Sorice v. Johnson & Johnson, LLP CA2/5 ( 2021 )

Filed 4/15/21 Sorice v. Johnson & Johnson, LLP CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
LEANDRO SORICE, B300453
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 19STCV14785)
JOHNSON & JOHNSON, LLP,
et al,
Defendants and
Appellants.
APPEAL from an order of the Superior Court of the County
of Los Angeles, Randolph Hammock, Judge. Reversed and
remanded with directions.
Johnson & Johnson, Douglas L. Johnson and Ronald P.
Funnell, for Defendants and Appellants.
Sall Spencer Callas & Krueger, Michael A. Sall, Suzanne
Burke Spencer, and Stephanie M. Brault, for Plaintiff and
Respondent.
I. INTRODUCTION
Plaintiff Leandro Sorice sued his former attorneys,1
claiming they collected an excessive fee from the proceeds of a
settlement. Defendants moved to compel arbitration of the fee
dispute, but the trial court denied the motion, concluding that the
fee agreement containing the arbitration clause was voidable at
plaintiff’s option under Business and Professions Code section
6148.2
On appeal from the order denying the motion, the Johnson
defendants contend, among other things, that the trial court
erred by determining the voidability issue on the merits.
According to the Johnson defendants, that issue had been
reserved for determination by the arbitrator under the delegation
clause in the parties’ arbitration agreement. We agree and
therefore reverse the order denying the motion to compel
arbitration and remand the matter for further proceedings.
1 Plaintiff’s former attorneys are defendants Johnson &
Johnson, LLP (the Johnson firm), Douglas L. Johnson (attorney
Johnson), The Hamideh Firm, P.C. (the Hamideh firm), and
Bassil A. Hamideh (attorney Hamideh). When we discuss the
proceedings in the trial court, those four parties will be referred
to collectively as defendants. But, as explained below, only the
Johnson firm and attorney Johnson are parties to this appeal.
Thus, when we discuss the parties’ contentions and arguments on
appeal, we will refer to appellants as the Johnson defendants.
2 All further statutory references are to the Business and
Professions Code, unless otherwise indicated.
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II. BACKGROUND
A. Plaintiff’s Retention of the Hamideh Firm
In September 2016, plaintiff contacted the Hamideh firm
regarding a potential litigation against a clothing company,
Trendy Butler, Inc., arising from the company’s unauthorized use
of plaintiff’s image or likeness (the Trendy Butler action). That
same day, attorney Hamideh e-mailed plaintiff a proposed fee
agreement which plaintiff signed and returned by e-mail.
The three-page agreement, which was in letter format on
the Hamideh firm’s letterhead, set forth, among other things, the
attorney fees to which the firm would be entitled in return for
services rendered in the Trendy Butler action: “As we have
discussed . . . we are prepared to represent you in this matter on
a contingency basis. Any and all costs incurred from the
representation shall be reimbursed out of any proceeds that we
may recover for you. For our fee, if the matter is resolved before
a [c]omplaint is filed, we will receive forty percent (40%) of the
gross recovery. However, if this matter is not resolved prior to
litigation, and a decision is made to file a [c]omplaint and pursue
litigation, our fee shall then be forty-five percent (45%) of the
gross recovery. Should this matter proceed to a judgment,
verdict, settlement, or award in your favor, we shall receive the
greater of our percentage contingency fee or the attorneys’ fee at
the time of the verdict, settlement, or award. For example, if the
attorneys’ fees are greater than forty-five percent (45%) of the
judgment, settlement, or award, we shall receive our advanced
costs and attorneys’ fees and you shall receive one hundred
percent (100%) of the amount awarded to you in the case minus
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any costs not reimbursed by defendant or ordered by the [c]ourt.”
(Italics added.) The fee agreement did not include a description
of an hourly rate, statutory fees, or flat fees.
The agreement gave the Hamideh firm sole discretion to
associate other attorneys to assist the firm in the Trendy Butler
action. “You agree that [the Hamideh firm] may, in our sole
discretion, associate other counsel to assist us in the institution,
maintenance, prosecution, settlement, or compromise of your
[m]atter. If [the Hamideh firm] associates in additional counsel,
that law firm shall be [the Johnson firm]. Compensation of the
associated counsel is the sole responsibility of [the Hamideh firm]
and you shall incur no obligation to pay fees in excess of those set
forth in this agreement. You further authorize us to share our
[a]ttorneys’ fees with associated counsel. The division of fees
shall be 66 2/3% of all attorneys’ fees in the case to [the Johnson
firm] and 33 1/3% of all attorneys’ fees in the case to [the
Hamideh firm].”
On the last page of the fee agreement, the parties agreed to
arbitrate disputes arising under the agreement as follows: “Any
and all disputes arising in connection with this agreement or the
services provided pursuant to this agreement, including any
claims of malpractice or breach of fiduciary duty, shall be
governed by the laws of the State of California and resolved by
binding arbitration in Los Angeles pursuant to JAMS’
comprehensive rules before a single retired Los Angeles Superior
Court Judge. By agreeing to do so, we are waiving a right to trial
in a court and by a jury and any right of appeal. The arbitrator’s
decision shall be in writing and contain a statement of reasons
for the decision.” Rule 11(b) of the JAMS “Comprehensive
Arbitration Rules & Procedures,” effective July 1, 2014, provided:
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“Jurisdictional and arbitrability disputes, including disputes over
the formation, existence, validity, interpretation or scope of the
agreement under which Arbitration is sought, and who are proper
Parties to the Arbitration, shall be submitted to and ruled on by
the Arbitrator. The Arbitrator has the authority to determine
jurisdiction and arbitrability issues as a preliminary matter.”
(Italics added.)
The fee agreement was signed on behalf of the Hamideh
firm by attorney Hamideh. Although the fee agreement expressly
referred to the Johnson firm as potential associated counsel,
neither the Johnson firm nor attorney Johnson signed the
agreement.
B. The Trendy Butler Action
On April 27, 2017, defendants filed a first amended
complaint on behalf of plaintiff in the Trendy Butler action.
Defendants represented plaintiff in that matter through May
2018, when it settled on a confidential basis following mediation.
C. Instant Action
On April 26, 2019, plaintiff filed this action against
defendants, alleging causes of action for quantum meruit, breach
of fiduciary duty, and declaratory relief. Plaintiff sought, among
other things, to recover a portion of the fees paid to defendants
under the alternative “attorneys’ fee” provision of the fee
agreement and a declaration that the fee agreement was void.
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D. Motion to Compel Arbitration
On July 1, 2019, defendants filed a motion to compel
arbitration, arguing, among other things,3 that the delegation
clause in the parties’ fee agreement required that any disputes
about the validity and enforceability of the arbitration clause be
determined by the arbitrator. In support of the motion, attorney
Hamideh submitted a declaration confirming that he mailed a
fully executed copy of the fee agreement to plaintiff.
Plaintiff opposed the motion. He argued that the fee
agreement was void as illegal because it did not adequately
specify the basis of compensation as required by sections 6147
and 6148 and defendants did not provide plaintiff with a fully
executed copy of the agreement. Plaintiff additionally argued
that: (1) the arbitration agreement was governed by the
California Arbitration Act (CAA) not the FAA; (2) the illegality of
the agreement must be determined by the trial court; (3) the
defendants who did not execute the fee agreement were not
parties to that agreement and thus lacked standing to enforce it;
and (4) the claims against the Johnson firm and attorney
Johnson were outside the scope of the arbitration agreement.
In their reply brief, defendants argued that the fee
agreement was not illegal but rather, at best, voidable under the
express terms of sections 6147 and 6148. They also asserted that
the arbitration clause was governed by the FAA, that the
Johnson defendants had standing to enforce it as either agents or
third-party beneficiaries, and that the associated attorneys were
3 Defendants maintained that the arbitration clause in the
fee agreement was governed by the Federal Arbitration Act
(FAA).
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not required to have a separate fee agreement with plaintiff
under sections 6147 and 6148.
The trial court conducted a hearing on the motion on
July 31, 2019, and August 21, 2019. At the conclusion of the
hearing, the court issued a written order denying defendants’
motion to compel arbitration. The court found that the
delegation clause “constitute[d] a clear and unmistakable
agreement to have the arbitrator determine the existence, scope,
and validity of the arbitration agreement, including its proper
parties[.]” The court nonetheless decided that plaintiff’s
challenge to the validity of the fee agreement itself was “not an
issue that ha[d] been delegated to the arbitrator.” Thus, the
court concluded that it, rather than the arbitrator, must
“consider whether the fee agreement itself is enforceable.” The
court thereafter concluded that the agreement did not comply
with section 6148 because it did not include the basis of the
attorney’s hourly compensation and was thus “voidable at
Plaintiff’s option.”4 The court continued, “[b]ecause the fee
agreement containing the arbitration agreement is void, the
Court DENIES the motion to compel arbitration.”
III. DISCUSSION
The Johnson defendants contend that pursuant to the
delegation clause in the fee agreement, the arbitrator, rather
4 The court, however, rejected plaintiff’s contention that the
fee agreement was void because he did not receive a fully
executed copy of the agreement, finding that his declaration was
not credible on this point.
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than the trial court, should have decided the enforceability of the
fee agreement. We agree.
A. Standard of Review
Our review of the trial court’s ruling on the “who decides”
question requires us to interpret the parties’ arbitration
agreement. (Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th
233, 243 [“we must examine the parties’ agreements to determine
what they say concerning the ‘who decides’ question”].) “When
‘the language of an arbitration provision is not in dispute, the
trial court’s decision as to arbitrability is subject to de novo
review.’ [Citation.] Thus, in cases where ‘no conflicting extrinsic
evidence is introduced to aid the interpretation of an agreement
to arbitrate, the Court of Appeal reviews de novo a trial court’s
ruling on a petition to compel arbitration.’ [Citation.]”
(Molecular Analytical Systems v. Ciphergen Biosystems, Inc.
(2010) 186 Cal.App.4th 696, 707.)
B. Delegation Clauses
“Under both federal and state law,[5] arbitration
agreements are valid and enforceable, unless they are revocable
5 “‘In most important respects, the California statutory
scheme on enforcement of private arbitration agreements is
similar to the [FAA] . . . .’ [Citation.] . . . [¶] ‘California courts
often look to federal law when deciding arbitration issues under
state law.” [Citation.] They have specifically looked to the FAA
when considering delegation clauses [citation] and have long held
that the rules governing these clauses are the same under both
state and federal law[.] [Citations omitted.]” (Tiri v. Lucky
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for reasons under state law that would render any contract
revocable. (9 U.S.C. § 2; Code Civ. Proc., § 1281; Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83,
98 . . . .)” (Tiri, supra, 226 Cal.App.4th at p. 239, original fns.
omitted.)
“Parties to an arbitration agreement may agree to delegate
to the arbitrator, instead of a court, questions regarding the
enforceability of the agreement. (Freeman v. State Farm Mut.
Auto. Ins. Co. (1975) 14 Cal.3d 473, 480 . . . .) They ‘can agree to
arbitrate almost any dispute—even a dispute over whether the
underlying dispute is subject to arbitration.’ (Bruni v. Didion
(2008) 160 Cal.App.4th 1272, 1286 . . . .) . . . [¶] There are two
prerequisites for a delegation clause to be effective. First, the
language of the clause must be clear and unmistakable. (Rent-A-
Center [W., Inc. v. Jackson (2010)] 561 U.S. [63,] 69, fn. 1.)
Second, the delegation must not be revocable under state contract
defenses such as fraud, duress, or unconscionability. (Id. at p. 68;
[citation].)” (Tiri, supra, 226 Cal.App.4th at pp. 241–242.)
“[W]hen a party is claiming that an arbitration agreement
is unenforceable, it is important to determine whether the party
is making a specific challenge to the enforceability of the
delegation clause or is simply arguing that the agreement as a
whole is unenforceable. If the party’s challenge is directed to the
agreement as a whole—even if it applies equally to the delegation
clause—the delegation clause is severed out and enforced; thus,
the arbitrator, not the court, will determine whether the
agreement is enforceable.” (Malone v. Superior Court (2014) 226
Cal.App.4th 1551, 1559–1560.)
Chances, Inc. (2014) 226 Cal.App.4th 231, 239-240, original fns.
omitted (Tiri).)
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C. Analysis
1. Enforceable Delegation Clause
Under the authorities discussed above, unless the language
of the delegation clause was not clear and unmistakable or the
clause itself was revocable under state contract defenses such as
fraud, duress, or unconscionability, it was separately enforceable.
Plaintiff raises no challenge to the delegation clause but instead
maintains that the fee agreement, in its entirety, was voidable at
his election. As we explain above, the enforceability of the fee
agreement is a matter to be decided by the arbitrator, not the
court. (Malone v. Superior Court, supra, 226 Cal.App.4th at
pp. 1559–1560.)
Plaintiff’s citation to Sheppard, Mullin, Richter, &
Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th
59 (Sheppard Mullin) is inapposite. The court in Sheppard
Mullin did not consider the enforceability of a delegation clause
on a motion to compel arbitration. Instead, the court considered
whether, under Code of Civil Procedure section 1286.2, an
arbitrator’s award should be vacated because the arbitration had
been “undertaken to enforce a contract that [was] ‘illegal and
against the public policy of the state.’” (Sheppard Mullin, supra,
6 Cal.5th at p. 73.) Thus, its holding has no application to the
issue at hand, that is, whether the delegation clause is severable
and enforceable. (See, e.g. Henry Schein, Inc. v. Archer and White
Sales, Inc. (2019) 586 U.S. __, 139 S.Ct. 524, 527, 530 [rejecting
argument that because the FAA provides “for back-end judicial
review of an arbitrator’s decision if an arbitrator has ‘exceeded’
his or her ‘power[,]’ . . . the court at the front end should also be
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able to say that the underlying issue is not arbitrable,” because it
is not the court’s role to “redesign the statute”].)
The facts of Sheppard Mullin, supra, 6 Cal.5th 59 are
further distinguishable because, in that case, a law firm had
entered into an engagement agreement with a client while
simultaneously representing another client with an adverse
interest and without informing either client about the conflict.
(Id. at pp. 80–81.) Because the engagement agreement could not
be performed without violating the Rules of Professional Conduct,
the court concluded that it was void as against public policy.
(Sheppard Mullin, supra, 6 Cal.5th at pp. 79–80.) Here,
plaintiff’s claim of illegality is directed at defendants’ alleged
failure to comply with sections 6147 and 6148, which sections, by
their express terms, render a fee agreement voidable, rather than
void.6 Thus, unlike the ethical conflict in Sheppard Mullin,
supra, 6 Cal.5th 59—which tainted the entire engagement
agreement and made the law firm’s representation of the client
under it illegal from the outset—the alleged noncompliance with
6 “‘A void contract is without legal effect. [Citation.] “It
binds no one and is a mere nullity.” [Citation.] “Such a contract
has no existence whatever. It has no legal entity for any purpose
and neither action nor inaction of a party to it can validate it
. . . .” [Citation.]’ (Yvanova [v. New Century Mortgage Corp.
(2016)] 62 Cal.4th [919,] 929.) [¶] ‘A voidable transaction, in
contrast, “is one where one or more parties have the power, by a
manifestation of election to do so, to avoid the legal relations
created by the contract, or by ratification of the contract to
extinguish the power of avoidance.” [Citation.] It may be
declared void but is not void in itself. [Citation.] Despite its
defects, a voidable transaction, unlike a void one, is subject to
ratification by the parties. [Citations.]’ ([Id.] at p. 930.)”
(Safarian v. Govgassian (2020) 47 Cal.App.5th 1053, 1067.)
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the Business and Professions Code here did not affect the
primary object of the fee agreement, that is, defendants’ legal
representation of plaintiff in the Trendy Butler action from
inception through mediation.
We are also unpersuaded by plaintiff’s argument, raised for
the first time on appeal, that the fee agreement was not only
voidable, but void, because it violated Rules of Professional
Conduct, Rule 3-300 and 3-310. We reject that argument for
three reasons. First, plaintiff’s contention that defendants
operated under a conflict is based, in large part, on his
characterization of counsel’s arguments on appeal.7 The
argument of counsel, however, is not evidence. (Fuller v. Tucker
(2000) 84 Cal.App.4th 1163, 1173.) Second, plaintiff’s argument
requires that we make factual findings regarding the existence of
a conflict of interest, which we decline to do. (In re Zeth S. (2003)
31 Cal.4th 396, 405.) And finally, as we discuss above, the
determination of whether the agreement is void or voidable is a
matter the parties have delegated to the arbitrator.
2. Standing of the Johnson Defendants to Enforce
Arbitration Agreement
Pointing to the undisputed fact that neither the Johnson
firm nor attorney Johnson signed the fee agreement, plaintiff
7 For instance, plaintiff argues, “[h]ere, as [the Johnson
defendants] interpret it, the [fee agreement] created a conflict of
interest between [plaintiff] and his attorneys . . . . Specifically,
[the Johnson defendants] claim the alternate ‘attorneys’ fees’ in
the [fee agreement] includes hourly attorneys’ fees negotiated at
a mediation.” (Italics added, fn. omitted.)
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contends that they lack standing to enforce the arbitration
agreement contained in it. Plaintiff made the same argument in
his opposition below, but the trial court did not reach the merits
of it due to its threshold determination of the “who decides” issue
and subsequent finding that the fee agreement was voidable.
Because the trial court has yet to address the standing issue,
including whether the merits of it fall within the scope of the
delegation clause, we remand the matter for further proceedings
on that issue. (See, e.g., K.G. v. Meredith (2012) 204 Cal.App.4th
164, 168 [reversing dismissal and remanding matter for
consideration of propriety of request for mandamus relief that
trial court did not address]; Hughes Electronics Corp. v. Citibank
Delaware (2004) 120 Cal.App.4th 251, 271 [remand for litigation
of issue was appropriate when issue was rendered moot by
erroneous trial court ruling].)
3. Reversal as to Nonappealing Defendants
Finally, we consider plaintiff’s contention that because the
Hamideh firm and attorney Hamideh did not appeal from the
order denying their petition to compel arbitration, that order is
now final as to those two defendants and the litigation in the trial
court must proceed against them, regardless of whether we
reverse the order as to the Johnson defendants. According to
plaintiff, under these procedural circumstances, the arbitration of
his claims against the Johnson defendants should not proceed
due to the risk of inconsistent rulings on claims arising from the
same transaction. He cites Code of Civil Procedure section
1281.2, subdivision (c) in support.
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The Johnson defendants counter that, although the
Hamideh firm and attorney Hamideh are not parties to the
appeal, we can reverse the trial court’s order denying arbitration
in its entirety. We agree.
“As a general rule, where only one of several parties
appeals from a judgment, the appeal includes only that portion of
the judgment adverse to the appealing party’s interest, and the
judgment is considered final as to the nonappealing parties.
[Citations]. That general rule has an important exception,
however: ‘[Where] the part [of a judgment] appealed from is so
interwoven and connected with the remainder, . . . that the
appeal from a part of it . . . involves a consideration of the whole,
. . . if a reversal is ordered it should extend to the entire
judgment. The appellate court, in such cases, must have power
to do that which justice requires and may extend its reversal as
far as may be deemed necessary to accomplish that end.’ (Whalen
v. Smith (1912) 163 Cal. 360, 362 . . . [(Whalen)].) Although
Whalen involved an appeal from a part of a judgment rather
than, as in the case at bench, an appeal by only one of several
parties, the rule discussed therein has been applied in the latter
situation as well. [Citations.]” (Estate of McDill (1975) 14 Cal.3d
831, 840.)
The part of the order from which the Johnson defendants
appealed is so interwoven and connected with the remainder that
it requires a consideration of the whole order. All four
defendants below jointly filed the motion to compel based on the
same briefs and evidence. Moreover, the trial court’s denial of
the motion was to the entirety of it, based solely on its erroneous
threshold determination of the “who decides” question. Because
that determination affected each defendant equally and to the
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same extent, our power to do justice requires that the reversal
must extend to all four adversely affected defendants, regardless
of whether they separately appealed from the order. Our holding,
however, does not foreclose a defendant, including any who did
not appeal the court’s denial of the motion to compel arbitration,
from waiving its right to arbitrate.
IV. DISPOSITION
The order denying the motion to compel arbitration is
reversed and remanded with directions to conduct further
proceedings on that motion consistent with this opinion. In the
interests of justice, no costs are awarded on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KIM, J.
We concur:
RUBIN, P. J.
MOOR, J.
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