall be conducted pursuant to
the provider’s rules. If the parties cannot agree on an arbitrator,
then the Superior Court of the County of San Francisco shall
1 We draw the facts in this matter from the award of the
arbitrator that is at issue, as well as additional evidence the
parties submitted to the trial court in connection with
Nationwide’s petition to vacate the award. (Lindenstadt v. Staff
Builders, Inc. (1997) 55 Cal.App.4th 882, 893, fn. 8
(Lindenstadt).) We grant Ponist’s request for judicial notice of
the commercial arbitration rules of the American Arbitration
Association (AAA). (Boghos v. Certain Underwriters at Lloyd’s of
London (2005) 36 Cal.4th 495, 505, fn. 6 [noticing AAA’s
commercial arbitration rules].)
2
choose an impartial arbitrator whose decision shall be final and
conclusive on all parties.”
Ponist later broadened its representation to include Lipsky,
an Ohio resident, and LPA, which was a wholly-owned subsidiary
of NBA. (Consumer Financial Protection Bureau v. Nationwide
Biweekly Administration, Inc., supra, 2017 U.S. Dist. LEXIS
145923, at *1.) In December 2015, Ponist therefore asked NBA,
LPA, and Lipsky to sign a first addendum to the fee agreement.
Ponist emailed the first addendum to two attorneys for NBA,
telling them that it memorialized the existing representation,
provided a required conflict of interest advisement, and clarified
the scope of services Ponist would provide. Lipsky signed the
first addendum for NBA, LPA, and himself personally.
The first addendum is four pages and includes an
acknowledgement and waiver of conflicts of interest arising from
Ponist’s joint representation of Nationwide and Lipsky. It also
includes the text of former rule 3-310 of the Rules of Professional
Conduct, which at the time governed conflicts of interest in legal
representation.2 The last page of the first addendum consists of a
four-line paragraph of text and then the signature lines. That
paragraph states, “CLIENT HAS READ AND UNDERSTOOD
THE FOREGOING TERMS AND AGREES TO THEM AS OF
THE DATE ATTORNEY FIRST PROVIDED SERVICES. IF
Comprehensive amendments to the Rules of Professional
2
Conduct, which included renumbering of the rules, took effect in
November 2018. (Sheppard, Mullin, Richter & Hampton, LLP v.
J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 85, fn. 7
(Sheppard Mullin).)
3
MORE THAN ONE CLIENT SIGNS BELOW, EACH AGREES
TO BE LIABLE, JOINTLY AND SEVERALLY, FOR ALL
OBLIGATIONS UNDER THIS AGREEMENT.” Ponist copied
this paragraph from a State Bar model fee agreement.
Nationwide suspended operations shortly before Lipsky
signed the first addendum, and its outside counsel withdrew from
representing it due to non-payment of fees. Ponist therefore
asked Nationwide and Lipsky to sign a second addendum
intended to ensure they would pay Ponist’s fees. Like the first
addendum, the second addendum includes a paragraph attesting
that Nationwide and Lipsky agreed to the terms and further
agreed that they would be jointly and severally liable for all of
the fee agreement’s obligations.
Ponist later claimed that Nationwide and Lipsky failed to
pay about $200,000 in fees. In June 2018, Ponist filed a demand
for arbitration with AAA. The parties could not agree on an
arbitrator. In October 2018, Ponist filed a petition in San
Francisco Superior Court to have the court appoint an arbitrator.
Ponist served this petition by mailing it and emailing it to Lipsky
and three different attorneys for Nationwide and Lipsky. A few
days later, Ponist transmitted another copy by overnight delivery
to one of the attorneys for Nationwide and Lipsky and emailed
copies to two of their attorneys. Ponist also had the petition
personally served on Nationwide’s counsel in California and Ohio.
Ponist relied on rule R-43 of AAA’s Commercial Arbitration
Rules, which permits service on a party by mail, personal service,
4
or overnight delivery to the party or its representative, so long as
the party receives a reasonable opportunity to be heard.
Nationwide and Lipsky objected that they had not been
served with the petition by registered or certified mail and that
LPA and Lipsky had not received any notice of the petition. The
trial court ultimately overruled their objections to service and in
January 2019 appointed an arbitrator and two backups.
Nationwide and Lipsky filed a petition for writ of mandate
challenging this order, and we summarily denied it. (Nationwide
Biweekly Administration, Inc. v. Superior Court (Feb. 15, 2019,
A156451) [nonpub. opn.].)
The arbitration was heard in September 2019. Among
other arguments, Lipsky contended he was not personally liable
for Ponist’s fees because the provision making him liable was
slipped into the agreement and he did not know what he was
signing. In January 2020, the arbitrator rejected this and other
arguments, found in Ponist’s favor, and awarded Ponist about
$200,000 in fees and interest.
Nationwide and Lipsky filed a petition to vacate the award
based on improper service of Ponist’s petition to appoint the
arbitrator. Lipsky also argued the award against him was void
because the first addendum violated public policy. More
specifically, Lipsky argued Ponist violated the Rules of
Professional Conduct by failing to disclose the joint and several
liability clause in the first addendum and the conflict of interest
that clause created, and not advising Lipsky of the need to have
independent counsel review the agreement. The trial court
5
denied Nationwide and Lipsky’s petition and entered judgment
confirming the award.
DISCUSSION
The California Arbitration Act (CAA) “is ‘a comprehensive
statutory scheme regulating private arbitration in this state.’
[Citation.] ‘Through this detailed statutory scheme, the
Legislature has expressed a “strong public policy in favor of
arbitration as a speedy and relatively inexpensive means of
dispute resolution.” ’ [Citation.] To effectuate that policy, the
CAA provides that ‘[a] written agreement to submit to arbitration
an existing controversy or a controversy thereafter arising is
valid, enforceable and irrevocable, save upon such grounds as
exist for the revocation of any contract.’ [Citation.] Where, as
here, an arbitrator has issued an award, the decision is ordinarily
final and thus ‘is not ordinarily reviewable for error by either the
trial or appellate courts.’ [Citation.] The exceptions to this rule
of finality are specified by statute. As relevant here, the CAA
provides that a court may vacate an arbitration 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.’ ” (Sheppard Mullin, supra, 6 Cal.5th at
p. 72.)
I. Service of petition to appoint an arbitrator
Nationwide and Lipsky first contend that the trial court
erred by rejecting their argument that Ponist failed to properly
serve Nationwide and Lipsky with the petition to appoint an
arbitrator. Nationwide and Lipsky do not base this argument
6
upon a specific statutory exemption to the finality of the
arbitrator’s award, but we construe it as a contention that the
arbitrator exceeded her powers because she was not properly
appointed to begin with.
Nationwide and Lipsky’s service argument turns on the
terms of the fee agreement and sections 1290 and 1290.4 of the
Code of Civil Procedure3. Section 1290 states that “[a] proceeding
under [the CAA] in the courts of this State is commenced by filing
a petition.” Section 1290.4, subdivision (a) provides, “A copy of
the petition and a written notice of the time and place of the
hearing thereof and any other papers upon which the petition is
based shall be served in the manner provided in the arbitration
agreement for the service of such petition and notice.”
Subdivision (b)(2) of the same section further states, “If the
arbitration agreement does not provide the manner in which such
service shall be made and the person upon whom service is to be
made has not previously appeared in the proceeding and has not
previously been served in accordance with this subdivision:
[¶] . . . [¶] Service outside this State shall be made by mailing the
copy of the petition and notice and other papers by registered or
certified mail. Personal service is the equivalent of such service
by mail. Proof of service by mail shall be made by affidavit
showing such mailing together with the return receipt of the
United States Post Office bearing the signature of the person on
whom service was made. Notwithstanding any other provision of
3Subsequent undesignated statutory citations are to the
Code of Civil Procedure.
7
this title, if service is made in the manner provided in this
paragraph, the petition may not be heard until at least 30 days
after the date of such service.”
The trial court ruled that Ponist properly served
Nationwide and Lipsky by mailing the petition because section
1290.4, subdivision (a) permits service “in the manner provided
in the arbitration agreement,” the fee agreement states that “the
arbitration shall be conducted pursuant to” AAA’s rules, and rule
R-43 of AAA’s rules permits service by mail or personal service on
a party or its representatives for “any court action in connection”
with an arbitration. We agree with this straightforward
application of the relevant authorities.
Nationwide and Lipsky’s argument against the trial court’s
ruling is more intricate. They begin by noting that while the fee
agreement specifies that AAA’s rules govern the arbitration
process, it requires the trial court to appoint an arbitrator if the
parties cannot agree. They point out that AAA rule R-12(b)
states that if the parties cannot agree on an arbitrator, AAA can
appoint an arbitrator. Nationwide and Lipsky argue that by
requiring the trial court to appoint an arbitrator, the fee
agreement imposes a specific provision that conflicts with and
controls over the more general provision in the agreement
requiring the parties to follow AAA’s rules, including rule R-12(b)
for appointing an arbitrator. Nationwide and Lipsky further
argue that the fee agreement provision requiring a trial court to
appoint an arbitrator likewise controls over other general rules
applicable to the same subject of arbitrator appointment, such as
8
rule R-43’s provision for service of process as it relates to a
petition to appoint an arbitrator.
This argument is not persuasive. At the outset, the fee
agreement’s provision requiring the trial court to appoint an
arbitrator when the parties cannot agree on one is consistent
with and does not contradict AAA’s rules. Nationwide and
Lipsky ignore the first sentence of rule R-12, which states that
AAA will appoint an arbitrator when the parties cannot agree on
one only if the parties “have not provided any other method of
appointment.” The fee agreement’s provision requiring a court to
appoint an arbitrator provides another method and is therefore
consistent with AAA’s rules. Contrary to Nationwide and
Lipsky’s argument, it is not a more specific provision that
conflicts with AAA’s general rules.
In addition, while Nationwide and Lipsky are correct that a
specific provision in a contract will control over a general one
(§ 1859), AAA’s rules are more specific in this instance. Rule R-
43 states that its provisions governing service of process apply to
“[a]ny papers, notices, or process necessary or proper for the
initiation or continuation of an arbitration under these rules, for
any court action in connection therewith, or for the entry of
judgment on any award made under these rules.” (Italics added.)
The question here concerns service of a document in a court
action connected with an arbitration, so rule R-43 directly
controls. There is no basis for reading the fee agreement’s
appointment provision as impliedly extending to service of
9
process when AAA’s rules, which the fee agreement makes
applicable, already address the issue.
Citing Cable Connection, Inc. v. DIRECTV, Inc. (2008)
44 Cal.4th 1334, 1350, fn. 12, Nationwide and Lipsky argue that
our Supreme Court has prohibited arbitration agreements from
imposing on court proceedings outside of the arbitration those
conditions that were agreed upon within the arbitration.
Nationwide and Lipsky misread the case on which they rely.
Cable Connection Inc. expressly declined to consider whether a
contract could require judicial review of an arbitration award to
be governed by the Federal Arbitration Act rather than the CAA,
holding that the appellant there failed to raise the argument in
the trial court. (Ibid.)
Nationwide and Lipsky also raise several subsidiary
arguments related to service, but none requires much discussion.
They argue they did not knowingly waive their rights under
section 1290.4, subdivision (b)(2) to service of process by certified
or registered mail and 30 days’ time to respond. But they signed
the fee agreement, which incorporated by reference AAA’s rules
for service, so they did waive their rights under the statute.
Relatedly, they argue that Mercuri v. Ligar (1964)
225 Cal.App.2d 240, 241 requires a fee agreement to “expressly”
identify the manner of service rather than incorporate rule R-
43(a)’s definition of service. Mercuri stated only that the contract
there did not address service, so the statutory rules for service
controlled. (Ibid.) Mercuri gave no indication that the contract
incorporated by reference an arbitrator’s rules for service, so the
10
court could not have held such incorporation was insufficient.
(Ibid.)
Nationwide and Lipsky contend the trial court improperly
required them to prove the absence of a waiver rather than
requiring Ponist to prove a waiver. The trial court noted that
Nationwide and Lipsky had failed to point to any rules that
might apply other than rule R-43, but it did so only after Ponist
had argued that rule R-43 applied and the trial court had given
Nationwide and Lipsky an opportunity to respond. The trial
court did not improperly shift the burden.
Finally, Nationwide and Lipsky argue the improper service
of process means the trial court did not have personal jurisdiction
over them. Aside from the fact that service was proper, service
was not necessary to establish personal jurisdiction here. “When
parties agree to California arbitration, they consent to submit to
the personal jurisdiction of California courts to enforce the
agreement and any judgment under section 1293.” (Rockefeller
Technology Investments (Asia) VII v. Changzhou SinoType
Technology Co., Ltd. (2020) 9 Cal.5th 125, 144.) Personal
jurisdiction is therefore not at issue here.4
4 In its reply brief, Nationwide and Lipsky argue for the
first time that even if rule R-43(a) governs here, service was
improper because that rule only allows service by mail on the
party or its representative if the recipient has a “reasonable
opportunity to be heard.” They assert that the 10 days they
received to respond to Ponist’s petition to appoint an arbitrator
was unreasonable because it is less than the 30 days set in
section 1290.4, subdivision (b)(2). They forfeited this argument
by failing to raise it in their opening brief, and we will not
11
II. Lipsky’s personal liability for fees
Lipsky argues the award against him personally must be
vacated because his fee agreement with Ponist violated the Rules
of Professional Conduct and is therefore voidable. He also argues
the trial court erred when it considered the agreement’s legality
by deferring to the arbitrator’s factual findings instead of
independently examining the evidence.
As noted ante, the exceptions to the finality of an
arbitration award that permit the vacation of the award are set
by statute and include the situation 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); Sheppard Mullin, supra,
6 Cal.5th at p. 72.) “[T]he excess-of-authority exception applies,
and an arbitral award must be vacated, when a court determines
that the arbitration has been undertaken to enforce a contract
that is ‘illegal and against the public policy of the state.’ ”
(Sheppard Mullin, at p. 73.) Public policy for these purposes
includes the Rules of Professional Conduct that govern attorney
fee agreements, so a “violation of a Rule of Professional Conduct
in the formation of a contract can render the contract
unenforceable as against public policy.” (Id. at pp. 73–74, 87.)
However, “the case law does not establish” and the Supreme
Court has not held “that an attorney-services contract may be
declared illegal in its entirety simply because it contains a
address it. (Dameron Hospital Assn. v. AAA Northern California,
Nevada & Utah Ins. Exchange (2022) 77 Cal.App.5th 971, 982.)
12
provision that conflicts with an attorney’s obligations under the
Rules of Professional Conduct.” (Id. at p. 79.) “It is only when
‘the illegality taints the entire contract’ that courts may declare
‘the entire transaction is illegal and unenforceable.’ ” (Id. at
p. 80.)
A trial court must independently review a claim that an
arbitration award based on a contract should be vacated because
the entire contract is illegal and unenforceable. (Lindenstadt,
supra, 55 Cal.App.4th at pp. 888–889, 893.) The trial court
“should consider all of the admissible evidence submitted to it
regardless of whether that evidence was before the arbitrator,” as
well as “the arbitration award itself, including the testimony and
other evidence described therein.” (Id. at p. 893, fn. 8.) An
appellate court independently reviews a trial court’s ruling on
illegality of the contract but applies the substantial evidence test
to any rulings on disputes of fact the trial court may have made.
(Id. at p. 892, fn. 7.)
Lipsky contends the trial court improperly deferred to the
arbitrator’s factual findings that he signed the fee agreement and
that Ponist sent the agreement to Nationwide’s counsel to review.
Lipsky is correct that the trial court should have conducted an
independent review of the evidence regarding illegality, rather
than deferring to the arbitrator’s factual rulings as it appears to
have done. (Lindenstadt, supra, 55 Cal.App.4th at pp. 888–889.)
But the trial court’s improper deference to the arbitrator did not
affect the result in this case. The record shows that Ponist sent
the first and second addenda to Nationwide’s counsel for review
13
and Lipsky signed them. Lipsky never argues that the
arbitrator’s findings were incorrect or cites any evidence to
contradict them. Moreover, even if we accept Lipsky’s argument
that the inclusion of the joint and several liability provision in
the fee agreement violated the Rules of Professional Conduct,
Lipsky has not shown that the inclusion of the provision would
make the fee agreement unenforceable in its entirety.5
Lipsky contends the provisions in the first and second
addenda making Nationwide and Lipsky jointly and severally
liable for Ponist’s fees violated former rule 3-310 of the Rules of
Professional Conduct. That rule governed conflicts of interest
and prohibited an attorney from accepting or continuing
representation of more than one client in which the interests of
the clients potentially or actually conflicted without obtaining the
clients’ informed consent. Lipsky also cites former rule 3-500,
which required an attorney to keep a client reasonably informed
about significant developments relating to the representation.
He argues that Ponist violated these provisions by
5 The trial court denied Lipsky’s petition to vacate the
arbitration award because the award did not violate Lipsky’s
unwaivable statutory rights. Lipsky argues the trial court should
have found the fee agreement was unenforceable for violating
public policy in the form of the Rules of Professional Conduct.
These appear to be separate exceptions to the finality of
arbitration awards. (Sheppard Mullin, supra, 6 Cal.5th at
pp. 77–78 [describing the statutory rights exception as a
“different subject” from the public policy exception]; but see
Cotchett, Pitre & McCarthy v. Universal Paragon Corp. (2010)
187 Cal.App.4th 1405, 1417, fn. 1 [seeing “some overlap” between
the exceptions].) Because Lipsky limits his argument here to the
public policy exception, so do we.
14
misrepresenting the first addendum as addressing only conflicts
of interest and the second as modifying retainer deposits and an
attorney’s hourly rate, without disclosing that both made the
clients jointly and severally liable for all fees, including those pre-
dating the execution of the addenda. Lipsky contends the joint
and several liability provision created an actual, undisclosed
conflict of interest between Nationwide and Lipsky, as well as
between Ponist and the clients, and deprived Lipsky of
unspecified “disclosure[s] about his corporate indemnity rights.”
Lipsky also faults Ponist for not explaining any of this to him.
We will assume for the sake of argument that Lipsky is
correct that Ponist violated the former Rules of Professional
Conduct by including the joint and several liability provision in
the fee agreement. But, as noted previously, our Supreme Court
has made clear that a violation of the Rules of Professional
Conduct is not always grounds to declare an entire contract
unenforceable. (Sheppard Mullin, supra, 6 Cal.5th at pp. 79–80.)
Rather, “[i]t is only when ‘the illegality taints the entire contract’
that courts may declare ‘the entire transaction is illegal and
unenforceable.’ ” (Id. at p. 80.) The violation of the former Rules
of Professional Conduct identified by Lipsky does not render the
entire fee agreement illegal.
Sheppard Mullin held that a law firm’s failure to disclose
and obtain consent to an actual conflict of interest between
current clients made the firm’s fee agreement unenforceable in
its entirety because the “transaction . . . undermined an ethical
rule designed for the protection of the client as well as for the
15
preservation of public confidence in the legal profession.”
(Sheppard Mullin, supra, 6 Cal.5th at p. 87.) The court cited two
cases in which courts refused to enforce fee-sharing agreements
between lawyers because the purpose of the agreements violated
Rules of Professional Conduct requiring the client’s informed
consent. (Ibid., citing Chambers v. Kay (2002) 29 Cal.4th 142,
159 and Altschul v. Sayble (1978) 83 Cal.App.3d 153, 164.)
By contrast, Sheppard Mullin cited several cases in which
the Supreme Court had held that violations of the Rules of
Professional Conduct did not preclude enforcement of a contract
as a whole. (Sheppard Mullin, supra, 6 Cal.5th at pp. 79–80.)
Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 30, 32–33
(Moncharsh) held that a fee-splitting provision in an employment
agreement between a lawyer and law firm did not make the
entire contract unenforceable so as to defeat an arbitration award
based on the contract. Birbrower, Montalbano, Condon & Frank
v. Superior Court (1998) 17 Cal.4th 119, 137–139 (Birbrower)
held that a law firm could enforce its fee agreement for services
performed in New York, even though it could not obtain fees
under the agreement for work performed in California in
violation of the statutory bar on the unauthorized practice of law.
Calvert v. Stoner (1948) 33 Cal.2d 97, 103–105 (Calvert) held that
a provision in a fee agreement preventing the client from settling
without the lawyer’s consent did not prevent the lawyer from
enforcing the rest of the fee agreement.
The joint and several liability provision at issue here is
more similar to the violations found not to invalidate entire
16
contracts in Moncharsh, Birbrower, and Calvert than the actual
conflict of interest between the firm’s two current clients that
resulted in the invalidation of the entire agreement in Sheppard
Mullin. The provision did not create an actual conflict of interest
between Nationwide and Lipsky like the clients in Sheppard
Mullin because there is no evidence that the provision made
either Lipsky or Nationwide liable for fees they would not
otherwise have owed. It appears Nationwide paid all of Ponist’s
fees until the end of the representation in 2017, so there was no
retroactive liability. Ponist’s work for Nationwide also appears to
have overlapped completely with its work for Lipsky. Lipsky was
the founder, president, sole officer, and sole shareholder of NBA.
(Nationwide Biweekly Administration, Inc. v. Owen, supra,
873 F.3d at p. 721, fn. 1; Consumer Financial Protection Bureau
v. Nationwide Biweekly Administration, Inc., supra, 2017 U.S.
Dist. LEXIS 145923, at *1.) LPA is a wholly-owned subsidiary of
NBA, and Lipsky served as LPA’s managing member. (Ibid.)
Lipsky was named personally in at least two of the lawsuits
against Nationwide. (Ibid.; Nationwide Biweekly Administration,
Inc. v. Superior Court of Alameda County, supra, 9 Cal.5th at
p. 294.) Lipsky was alleged in at least one suit to be Nationwide’s
alter ego, making those claims against Nationwide equivalent to
claims against him. (Nationwide Biweekly Administration, Inc. v.
Superior Court of Alameda County, supra, 9 Cal.5th at p. 294.)
Given the commonality of interest between Lipsky and
Nationwide and their roles in the litigation, it is logical to assume
that Ponist’s work applied equally to all three clients. Lipsky
17
certainly has not offered any evidence that Ponist’s work for
Nationwide was separate from its work for him, despite Ponist
raising this issue in its respondent’s brief.
The joint and several liability provision may have
advantaged Ponist relative to Lipsky to the extent that it
prevented Lipsky from using Nationwide’s insolvency to avoid
liability for Ponist’s fees. But unlike in Chambers v. Kay and
Altschul v. Sayble, where the entire object of the agreements
between attorneys to split fees was illegal, the joint and several
liability provision did not make the entire object of Ponist’s fee
agreement illegal. As with the fee-splitting provision in
Moncharsh and the consent to settlement provision in Calvert v.
Stoner, Ponist’s ability to invoke the provision in a potential
insolvency scenario did not affect the substance of Ponist’s work
on a day-to-day level while its representation of Nationwide and
Lipsky continued. The provision did not affect Ponist’s loyalty to
Lipsky and Nationwide relative to each other or any third
parties, nor did it call into question the value of the services
Ponist provided. The provision also does not appear to have been
inserted in bad faith, notwithstanding Lipsky’s allegation that
Ponist did not raise it to his attention, since model fee
agreements published by the State Bar contained an identical
provision. The joint and several liability provision is mentioned
in neither the instructions for the model fee agreement nor the
related model disclosure for conflicts of interest arising from joint
representation.
18
Lipsky cites several cases that he claims support the
proposition that a violation of an attorney’s disclosure obligations
under the Rules of Professional Conduct renders a fee agreement
voidable at the client’s election, but his reliance on these cases is
misplaced. Pringle v. La Chapelle (1999) 73 Cal.App.4th 1000,
1005–1006, held, consistent with the Supreme Court’s later
holding in Sheppard Mullin, that a violation of the Rules of
Professional Conduct does not automatically make a fee
agreement voidable. Pringle further construed Supreme Court
precedent as suggesting that “there must be a serious violation of
the attorney’s responsibilities before an attorney who violates an
ethical rule is required to forfeit fees.” (Id. at p. 1006.) Pringle
declined to hold the fee agreement there entirely unenforceable
because the client had not provided a sufficient record to
demonstrate whether the attorney’s violation was serious. (Ibid.)
Pringle is consistent with our conclusion that Lipsky has not
shown that Ponist’s alleged violation of the Rules of Professional
Conduct was serious enough to invalidate the entire fee
agreement.
Fair v. Bakhtiari (2011) 195 Cal.App.4th 1135, 1142–1144
is factually distinguishable, as the attorney’s conduct there was
“fundamentally at war” with the rules prohibiting attorneys from
entering into business dealings with their clients without
disclosure and consent. (Id. at p. 1169.) BGJ Associates v.
Wilson (2003) 113 Cal.App.4th 1217, 1226 is similarly inapposite.
The attorney in that case violated the Rules of Professional
Conduct by forming a joint venture with a client to buy a
19
property, and the joint venture was “inextricably intertwined”
with the attorney’s representation of the client in a suit to obtain
a prescriptive easement on the same property. (Ibid.) In both of
these cases, the attorneys’ conduct amounted to undue influence
over their clients. (Fair, at pp. 1155–1156; BGJ, at p. 1228.) By
comparison, the joint and several liability provision did not affect
Ponist’s entire relationship with Lipsky or Nationwide, nor did it
constitute undue influence. It merely created the potential for a
conflict over who would pay Ponist’s fees if Nationwide were
unable or if Ponist performed some work that was not equally for
the benefit of all the clients (only the former of which came to
pass).
Because Ponist’s asserted violation of the Rules of
Professional Conduct with respect to the joint and several
liability provision did not infect the entire fee agreement between
Ponist and Lipsky, the fee agreement as a whole is not invalid. It
therefore follows that the trial court correctly denied Lipsky’s
motion to vacate the arbitration award against Lipsky based on
the fee agreement. This is so even though the arbitrator enforced
the agreement against Lipsky personally, thereby perhaps
enforcing the same provision Lipsky contends is in violation of
the Rules of Professional Conduct.6 If a contract as a whole is
We say “perhaps” because Lipsky has not shown that the
6
joint and several liability provision was necessarily the basis for
the arbitrator’s joint and several award against him and
Nationwide. Because Ponist’s work appears to have been equally
for the benefit of Lipsky and Nationwide, Lipsky may have been
liable for all of Ponist’s fees even in the absence of the joint and
several liability clause.
20
valid, then judicial review of an arbitrator’s resolution of an
argument that a clause of the contract is illegal is unavailable,
even if an arbitrator makes errors of fact or law that cause
substantial injustice to the parties. (Moncharsh, supra, 3 Cal.4th
at pp. 6, 32–33; Cotchett, Pitre & McCarthy v. Universal Paragon
Corp., supra, 187 Cal.App.4th at pp. 1417, fn. 1, 1418 [refusing to
review arbitrator’s award of an allegedly unconscionable fee
under fee agreement].)
DISPOSITION
The judgment is affirmed.
BROWN, J.
WE CONCUR:
STREETER, ACTING P. J.
NADLER, J.
Ponist Law Group, P.C., et al. v. Nationwide Biweekly Administration, Inc., et al.
(A160798)

Judge of the Superior Court of California, County of
Sonoma, assigned by the Chief Justice pursuant to article VI,
section 6 of the California Constitution.
21