Rosenbaum v. Howard
Owner of several companies involved in the carpet distribution business (collectively, clients), hired attorneys to defend clients against an unfair business practices lawsuit (underlying litigation). The parties signed a written retainer agreement providing for binding arbitration to resolve any disputes between them. During eight months of litigation, attorneys claimed to have provided approximately $360,000 in legal services and incurred $65,000 in costs, of which clients had paid approximately $85,000. During that eight month period, after consulting with Etess, Howard recorded a deed of trust in attorneys favor on Idaho realty owned by one of Howards companies. A dispute arose between the parties regarding attorneys fees in the underlying litigation. Clients hired current counsel to replace attorneys as their lawyers who eventually secured a judgment in clients favor in the underlying litigation. (That judgment is not before Court in this appeal.)
The parties agreed to arbitrate their fee dispute before a Los Angeles County Bar Association panel. Attorneys proposed that the arbitration be binding but clients would not agree. At a contested hearing, the arbitration panel concluded that the arbitration was binding and that attorneys were entitled to $85,000 in fees and costs, the amount clients already had paid.
Attorneys then filed this lawsuit, alleging causes of action for breach of contract, common counts, account stated, book account, quantum meruit, and fraud, and seeking economic and punitive damages. Clients cross-complained, alleging breach of fiduciary duty and slander of title regarding the trust deed, and seeking declaratory relief expunging the trust deed, reconveying their interest in the Idaho property, quieting their title thereto, and determining that the arbitration award barred attorneys claims. Clients sought economic and punitive damages.
The parties agreed that the court first would try their respective equitable claims, but, both below and on appeal, disputed whether that agreement included attorneys quantum meruit claim and whether attorneys waived their right to a jury trial of the quantum meruit claim. The case proceeded as a bench trial, including attorneys quantum meruit claim. The court found for clients on the breach of fiduciary duty and slander of title claims, awarding them $250,000 in economic and $300,000 in punitive damages. The court also ordered attorneys to reconvey their interest in the Idaho realty. Regarding attorneys quantum meruit claim, the court found that the value of attorneys legal services was approximately $45,000, ordered them to refund $40,000 previously paid to clients, and found that as a result attorneys other causes of action were moot because they were not entitled to any damages thereon. The court also found that the arbitration was binding and barred attorneys claims.
Attorneys appeal, contending that (I) the arbitration was not binding, and thus did not bar their lawsuit; (II) they were entitled to a jury trial on their contract and quantum meruit causes of action and did not waive that right; (III) the evidence was insufficient to support the finding that clients suffered any economic damages, and as a result they were not entitled to either economic or punitive damages; and (IV) the court lacked jurisdiction to affect the trust deed on realty located in Idaho. Attorneys also challenge many of the courts evidentiary rulings and claim the court displayed bias against them and preference for clients.
Court agree with contentions (I) (III), but reject contention (IV). Court reverse that portion of the judgment for clients on the amended complaint and remand for a new trial. Court reverse that portion of the judgment for clients on the breach of fiduciary duty and slander of title claims in the cross complaint and remand for the trial court to enter judgment for attorneys thereon. Court affirm that portion of the judgment on the cross-complaint ordering attorneys to reconvey their interest in the Idaho realty. Because of these conclusions Court do not address attorneys remaining contentions.
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