# The Estate of Aleida Arce v. Panish Shea & Boyle LLP

> District Court, S.D. California · November 20, 2019

URL: https://www.frixlaw.com/law-library/cases/10079992

## Case

- **Court:** District Court, S.D. California
- **Decided:** November 20, 2019
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10079992

## How later opinions describe it (automated extraction)

- holding that if the making of the arbitration 6 agreement is an issue “the federal court may proceed to adjudicate it”
- holding that courts shall order a stay 4 || of judicial proceedings “pending compliance with a contractual arbitration clause’’

## Opinion text

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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
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11 THE ESTATE OF ALEIDA ARCE, by Case No.: 19-cv-0500 AJB
and through its Successor in Interest,
12 ORDER:
MARIA HERNANDEZ HUERTA, et al.,

13 Plaintiffs,
(1) GRANTING DEFENDANT’S
14 v. MOTION TO COMPEL
ARBITRATION (Doc. No. 6); AND
15 PANISH SHEA & BOYLE LLP,

Defendant.
16 (2) DENYING DEFENDANT’S
MOTION TO DISMISS AS MOOT
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(Doc. No. 5)
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19 Presently before the Court is Defendant Panish Shea & Boyle LLP’s (“Defendant”)
20 motion to compel arbitration, (Doc. No. 6) and motion to dismiss for failure to state a claim,
21 or in the alternative, motion to strike punitive damages from Plaintiffs’ complaint, (Doc.
22 No. 5). The motions were fully briefed on May 22, 2019. Having reviewed the parties’
23 arguments and controlling legal authority, and pursuant to Civil Local Rule 7.1.d.1, the
24 Court finds the matter suitable for decision on the papers and without oral argument. For
25 the reasons set forth below, the Court GRANTS Defendant’s motion to compel arbitration
26 and DENIES AS MOOT Defendant’s motion to dismiss. Furthermore, the Court STAYS
27 these proceedings pending the outcome of any arbitration.
28 //
1 I. BACKGROUND
2 This case involves claims for legal malpractice against Defendant Panish Shea &
3 Boyle LLP, a personal injury law firm located in Los Angeles, California. (Doc. No. 1-2,
4 Complaint “Compl.” ¶ 1.)
5 On February 3, 2013, Plaintiff Victoria Arce and her mother, Aleida Arce
6 (“Decedent”) were traveling on a tour bus on California State Route 38 near Yucaipa,
7 California. (Id. at ¶ 2.) The tour bus was owned and operated by Interbus Tours and Charter
8 and Scapadas Magicas, LLC. (Id.) On the last leg of the trip, the bus driver lost control of
9 the bus, careened into other vehicles, crossed the center divider, collided with an oncoming
10 truck, before rolling over and coming to a rest in the middle of the roadway. (Id.) During
11 the accident, passengers were ejected from the bus. (Id.) Decedent suffered fatal blunt force
12 injuries. Plaintiff Victoria Arce suffered blunt force trauma to her head and sustained
13 severe injuries. (Id.)
14 Defendant pursued and settled a case in state court on Plaintiffs’ behalf. (Id. at ¶ 3.)
15 Plaintiffs’ case in state court included causes of action for wrongful death, a survival action,
16 and a personal injury claim by Plaintiff Victoria Arce. (Id.) After settlement of the state
17 court case, Plaintiffs filed another separate lawsuit, alleging that Defendant failed to file,
18 pursue, or settle a case in federal court on Plaintiffs’ behalf. (Id. at ¶ 4.) Specifically,
19 Plaintiffs assert two causes of action for professional negligence and for breach of fiduciary
20 duty. Plaintiffs contend that a federal case should have been filed because the bus was
21 regulated, overseen, inspected, and certified by the United States Department of
22 Transportation, Federal Motor Carrier Safety Administration (“FMCSA”). (Id.) Plaintiffs
23 claim FMCSA failed to properly inspect the bus, and issued a satisfactory rating to the bus
24 in violation of its duties and procedures. (Id.) Instead of pursuing a claim in federal court,
25 Plaintiffs allege Defendant allowed the statute of limitations on the federal claim to run,
26 even though the attorneys considered the claim, and knew that at least one other lawyer
27 representing another passenger in the accident was pursuing such a federal claim. (Id. at ¶
28 5.)
1 Plaintiffs filed their legal malpractice action in San Diego Superior Court on January
2 15, 2019. (Compl.) Defendants removed to this Court on March 15, 2019. (Doc. No. 1.)
3 On April 3, 2019, Defendant filed: (1) a motion to dismiss for failure to state a claim, or in
4 the alternative, motion to strike punitive damages from Plaintiffs’ complaint (Doc. No. 5),
5 and (2) a motion to compel arbitration (Doc. No. 6.) The motions were fully briefed on
6 May 22, 2019. This order follows.
7 II. REQUEST FOR JUDICIAL NOTICE
8 Federal Rule of Evidence 201 states that a “court may judicially notice a fact that is
9 not subject to reasonable dispute because it: (1) is generally known within the trial court’s
10 territorial jurisdiction; or (2) can be accurately and readily determined from sources whose
11 accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). Courts routinely take
12 judicial notice of documents filed on public court dockets under Rule 201(b). See Porter v.
13 Ollison, 620 F.3d 952, 954–55 n.1 (9th Cir. 2010) (“Judicial notice is taken of court dockets
14 in the state court proceedings.”); Qualcomm, Inc. v. Motorola, Inc., 185 F.R.D. 285, 286
15 nn.2–3 (S.D. Cal. 1999). A court has authority to take judicial notice that certain
16 proceedings occurred, but a court may not take “judicial notice of disputed facts stated in
17 public records.” Perdue v. Rodney Corp., No. 13CV2712-GPC BGS, 2014 WL 3726700,
18 at *4 (S.D. Cal. July 25, 2014).
19 Defendant requests the Court take judicial notice of documents filed in the previous
20 state court litigation. (Doc. No. 14-1.) Defendant requests judicial notice of two
21 documents—an Amended Petition for Compromise of Plaintiff Victoria Arce, and an
22 Amended Order Approving Compromise of Minor, both filed in the state court matter,
23 Morales et al. v Scapadas Magicas et al., San Bernardino Superior Court, Case No.
24 CIVDS1301868. Because these documents are part of the state court docket, the Court
25 GRANTS Defendant’s request to take judicial notice of both documents. See Porter, 620
26 F.3d at 954–55 n.1.
27 //
28 //
1 III. LEGAL STANDARD
2 A. Motion to Compel Arbitration
3 The Federal Arbitration Act (“FAA”) governs the enforcement of arbitration
4 agreements involving interstate commerce. See 9 U.S.C. § 2. Pursuant to § 2 of the FAA,
5 an arbitration agreement is “valid, irrevocable, and enforceable, save upon such grounds
6 as exist at law or in equity for the revocation of any contract.” Id. The FAA permits “[a]
7 party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a
8 written agreement for arbitration [to] petition any United States district court . . . for an
9 order directing that such arbitration proceed in the manner provided for in [the]
10 agreement.” Id. § 4.
11 Given the liberal federal policy favoring arbitration, the FAA “mandates that district
12 courts shall direct parties to proceed to arbitration on issues as to which an arbitration
13 agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985).
14 Thus, in a motion to compel arbitration, the district court’s role is limited to determining
15 “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement
16 encompasses the dispute at issue.” Kilgore v. KeyBank Nat’l Ass’n, 673 F.3d 947, 955–56
17 (9th Cir. 2012) (citing Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130
18 (9th Cir. 2000)). If these factors are met, the court must enforce the arbitration agreement
19 in accordance with its precise terms. Id.
20 While generally applicable defenses to contract, such as fraud, duress, or
21 unconscionability, may invalidate arbitration agreements, the FAA preempts state law
22 defenses that apply only to arbitration or that derive their meaning from the fact that an
23 agreement to arbitrate is at issue. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339
24 (2011). There is generally a strong policy favoring arbitration, which requires any doubts
25 to be resolved in favor of the party moving to compel arbitration. Moses H. Cone Mem.
26 Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983). However, where a party
27 challenges the existence of an arbitration agreement, “the presumption in favor of
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1 arbitrability does not apply.” Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 742
2 (9th Cir. 2014).
3 IV. DISCUSSION
4 A. Motion to Compel Arbitration
5 1. Whether a Valid Agreement to Arbitrate Exists
6 As a preliminary matter, the Court must first resolve the issue of whether there was
7 a valid agreement to arbitrate. Defendant moves for arbitration, arguing that Plaintiffs’ fee
8 agreement with Defendant contained a valid arbitration clause, and Plaintiffs’ causes of
9 action for professional negligence and breach of fiduciary duty fall within the scope of the
10 arbitration agreement. (Doc. No. 6-1 at 4–5.) In opposition, Plaintiffs mount two
11 arguments. First, Plaintiffs contend that the fee agreement is unenforceable and voidable
12 because Defendant never presented Plaintiffs with a mutually executed contract at the time
13 the contract was entered into. (Doc. No. 10-3 at 6.) Second, as an alternative ground,
14 Plaintiff argues the contract was never formed in the first place because while Plaintiffs
15 apparently signed the fee agreement, Defendant never signed the agreement until this
16 litigation. (Id.) However, Defendant replies that the issue of whether the retainer is voidable
17 is a question that should be saved for the arbitrator, and in any event, there was a binding
18 agreement to arbitrate because Plaintiffs signed the retainer and paid Defendant for their
19 legal representation through settlement. (Doc. No. 15 at 2–7.) Given the facts of this matter,
20 the Court is faced with three different tasks: (1) assessing whether the question of contract
21 formation or voidability should be left to an arbitrator; (2) determining if a contract was
22 ever formed; and (3) determining whether a contract to arbitrate specifically exists. The
23 Court will address each issue in turn.
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a. Whether the Question of Contract Formation or Voidability Should
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Be Left to an Arbitrator
26 Before the Court addresses the issue of whether there was an arbitration agreement,
27 the Court must first turn to whether that task belongs to an arbitrator or should remain with
28 this Court. The FAA governs the question of who must decide issues of arbitrability. Under
1 the FAA, a district court must compel arbitration if the parties have agreed to arbitrate their
2 dispute. 9 U.S.C. §§ 2, 3 (1988). However, if the validity of the agreement to arbitrate is in
3 issue, a district court—and not a panel of arbitrators—must decide if the arbitration clause
4 is enforceable against the parties. Id. § 4; see also Prima Paint Corp. v. Flood & Conklin
5 Mfg. Co., 388 U.S. 395, 403–04 (1967) (holding that if the making of the arbitration
6 agreement is an issue “the federal court may proceed to adjudicate it”). Put simply, parties
7 cannot be forced to arbitrate if they have not agreed to do so. Volt Info. Sciences, Inc. v.
8 Board of Trustees, 489 U.S. 468, 478 (1989). Thus, “the first task of a court asked to
9 compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that
10 dispute.” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626
11 (1985).
12 Here, Plaintiffs assert two alternative grounds in an attempt to avoid arbitration.
13 First, Plaintiffs allege that no contract was ever formed. (Doc. No. 10-3 at 9.) And second,
14 Plaintiffs argue that even if a contract was formed, it is voidable under California Business
15 and Professions Code section 6147 because Plaintiffs were not provided with a fully signed
16 copy of the retainer agreement. (Id.) The Court must determine if either question is
17 appropriate for the Court to resolve.
18 Defendant cites to Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 446
19 (2006) for the proposition that “unless the challenge is to the arbitration clause itself, the
20 issue of the contract’s validity is considered by the arbitrator in the first instance.” (Doc.
21 No. 15 at 3.) In Buckeye, the Supreme Court explained that challenges to the validity of
22 arbitration agreements can be divided into two types—“one type challenges specifically
23 the validity of the agreement to arbitrate” and the “other challenges the contract as a whole,
24 either on a ground that directly affects the entire agreement (e.g., the agreement was
25 fraudulently induced), or on the ground that the illegality of one of the contract’s provisions
26 renders the whole contract invalid.” Buckeye, 546 U.S. 440 at 444. The Court ultimately
27 concluded that the matter involved the second type of challenge, and held that the issue of
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1 a contract’s validity is a question for the arbitrator. Id. at 446. But in Buckeye, the Court
2 specifically clarified:
3 The issue of the contract’s validity is different from the issue whether of any
agreement between the alleged obligor and obligee was ever concluded. Our
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opinion today addresses only the former, and does not speak to the issue
5 decided in the cases cited by respondents (and by the Florida Supreme Court),
which hold that it is for courts to decide whether the alleged obligor ever
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signed the contract.
7 Id. at 444 n.1 (emphasis added and citations omitted). As such, the Court drew a distinction
8 between instances where the claims were that an entire contract was agreed to but rendered
9 invalid, and instances where the claim is the agreement was never concluded in the first
10 place. Accordingly, the Court finds Buckeye inapplicable to Plaintiffs’ challenge that the
11 contract was never concluded.
12 Furthermore, in Granite Rock Co. v. International Brotherhood of Teamsters, 561
13 U.S. 287 (2010), the Supreme Court expressly stated that it is “well settled that where the
14 dispute at issue concerns contract formation, the dispute is generally for courts to decide.”
15 Id. at 2855–56 (emphasis added). Here, Plaintiffs explicitly “asserts the purported
16 Agreement was never formed.” (Doc. No. 10-3 at 16.) Thus, the Court holds that the
17 threshold issue of whether a contract was ever formed is for this Court to resolve. See Three
18 Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1140–41 (9th Cir. 1991)
19 (“[A] party who contests the making of a contract containing an arbitration provision
20 cannot be compelled to arbitrate the threshold issue of the existence of an agreement to
21 arbitrate. Only a court can make that decision.”).
22 However, Plaintiffs’ other ground in resisting arbitration is a different story.
23 Plaintiffs argue the retainer agreement is unenforceable and voidable as a matter of law
24 because California Business and Professions Code section 6147, regulating contingent fee
25 agreements, requires not only that a law firm sign its contracts; but that the mutually
26 executed agreement be provided to the client. Failure to do so, Plaintiffs assert, renders the
27 contingent fee agreement voidable at the option of the client. (Doc. No. 10-3 at 16–17.)
28 Defendant points out, “no authority stands for the proposition asserted by Plaintiffs that a
1 purported failure to comply with Section 6147’s requirements imposed on contingency fee
2 agreements provides the client with a right to void the retainer agreement as a whole,
3 including provisions therein unrelated to payment of attorney fees.” (Doc. No. 15 at 3
4 (emphasis in original).) To the extent Plaintiffs argue that an agreement was formed but
5 seeks to void the contract, that question falls within the purview of Buckeye, as it goes to a
6 contract’s validity, and is an issue reserved for an arbitrator. See also Three Valleys Mun.
7 Water Dist., 925 F.2d 1136, 1140–41 (9th Cir. 1991) (“If the dispute is within the scope of
8 an arbitration agreement, an arbitrator may properly decide whether a contract is ‘voidable’
9 because the parties have agreed to arbitrate the dispute.”).
10 In conclusion, the Court holds that the question of whether a contract was ever
11 formed is a question for this Court to adjudicate. However, this Court will save the issue
12 of whether the contract was voidable for an arbitrator.
13 b. Whether a Contract Was Formed
14 Having determined that this Court is the appropriate forum to adjudicate the issue of
15 contract formation, the Court now turns to whether there was indeed an agreement formed.
16 Plaintiffs contend that no agreement existed in the first instance because Defendant never
17 signed the retainer agreement to establish the attorney-client relationship. (Doc. No. 10-3
18 at 18.) Under California law, “a contract is invalid if not signed by all parties purportedly
19 bound [o]nly when it is shown, either by parol or express condition, that the contract was
20 not intended to be complete until all parties had signed.” Croshal v. Aurora Bank, F.S.B.,
21 No. C 13-05435 SBA, 2014 WL 2796529, at *5 (N.D. Cal. June 19, 2014) (emphasis
22 added) (quoting Angell v. Rowlands, 85 Cal. App. 3d 536, 542 (1978)). The Court first
23 notes that the agreement does not contain an express condition providing that it is not
24 complete until all parties have signed it. Indeed, the retainer agreement plainly provides as
25 a condition, “[t]his Agreement will not take effect and Attorney will have no obligation to
26 provide legal services, until Client returns a signed copy of this Agreement.” (Doc. No. 6,
27 Exhibit 1 at 4.) This is what happened here as Plaintiffs returned a signed retainer
28 agreement to Defendant. (Id.) Additionally, California law provides that “in the absence of
1 a showing that the contract is not intended to be complete until signed by all parties, the
2 parties who did sign will be bound.” See Croshal, 2014 WL 2796529, at *5; see also Cal.
3 Civ. Code § 3388 (party who has signed a written contract may be compelled to specifically
4 perform it, though the other party has not signed it, if the other party offers to perform it
5 on his part). Here, it is undisputed that Plaintiffs signed the retainer agreement. (Doc. No.
6 10-3 at 6.) And, it is undisputed that the agreement was fully executed as attorney services
7 were provided through settlement of the state court action. (Compl. ¶ 3.) Defendant also
8 highlights that Plaintiffs paid Defendant for the legal representation after settlement of the
9 state court case. (Doc. No. 15-1, Exhibit 1.) Accordingly, the Court holds that a contract
10 did in fact exist between Plaintiffs and Defendant. See Elieff v. Groves, No. CV 10-3879-
11 VBF(JEMX), 2010 WL 11601213, at *3 (C.D. Cal. Aug. 11, 2010) (“Plaintiff presents no
12 authority requiring the production of a fully signed arbitration agreement before it may be
13 enforced, and the authorities located independently by the Court hold that a signature is not
14 required for an enforceable arbitration agreement.”).
15 c. Whether a Contract to Arbitrate Exists
16 Next, the Court turns to the question of whether a valid agreement to arbitrate exists.
17 Here, the retainer agreement between Plaintiffs and Defendant provides, “[a]ny
18 controversy between the parties regarding the construction, application or performance of
19 any services under this Agreement, including any claim by Client against Attorney for
20 breach or contract, professional negligence (malpractice), breach of fiduciary duty or any
21 other tort of contract claim, shall be submitted to binding arbitration. . . .” (Doc. No. 6,
22 Exhibit 1 at 5.) Additionally, the retainer agreement, which includes Plaintiffs’ signature,
23 states “Client acknowledges that Client can retain an attorney whose retainer agreement
24 does not contain an arbitration provision and that Client has been fully advised of all of the
25 possible consequences of arbitration . . . .” (Id. at 5–6.)
26 Thus, the Court finds that there was valid agreement to arbitrate the claims between
27 Plaintiffs and Defendant.
28 //
1 2. Whether the Agreement Encompasses the Dispute at Issue
2 The Court’s final task is to determine whether Plaintiffs’ legal malpractice and
3 breach of fiduciary duty claims fall within the scope of the arbitration agreement. To
4 determine whether an arbitration agreement encompasses a particular dispute, courts must
5 “look first to whether the parties agreed to arbitrate a dispute, not to general policy goals,
6 to determine the scope of the agreement.” E.E.O.C. v. Waffle House, Inc., 534 U.S. 279,
7 294 (2002). The Ninth Circuit has stated that “where the contract contains an arbitration
8 clause, there is a presumption of arbitrability in the sense that [a]n order to arbitrate the
9 particular grievance should not be denied unless it may be said with positive assurance that
10 the arbitration clause is not susceptible of an interpretation that covers the asserted
11 dispute.” Int’l Alliance v. InSync Show Prods., Inc., 801 F.3d 1033, 1042 (9th Cir. 2015)
12 (quoting AT&T Techs., Inc. v. Comms. Workers of Am., 475 U.S. 643, 650 (1986)
13 (quotation marks omitted)).
14 In this case, the retainer agreement provides that “[a]ny controversy between the
15 parties regarding the construction, application or performance of any services under this
16 Agreement, including any claim by Client against Attorney for breach of contract,
17 professional negligence (malpractice), breach of fiduciary duty or any other tort of
18 contract claim, shall be submitted to binding arbitration. . . .” (Doc. No. 6, Exhibit 1 at 5
19 (emphasis added).) The Complaint here only asserts two causes of action—one for
20 professional negligence and the other for breach of fiduciary duty. (Compl. ¶¶ 13–27). Both
21 causes of action fall squarely within the scope of the arbitration agreement.
22 In sum, the Court agrees with Defendant that the present dispute is for the arbitrator
23 to decide. Plaintiff fails to overcome the presumption that this dispute falls within the scope
24 of the parties’ arbitration agreement. Accordingly, the Court GRANTS Defendant’s
25 motion to compel arbitration.
26 V. CONCLUSION
27 Based on the foregoing, the Court (1) GRANTS Defendant’s motion to compel
28 arbitration (Doc. No. 6), and (2) DENIES AS MOOT Defendant’s motion to dismiss (Doc.
1 ||No. 5). Furthermore, pursuant to the FAA, the Court STAYS the judicial proceedings
2 || pending the outcome of any arbitration. See 9 U.S.C. § 3; Martin Marietta Aluminum, Inc.
3 || v. Gen. Elec. Co., 586 F.2d 143, 147 (9th Cir. 1978) (holding that courts shall order a stay
4 || of judicial proceedings “pending compliance with a contractual arbitration clause’’). The
5 || parties are ordered to file a joint status report with this Court, detailing the progress of the
6 || arbitration in 180 days from the date of this order.
7 || IT ISSO ORDERED.
8 Dated: November 20, 2019

10 United States District Judge
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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10079992. Public record. Not legal advice.