Judge: Virginia Keeny, Case: 19VECV01130, Date: 2022-10-20 Tentative Ruling

Case Number: 19VECV01130    Hearing Date: October 20, 2022    Dept: W

Gary Kurtz; et al. v. abba Bail bonds, Inc.; et al.

MOTION TO DISMISS; MOTION TO STAY PROCEEDINGS PENDING ARBITRATION

Date of Hearing:          October 20, 2022                    Trial Date:       None set.

Department:               W                                             Case No.:         19VECV01130

Moving Party:             Defendant Ruth Soto

Responding Party:       Plaintiff Gary Kurtz

BACKGROUND

Gary Kurtz (Plaintiff) is a California-licensed attorney who provided legal services to ABBA Bail Bonds, Inc., Jane Un, Ruth Soto, and International Capital Alliance, Inc. (collectively, Defendants).  Plaintiff accuses Defendants of failing to pay legal fees as required under their agreement and unreasonably rejecting a settlement.  Accordingly, Plaintiff filed this action against Defendants on August 6, 2019, stating the following causes of action: (1) breach of written contract, (2) common count – account stated, (3) quantum meruit, (4) breach of written contract, (5) common count – account stated, and (6) quantum meruit.

The Court entered a default judgment against Defendants before setting aside the default against Defendants and vacating the default as to defendant Ruth Soto (Soto).  Soto moves the court to dismiss for failure to provide statutory notice of Defendant’s right to arbitration prior to filing of this lawsuit, or in the alternative stay the proceedings and permit election pursuant to the mandatory fee arbitration to the state bar.

[Tentative] Ruling

DENY motion to dismiss; GRANT motion to stay proceedings pending arbitration.

LEGAL STANDARD

Business and Professions Code section 6200 et seq. establishes arbitration that is “conducted by [a] local bar association[,] . . . not some other private alternative dispute resolution provided by another forum."  (Alternative Systems, Inc. v. Carey (1998) 67 Cal.App.4th 1034, 1042-1043.)  The primary limitation of the article is that it applies only to disputes concerning "[legal] fees, costs, or both” and is specifically inapplicable to "[c]laims for affirmative relief against the attorney for damages or otherwise based upon alleged malpractice or professional misconduct.”  (BPC § 6200(a), (b)(2).)

Arbitration under section 6200 is voluntary for the client, but mandatory for the attorney.  (BPC § 6200(c).)  The attorney and the client need not have entered into a prior agreement to arbitrate for the client to elect arbitration under this article.  (Schatz v. Allen Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557, 565; Aguilar v. Lerner (2004) 32 Cal.4th 974, 984.)  The client can waive the right to arbitrate by either failing to request arbitration within 30 days of notice of their right to do so under this article or by filing an action or a responsive pleading.  (BPC § 6201(a), (b), (d).)

The attorney has a duty to give notice of the right to arbitrate under section 6200 before initiating an action against a client for legal fees.  (BPC § 6201(a).)  If the attorney fails to give notice of a client’s right to arbitrate, then the court has the discretion to dismiss the action against the client.  (BPC § 6201(a).)  The client can also invoke a stay of “any other proceedings” for fees commenced by the attorney.  (Alternative Systems, Inc., supra, at p. 1042-43.)  Proceedings are automatically stayed upon filing and service of the request for arbitration.  (BPC § 6201(c).)

ANALYSIS

BPC § 6200 Governs the Dispute Between Plaintiff and Soto

Section 6200 provides that attorneys and their clients can resolve disputes over the payment of fees through arbitration.  The underlying action is a dispute over the payment of fees from Defendants from legal services provided by Plaintiff.  Moreover, the underlying motion is not made based on Plaintiff’s alleged malpractice or professional misconduct.

Therefore, section 6200 governs the dispute between Plaintiff and Soto.

Plaintiff Did Not Serve Soto with Notice of the Right to Arbitrate under BPC § 6200

Section 6200 requires the attorney to serve notice of the client’s right to arbitrate before or at the same time as the summons and complaint of the action for legal fees.  In this case, the Court previously ruled:

“Ms. Soto credibly attests that she no longer resided in the apartment at which she was allegedly subserved on October 3, 2019. She was not living in that apartment when the package was delivered to the security guard at the front of the building, and the package was subsequently mailed to her former address, not her actual “abode.”  The court agrees with Ms. Soto that she has established that she was not properly served with the complaint and summons.  Further, the court did not find credible evidence that she had actual notice of the complaint.  The court does not impute Ms. Un’s knowledge to Ms. Soto, despite their relationship.  Accordingly, the court finds that the default as to Ms. Soto alone should be set aside pursuant to Evidence Code Section 473.5(a).”

(Ruling on Motion for Order Setting Aside Default Judgment, at p. 8.)

Therefore, in accordance with the Court’s previous ruling, Plaintiff did not serve Soto with notice of the right to arbitrate under section 6200.

Soto Did Not Waive the Right to Arbitrate under BPC § 6200

Plaintiff does not claim to have served Soto with notice of the right to arbitrate under section 6200 before or at the same time as Soto was served with the summons and complaint; instead, Plaintiff claims that Soto waived the right to arbitration.

Plaintiff does not claim Soto filed a suit or responsive pleading that would constitute a waiver of the right to arbitrate under section 6200.

Plaintiff and Soto disagree, however, as to whether Soto waived the right to arbitrate by failing to request arbitration within 30 days of notice under section 6201(a).  Plaintiff argues Soto “had knowledge of the required [n]otice” when Soto filed the motion to vacate the default judgment on March 8, 2022 and when Soto filed this underlying motion on August 8.  But the statute does not require the client to request arbitration within 30 days of actual or constructive notice, but that the client has 30 days to request arbitration after the attorney gives notice in compliance with section 6200.  As stated above, Plaintiff did not give Soto notice in compliance with section 6200.  It is immaterial on the issue of waiver whether Soto eventually attained actual notice of the right to arbitrate; the statute only looks to whether the attorney complied with the statutory requirements of giving notice before the 30 days begins to toll.

Therefore, Soto did not waive the right to arbitrate under section 6200.

Proceedings Should Be Stayed Pending Arbitration

The only remaining question is whether the Court should exercise its discretion to dismiss the action as to Soto or to stay proceedings pending arbitration.  Even though Plaintiff did not meet the notice requirements of 6200 and Soto did not waive the right to arbitrate under that article, it is more prudent for the Court to enter a stay than a dismissal.  If the arbitration is non-binding, then the entire action may return to the Court.  If the arbitration is binding, then one or both of the parties may request the Court to enter the award as a judgment or challenge the award.  In either event, it would be inefficient to force the parties to file a new action and each pay initial filing fees when this action can be the vehicle for post-arbitration proceedings.

Therefore, proceedings should be stayed pending arbitration.

CONCLUSION

For the preceding reasons, the Court orders the following:

Soto’s motion to dismiss is DENIED.

Soto’s motion to stay proceedings pending arbitration is GRANTED.

Soto to give notice.