Arbitration Insight No. 3

TRIAL DEMAND AFTER FEE ARBITRATION IS STRICTLY CONSTRUED

In an opinion that may have implications far beyond mandatory fee arbitrations, the California Supreme Court has held that Code of Civil Procedure section 473(b) cannot remedy a failure to meet the 30-day deadline for seeking a trial de novo following arbitration pursuant to Business and Professions Code section et seq. 6200 (the MFAA).

In Maynard v. Brandon (2005) 2005 DJDAR 8338, No. S114829, after an attorney sued his former clients for fees, the clients asserted their arbitration rights under the MFAA. The arbitration award was for the attorney, and the clients then demanded a trial; unfortunately, their demand was more than 30 days after the mailing of the notice of the award. The defendants then sought relief from the default, claiming excusable neglect because their attorney’s secretary had to leave work because of a death in her family.

Although section 473(b) may be used to excuse a delay in seeking a trial de novo following judicial arbitration, Maynard notes that the terms, goals and legislative history of the MFAA provide the inescapable conclusion that relief from default is not available to a party who fails to comply with the 30-day deadline. For example, both the judicial arbitration statute (C.C.P. section 1141.23) and the Rules of Court (rule 1615(d)(1)) allow the use of section 473 when a party has failed to move for a trial de novo 30 days after the filing of the arbitration award. On the other hand, Maynard also observed that MFAA arbitration, unlike judicial arbitration, “seeks to resolve disputes without reference to the judicial system …¶ Judicial arbitration, by contrast, is an adjunct to litigation. It is mandatory in certain cases, and it occurs only when an action has been filed.” Lastly, this case found that the MFAA was enacted, in part, to address the disparity in bargaining power between clients and attorneys involved in fee disputes.

Maynard never discusses contractual arbitrations but surely it, and the policies it references, shall be prominently mentioned in post-contractual arbitration proceedings whenever a party seeks relief from default after failing to comply with a statutory time deadline (C.C.P. sections 1288, 1288.2) for moving to confirm, correct or vacate an award (C.C.P. sections 1285, 1288) or to oppose such motions (C.C.P. section 1285.2). Consider that relief from default and, in particular, section 473 are not referenced in the statutory scheme regarding contractual arbitration agreements (C.C.P. section 1280 et seq.) and, similarly to fee arbitrations, such arbitration seeks “to resolve disputes without reference to the judicial system.” The moral here is to keep a careful eye on time deadlines in contractual arbitrations so that Maynard-type remedies can never be applied.

Copyright, Michael D. Marcus, July 31, 2005

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