Filed 5/31/18 Coblentz Patch Duffy & Bass, LLP v. Fair CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO


COBLENTZ PATCH DUFFY & BASS, LLP,
Plaintiff and Respondent,
v.
R. THOMAS FAIR,
Defendant and Appellant

A149688

(Marin County
Super. Ct. No. CIV1602356)


Defendant and cross-complainant R. Thomas Fair appeals from the trial court order denying his motion to stay judicial foreclosure by plaintiff law firm Coblentz Patch Duffy & Bass (Coblentz) and to compel Coblentz to arbitrate the matter. (Code Civ. Proc., § 1281.2.) The trial court found Fair waived his right to arbitrate by entering into a settlement agreement with Coblentz and that Fair’s assent to the general releases and waiver of Civil Code section 1542 contained therein was “voluntary, knowing and intelligent.” Fair contends on appeal that arbitration provisions of his two engagement agreements with Coblentz required it to provide him written notice of his right to arbitrate. He contends he was fraudulently induced to sign the settlement agreement by the failure of Coblentz to provide separate written notice of his right to arbitrate when their fee dispute arose and by the law firm’s failure to make complete disclosures of facts concerning its potential malpractice. He asserts these failures rendered the settlement agreement void.
We shall affirm.
BACKGROUND
In 2007, Coblentz began representing Fair in Fair v. Bakhtiari (2011) 195 Cal.App.4th 1135 (Fair I) and Fair v. Old Port Lobster Co. (Aug. 17, 2012, CIV460438) 2012 Cal. Super. Lexis 1320, then pending in the San Mateo Superior Court. Fair signed two engagement letters with Coblentz for both matters that provided with respect to the right to arbitrate fee disputes:
“If any dispute arises between us as to attorneys’ fees and/or costs charged under this agreement, we will provide you with written notice of your right to arbitrate as required by the California State Bar Act. . . .”
At the time he entered into the engagement letters, Fair was a member of the California State Bar on inactive status. He was an experienced business attorney and had been a partner at Hoge, Fenton, Jones and Appel, Inc. (See Fair I, supra, 195 Cal.App.4th at p. 1142.) Coblentz represented Fair in the first phase of trial in Fair I. The trial court ruled against Fair on all claims. At that point, Fair owed substantial amounts to Coblentz––approximately $2 million in fees and costs for Coblentz’s work in the two cases. Fair sought a substantial discount for the fees owed. In October 2008, Coblentz proposed an oral agreement for payment of the debt. Fair responded by email, with a detailed proposal concerning how much of the obligation he was willing to pay and how he proposed to structure the payment, using proceeds from his real estate assets. Fair also attached a list of “Discussion Points” listing nine specific mistakes he contended Coblentz made in representing him and issues he had with the firm’s representation of him that had arisen before and during the trial of Fair I. These asserted mistakes included, among other things, the failure to take particular depositions, late retention of an accountant expert, actions taken that hurt Fair’s credibility, and omission of a quantum meruit cause of action. Fair used these alleged mistakes and issues to negotiate a substantial discount of amounts he owed to Coblentz.
After months of negotiations and after the exchange of several drafts, Fair emailed Coblentz on March 31, 2009, that, “I have reviewed the documents and have forwarded them to counsel with request made previously to give some priority to the review.” A second email confirmed that, “My attorney has reviewed. He points out one thing” that should be changed. In these emails, Fair requested a minor change to the payment structure, but neither he nor his independent counsel objected to the broad scope of the releases. Fair executed the “SETTLEMENT AGREEMENT” on April 2, 2009. Fair’s independent attorney signed and “approved” the settlement, immediately below Fair’s signature. As part of the settlement, Coblentz agreed to reduce Fair’s debt by about $327,660, or approximately 15 percent of the amount owed. Also as part of the settlement agreement, Fair promised to pay Coblentz over $1.6 million and he executed a promissory note secured by, among other things, a deed of trust on certain properties owned by Fair.
The signed settlement agreement, set forth in section 3, broad “General Mutual Releases,” including, as had all of the preceding drafts, a broad release from “all Claims of every kind and nature whatsoever, in law or in equity, whether known or unknown . . . arising or accruing prior to the date this Agreement is signed by both Parties . . . .” Section 4 expressly waived the provisions of Civil Code section 1542. In section 6, immediately before the signature block, Fair initialed his acknowledgement that Coblentz had advised him to seek the advice of a lawyer of his own choosing before signing the Agreement, “including the advisability of the general mutual release of all claims and the other consideration being exchanged.” The settlement agreement does not contain an arbitration clause.
On June 29, 2016, Coblentz filed a complaint for judicial foreclosure seeking to collect on the amount then due—approximately $1,957,399.90 including interest calculated through May 31, 2016. On September 7, 2016, Fair moved to compel arbitration and filed a demurrer.
Fair argued below, as he does here, that the engagement letters preceding the settlement agreement each contained an agreement to arbitrate fee disputes as required by the State Bar Act and that Coblentz had concealed its “potential malpractice” and failed to advise him of the right to arbitrate a fee dispute in order to fraudulently induce him to settle. In support, he submitted a declaration from his attorney, who attested to having filed an arbitration claim with JAMS, and Fair’s own declaration. In his declaration, Fair asserted that Coblentz did not disclose to him “any instance” of its alleged malpractice committed during the representation; that had Coblentz done so, he would not have executed the settlement agreement; that Coblentz had inserted into the agreement a term releasing it from all claims, including malpractice claims, without discussion or disclosure of any such claims; and that other than the engagement letters themselves, Coblentz had not informed Fair of his right to arbitrate a fee dispute.
Coblentz opposed the motion, submitting the declaration of one of its partners and business records as exhibits thereto, including the “Discussion points” email in which Fair listed instances of purported “mistakes” and issues regarding Coblentz’s representation. Fair submitted a “SUPPLEMENTAL DECLARATION,” in which he stated that in December 2008, he had “begun to suspect that [Coblentz] may have committed professional malpractice and negligence in connection with the representations.” He also asserted his belief that Coblentz “failed to make complete disclosures to me concerning its potential malpractice . . . .” (Italics added.) Neither declaration identified a single instance of alleged malpractice of which he had not been aware before he signed the settlement agreement.
After hearing, the trial court affirmed its tentative ruling denying the motion, stating in its “RULING”:
“After reviewing the language of the settlement agreement and the circumstances surrounding its execution, the court finds defendant’s assent to the General Releases and waiver of [section] 1542 was voluntary, knowing and intelligent. Fair independently arrived at the decision to agree to those provisions based on his legal knowledge and expertise, and after consulting with his own lawyer. Accordingly, the court finds valid the settlement agreement and the General Mutual Releases. (See e.g., Winet v. Price (1992) 4 Cal.App.4th 1159, 1167–1168; Salehi v. Surfside III Condominium Owners’ Assn. (2011) 200 Cal.App.4th 1146, 1159–1161.)
“By executing this valid Release, Fair waived his right to arbitration. (Gustafson v. State Farm Mut. Auto. Ins. Co. (1973) 31 Cal.App.3d 361, 365; accord Commercial Ins. Co. of Newark v. Copeland (1967) 248 Cal.App.2d 561, 565 [court determines if release is valid and if so defendants have waived their arbitration rights].)”
The court rejected Fair’s claim that he would not have executed the settlement agreement had Coblentz not concealed its purported malpractice. The court relied on the nine instances of purported malpractice Fair identified during the settlement negotiations and Fair’s failure to offer evidence of (and the court’s failure to find in the record) any additional unknown acts of supposed malpractice. The court further rejected Fair’s claim that he would not have executed the agreement had Coblentz provided him written notice of his right to arbitrate fee disputes as required, ruling that the “Engagement Letters clearly notified [Fair] of his right to arbitrate the fee dispute, a fact which [Fair] well knows as an experienced, practicing attorney. [Fair] knowingly and voluntarily decided to resolve the fee dispute by negotiating the Settlement Agreement with the assistance and advice of independent counsel. On this record, [Fair] cannot complain that he would have arbitrated the fee dispute instead of entering into the Settlement Agreement.”
We conclude that the court got it exactly right.
On appeal, Fair argues for a de novo standard of review on the basis that the court decision misinterpreted and misapplied section 1281.2 and the engagement letters. We disagree. “Independent review is appropriate only when the facts permit just one reasonable inference. [Citation.]” (Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1043 (Bower).) Because there are factual disputes as to what Fair knew at the time he entered into the settlement, the substantial evidence standard of review applies to the court’s findings that Fair knew of his right to arbitrate and that his execution of the settlement agreement and the releases therein was “voluntary, knowing and intelligent.” The court’s finding that any potential malpractice was known to Fair before he executed the settlement agreement was amply supported by substantial evidence. (Ibid.) On appeal, as below, Fair points to no other specific evidence of professional malpractice by Coblentz.
Substantial evidence also supports the court’s findings with regard to Fair’s waiver of his right to arbitration. The engagement letters notified him of his right to arbitrate fee disputes. Furthermore, Fair had been an experienced, practicing attorney for many years and was represented by independent legal counsel during settlement negotiations and at the time he signed the agreement. It is virtually inconceivable that he was unaware of his right to arbitrate the fee dispute.
We turn to the arguments at the heart of Fair’s appeal: First, that the engagement letters required Coblentz to notify him in writing of his right to arbitrate at the time the fee dispute arose and that the settlement agreement was void because he was not so notified. Second, that Fair never waived his right to arbitrate.
The clear language of the engagement letters provides that written notice of the right to arbitrate will be provided “as required by the California State Bar Act.” The State Bar Act requires written notice of the right to arbitration at the time a lawsuit is initiated against the client for fees. (State Bar Act, rule 3.501(b).) No action for fees was initiated by Coblentz. As counsel for Fair acknowledged at the hearing on the motion to compel arbitration, “we agree under the State Bar Act they weren’t required to give the notice of right to arbitration.” Nevertheless, counsel argued Fair had a contractual right to written notice under the engagement letters when the fee dispute arose. We disagree. The provision of the engagement letters specifically references the State Bar Act and to interpret it otherwise, would render that language surplusage, which should be avoided and which we decline to do. (See Dalton v. Easy Bay Mun. Utility Dist. (1993) 18 Cal.App.4th 1566, 1571.)
Moreover, the court found Fair knew of his right to arbitrate, yet knowingly and voluntarily entered into the settlement agreement, waiving that right. (Gustafson v. State Farm Mut. Auto. Ins. Co., supra, 31 Cal.App.3d at p. 365 [§ 1281.2 and case authority “make it clear (1) that waiver of the right to compel arbitration is a preliminary question which should be decided by the trial court considering a petition to compel arbitration, and (2) that a valid release signed by [the party seeking to arbitrate] constitutes a waiver of the right to compel arbitration”]; see also, Commercial Ins. Co. of Newark v. Copeland, supra, 248 Cal.App.2d at pp. 565 [same].)
“The question of waiver is generally a question of fact, and the trial court’s finding of waiver is binding on us if it is supported by substantial evidence. (St. Agnes Medical Center [(2003)] 31 Cal.4th [1187,] 1196.) ‘We infer all necessary findings supported by substantial evidence [citations] and “construe any reasonable inference in the manner most favorable to the judgment, resolving all ambiguities to support an affirmance.” ’ [Citation.] . . . ‘[W]e may reverse the trial court’s waiver finding only if the record establishes a lack of waiver as a matter of law.’ [Citation, italics added.]” (Bower, supra, 232 Cal.App.4th at p. 1043.) The evidence introduced below demonstrated that Fair was (1) aware of his right to compel arbitration of the fee dispute, (2) acted inconsistently with that right in executing the settlement agreement, and (3) that Coblentz was prejudiced as a result by agreeing to forego part of the fees it was owed and by entering into a structured payment schedule. (Ibid.) There is ample evidence to support the court’s finding of waiver.
In light of the above, Fair’s argument that he “never intentionally relinquished his right to arbitration because the parties never entered a valid settlement agreement” is circular. His claim that the releases in the settlement agreement were not valid because he did not knowingly and intentionally waive his right to arbitrate because he was not specifically advised of that right before he signed the agreement is unpersuasive, given the court’s findings and the circumstances presented. Even if Fair’s interpretation of the engagement letters were correct and he was entitled to written notice of his right to arbitrate when the fee dispute arose, such failure would have been subsumed by the releases and waivers contained in the settlement agreement, where Fair knew he had the right to arbitrate fee disputes, as the court found.
We conclude the trial court did not err in denying Fair’s motion to compel arbitration.
DISPOSITION
The judgment is affirmed. Coblentz is awarded its costs on appeal.
 


_________________________
Kline, P.J.


We concur:


_________________________
Richman, J.


_________________________
Stewart, J.























Coblentz Patch Duffy & Bass, LLP v. Fair (A149688)