Aguilar v. Lerner

CHIN, J., Concurring.

I agree with the majority that plaintiff Raul V. Aguilar waived his rights under the mandatory fee arbitration act (MFAA). (Bus. & Prof. Code, § 6200 et seq.) 1 Accordingly, I have signed that opinion. I also believe, however, that Aguilar’s agreement to arbitrate this dispute is enforceable for a far more fundamental reason: An agreement for binding arbitration between an attorney and a client is enforceable under the California Arbitration Act (Code Civ. Proc., § 1280 et seq.; hereafter the CAA) whether or not the client requests and receives nonbinding arbitration under the MFAA. As the majority notes, this case “poses the question whether the parties’ agreement to arbitrate is enforceable or is superseded by the MFAA.” (Maj. opn., ante, at p. 985.) The answer, apparent from the statutes, is straightforward. The MFAA complements, not supersedes, the parties’ agreement to arbitrate. The CAA and the MFAA coexist; neither preempts or supersedes the other.

Code of Civil Procedure section 1281, part of the CAA, provides: “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.” This provision and the rest of the CAA represent a “ ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’ [Citations.] Consequently, courts will ‘ “indulge every intendment to give effect to such proceedings.” ’ ” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 [ 10 Cal.Rptr.2d 183 , 832 P.2d 899 ].)

*991 Nothing in the MFAA makes the arbitration agreement of this case unenforceable. The MFAA and the CAA create two very different types of arbitration. As the majority explains, arbitration under the MFAA is nonbinding, but arbitration under the CAA is binding. (Maj. opn., ante, at p. 985.) 2 Both may be given effect. Clients may, if they wish, request and obtain nonbinding arbitration under the MFAA. That arbitration may, and often will, resolve the dispute. But if the client does not request nonbinding arbitration, or if it is held but does not resolve the dispute, then the MFAA has played its role, and the matter would continue without it. Either party may then pursue judicial action unless the parties had agreed to binding arbitration. In that event, the CAA would apply, and the dispute would go to binding arbitration. This conclusion is consistent with the statutory language of both the MFAA and the CAA and the strong public policy in favor of binding arbitration as a means of resolving disputes.

Section 6201, subdivision (a), requires an attorney to inform the client of the client’s right to arbitration under the MFAA “prior to or at the time of service of summons or claim in an action against the client, or prior to or at the commencement of any other proceeding against the client under a contract between attorney and client which provides for an alternative to arbitration under this article . . . .” (Italics added.) The italicized language acknowledges that the parties may agree to some proceeding to resolve the controversy other than a judicial action, such as binding arbitration under the CAA. The same section goes on to provide that if an attorney “commences an action in any court or any other proceeding . . . , the client may stay the action or other proceeding” by requesting arbitration under the MFAA, which must be done “prior to the filing of an answer in the action or equivalent response in the other proceeding . . . .” (§ 6201, subd. (b), italics added.) If the client does request nonbinding arbitration, “the action or other proceeding shall be automatically stayed until the award of the arbitrators is issued or the arbitration is otherwise terminated.” (§ 6201, subd. (c), italics added.) This means that if the client requests nonbinding arbitration under the MFAA, the judicial action or other proceeding is stayed, but only until the nonbinding arbitration is finished. The other proceeding is merely stayed pending the nonbinding arbitration, not dismissed permanently.

In some respects, the MFAA statutory language is not entirely clear. Section 6201, subdivision (c), also states that a court may vacate the stay if it finds the matter not appropriate for nonbinding arbitration under the MFAA, and that “[t]he action or other proceeding may thereafter proceed subject to the provisions of Section 6204.” Section 6204, in turn, provides that the parties to the nonbinding arbitration may agree to be bound by the arbitrators’ *992 award, but, as it reads today, only after the controversy has arisen. It also states that if there is no such agreement, “either party shall be entitled to a trial after arbitration if sought within 30 days . . . .” (§ 6204, subd. (a), italics added.) The statute goes on to provide how “the trial after arbitration shall be initiated” both when an action is already pending and when no action is pending. (§ 6204, subds. (b)& (c).) In the latter situation, “the trial after arbitration shall be initiated by the commencement of an action in the court having jurisdiction over the amount of money in controversy . . . .” (§ 6204, subd. (c), italics added.)

Aguilar argues, and the court in Alternative Systems, Inc. v. Carey (1998) 67 Cal.App.4th 1034, 1042 , footnote 5 [ 79 Cal.Rptr.2d 567 ] (Alternative Systems), concluded, that the references in section 6204 to a “trial” and “an action in . . . court” mean that after nonbinding arbitration, the dispute can only be resolved in court, and may not be resolved by binding arbitration even if the parties had agreed to such binding arbitration. I disagree. Although this reading of section 6204 is plausible if the section is viewed in isolation, the section does not exist in isolation but is part of the MFAA, which includes section 6201. It is “a cardinal rule of statutory construction, that ‘every statute should be construed with reference to the whole system of law of which it is a part so that all may be harmonized and have effect.’ ” (Landrum v. Superior Court (1981) 30 Cal.3d 1, 14 [ 177 Cal.Rptr. 325 , 634 P.2d 352 ].) The references to a trial and court action in section 6204 do not negate section 6201. In context, and in order to give effect to section 6201, section 6204 must be construed as merely providing the procedure to follow if the nonbinding arbitration is followed by a judicial action, not as prohibiting the parties from agreeing to some other proceeding. The latter interpretation would make meaningless section 6201’s acknowledgment that the parties may agree to some form of dispute resolution other than judicial action, and its repeated references to some proceeding other than a court action.

Alternative Systems, supra, 67 Cal.App.4th 1034 , held that if the client requests and obtains nonbinding arbitration under the MFAA, an agreement to binding arbitration cannot be given effect, and the dispute must proceed to a trial de novo. It concluded that the MFAA “preempted” the binding arbitration agreement. (Id. at p. 1044.) The majority cites Alternative Systems but expresses no opinion on whether it was correct. (Maj. opn., ante, at pp. 984, 989, fn. 6.) For the reasons I have stated, I believe it was not correct. By its very terms, the MFAA complements the CAA rather than preempts it.

Alternative Systems, supra, 67 Cal.App.4th 1034 , cannot survive today’s ruling. We are holding today that a client who does not request nonbinding arbitration has waived the MFAA’s protections, and the binding arbitration agreement is enforceable. If Alternative Systems were to remain valid, that *993 would mean that a client who agreed to binding arbitration could evade that agreement simply by requesting nonbinding arbitration. The lesson future clients who had agreed to binding arbitration would learn from this case is that if they want to evade their agreement, they must demand nonbinding arbitration whether or not they otherwise want it. Future clients who wish to sue in court despite an arbitration agreement will be forced to go to nonbinding arbitration before they could do so. This situation would be unfortunate for two reasons. First, it would permit a client to evade an arbitration agreement by a simple procedural device, contrary to the letter and intent of the CAA. Second, it would require, as a prerequisite to evading the arbitration agreement, that the client pursue nonbinding arbitration. This would result in many sham nonbinding arbitrations that neither party wanted or intended to accept.

We cannot reasonably conclude that the Legislature created a system whereby clients who agree to binding arbitration may evade that agreement, but only if they go through the charade of demanding and obtaining a nonbinding arbitration that they may not want. Such a construction of the MFAA would not be “ ‘ “indulging] every intendment to give effect” ’ ” to a binding arbitration agreement. (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 9 .) I believe the majority has effectively overruled Alternative Systems, supra, 67 Cal.App.4th 1034 , and I would do so expressly.

Baxter, J., and Brown, J., concurred.

Unless otherwise indicated, all further statutory citations are to the Business and Professions Code.

For simplicity, I will sometimes just refer to arbitration under the MFAA as nonbinding arbitration and arbitration under the CAA as binding arbitration.