Baker Marquart LLP v. Kantor, 22 Cal. App. 5 th 729 (2018)

This case involves a dispute between attorney (Baker Marquart) and client (Kantor) regarding the proper percentage to apply to a contingency fee contract. The contract provided that if the attorney accomplished nine specific tasks within a specific time, the fee would be based on 35% of the amount recovered. If not, the fee would be 30% of the amount recovered. Approximately $1.6 million was recovered and the attorneys took 35% of this amount. Kantor initiated arbitration to take back a portion of the fee, arguing that the bonus was not earned, and the fee should have been 30%, rather than 35% of the amount recovered. The demand for arbitration identified only two of the nine tasks that were allegedly not performed.

The fee agreement provided that fee disputes would be handled by the Beverly Hills Bar Association under their Mandatory Fee Arbitration Rules. Although the fee agreement also provided that all arbitration awards would be final and non-appealable, the BHBA MFA rules only allow the parties to agree to binding arbitration after a dispute has arisen. After the dispute arose and before the arbitration hearing, the parties did agree that the award should be binding and neither party could request trial de novo. However, under the BHBA MFA rules and the MFA statute, even binding awards are still subject to limited judicial review under California’s general arbitration statute. CCP Sections 1284 and 1285.

Prior to the arbitration hearing the parties exchanged many of their exhibits. However, at the apparent invitation of the presiding arbitrator, Kantor submitted a “confidential brief” that alleged that Baker Marquart failed to accomplish any of the nine specific tasks, not just the two that were identified in the demand for arbitration. At the arbitration hearing, for the first time, Baker Marquart learned that they were accused of failing to accomplish any of the nine tasks. They requested the opportunity to review Kantor’s confidential brief and were denied. They requested a continuance to allow them to meet the new allegations and were denied.

In a split decision, the majority of the arbitration panel determined that Baker Marquart had failed to accomplish three of the nine tasks, and therefore, had failed to earn the 3% fee. The panel made no finding as to the two tasks that were identified in the demand for arbitration. The panel awarded Kantor a refund of over $100,000.00.

Baker Marquart petitioned to have the award vacated. Kantor petitioned to have it confirmed and entered as a judgment. The trial court confirmed the award. On appeal, the Court of Appeal for the Second District reversed. First, it dismissed Kantor’s argument that the award was unappealable under the parties’ fee agreement. Next, it determined that the confidential brief constituted an improper ex parte contact that infected the fairness of the proceedings. Because the award was based on allegations and arguments made in the confidential brief, the unfairness was significant. The Court of Appeal reversed the trial court decision and vacated the award as having been procured by “undue means.”

This result is not surprising. What is surprising is that the arbitrators thought that allowing a party to submit a confidential brief was a good idea, and that the trial court was not troubled by the unfairness caused by that unusual procedure.