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The California Court of Appeal held that a recent amendment to the Mandatory Fee Arbitration Act (MFAA) does not invalidate pre-dispute arbitration agreements between an attorney and client. Accordingly, pre-dispute arbitration agreements are enforceable against a client who waives his rights under the MFAA.
In Ervin, Cohen & Jessup, L.L.P. v. Kassel, No. B191761, 2007 WL 466282 (Cal. Ct. App. Feb. 14, 2007), Ervin, Cohen & Jessup (ECJ) sued Kassel, a former client, seeking to recover unpaid fees. ECJ moved to compel arbitration pursuant to an arbitration clause in the retainer agreement.
In opposing ECJ's motion to compel, Kassel argued that the arbitration agreement was invalid under the MFAA. The MFAA gives clients the right to submit attorney fee disputes to nonbinding arbitration before a local or state bar association. The trial court denied the motion.
On appeal, the Court looked to Aguilar v. Lerner, 88 P.3d 24 (Cal. 2004) for guidance. In Aguilar, the court held that a client waives his rights under the MFAA if he fails to invoke them and that such waiver enables the enforcement of any preexisting arbitration agreement. Since Kassel had waived his rights under the MFAA, the arbitration clause in the retainer agreement was enforceable.
Attempting to get around Aguilar, Kassel argued that the pre-dispute arbitration agreements are unenforceable under a subsequent amendment to the MFAA providing that "[t]he parties may agree in writing to be bound by the award of arbitrators . . . at any time after the dispute over fees . . . has arisen." Cal. Bus. & Prof. Code § 6204(a).
In rejecting this argument, the Court explained that § 6204(a) applies only to arbitration awards entered pursuant to the MFAA. As the Court noted, the purpose of § 6204(a) is to ensure that clients have an opportunity to bring fee disputes before a bar association in accordance with the MFAA. Kassel was given this opportunity but rejected it, and since Kassel thereby waived his rights under the MFAA, the pre-dispute arbitration agreement was enforceable. Accordingly, the Court remanded the case with instructions to order arbitration.
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