The Second District holds that a law firm’s arbitration demand was effective to invoke the arbitration clause in its retainer agreement with its client despite the fact the firm did not file a superior court action to compel arbitration within 30 days of the issuance of a non-binding arbitration award under the MFAA.
Bernard Rosenson signed a retainer agreement with the law firm of Greenberg Glusker Fields Claman & Machtinger LLC (Greenberg Glusker). The agreement provided for arbitration of fee disputes before a retired judge or justice in Los Angeles County. After a fee dispute arose, Rosenson requested nonbinding arbitration before the Beverly Hills Bar Association pursuant to the Mandatory Fee Arbitration Act (“MFAA”). Within 30 days of the arbitrators’ nonbinding arbitration award in favor of the client, Greenberg Glusker filed a demand for binding arbitration of the dispute under the retainer agreement with the Judicial Arbitration and Mediation Services (“JAMS”).
Rather than participate in binding arbitration, the client filed a petition to confirm the award. Greenberg Glusker opposed the petition, arguing it had exercised its contractual right to arbitration by filing a demand with JAMS within 30 days of the nonbinding award. Rosenson argued that the nonbinding award had become final because Greenberg Glusker’s written demand to JAMS did not constitute the filing of an action within 30 days of the nonbinding award, as it contemplated no court proceedings. The trial court granted the petition confirming the award, ruling that Greenberg Glusker’s filing of the demand for arbitration was not the filing of an action under the MFAA.
The Court of Appeal reversed and held that if the parties have agreed in writing to binding arbitration, a demand for arbitration within 30 days of service of the MFAA award is a proceeding that prevents the finality of the MFAA award. Rosenson’s contention that an action to compel arbitration in superior court is the only method of preventing an award under the MFAA from becoming final was inconsistent with the California Supreme Court’s determination that binding contractual arbitration is an alternative, acceptable form of dispute resolution. Moreover, Greenberg Glusker could not state a cause of action to compel arbitration in a superior court at the time it filed its demand for arbitration because Rosenson had not yet refused to arbitrate. Thus, Rosenson’s argument would have required Greenberg Glusker to file a meritless action to compel arbitration before Rosenson had refused to arbitrate. In conclusion, because Greenberg Glusker had a contractual right to arbitrate and invoked that right in a traditional way, the trial court should have denied the motion to confirm the nonbinding award in favor of Rosenson because binding arbitration under the retainer agreement remained unresolved.
Comment: This case is important for all attorney as it clarifies that a nonbinding arbitration award under the MFAA will not become binding so long as the attorney invokes its contractual right to arbitrate within 30 days of the award.