MORDECHAI KACHLON v. DRESSLER LAVINA LLP (2010)

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

Two attorneys in succession handled legal matters for plaintiffs.   The attorneys were not affiliated with each other.   Plaintiffs brought a legal malpractice action against the attorneys, alleging they breached their respective duties.   The second attorney moved to compel arbitration pursuant to a clause in his retention agreement with plaintiffs.   The trial court denied the motion on the ground that the first attorney was not party to the agreement, presumably because it was concerned about the danger of inconsistent rulings.   We conclude the inarbitrability of plaintiffs' claims against the first attorney does not preclude arbitration of their claims against the second.   Accordingly, we reverse.

BACKGROUND

This is the latest in a series of appeals by parties to tangled business and personal relationships gone sour.   The facts of the case are set forth in Markowitz v. Fidelity Nat. Title Co. (2006) 142 Cal.App.4th 508 (Kachlon I ) and Kachlon v. Markowitz (2008) 168 Cal.App.4th 316 (Kachlon II ).   The following summary is gleaned from those cases and the instant complaint.

Plaintiffs Mordechai and Monica Kachlon were owed $53,000 by Debra and Donny Markowitz, the debt represented by a promissory note and secured by a deed of trust.   The Markowitzes also owed Mordechai for personal loans and for contractor services he had performed at their home.   These latter debts were unsecured.  (Kachlon II, at p. 324.)

Plaintiffs retained an attorney, Daniel Spielfogel, “to represent them with respect to” the debts.   In July 2002, Mordechai agreed in writing that the debt underlying the note had been paid in full.  (Kachlon I, at pp. 513-514.)   Spielfogel nevertheless advised plaintiffs to initiate nonjudicial foreclosure proceedings on the note and trust deed.   Plaintiffs initiated foreclosure proceedings in May 2003, but the trustee dismissed the proceeding after seeing evidence that the $53,000 note had been fully satisfied.  (Kachlon II, at p. 328.)   In June 2003, again on Spielfogel's advice, plaintiffs recommenced foreclosure proceedings.  (See Kachlon II, at p. 328.)   Mordechai also sued the Markowitzes for breach of contract and in quantum meruit (the quantum meruit lawsuit), alleging they breached a home improvement contract and failed to repay the personal loans.  (Kachlon II, at p. 324.)   It is not clear whether Spielfogel was involved in this litigation.

In August 2003, the Markowitzes filed a lawsuit against plaintiffs, alleging they wrongfully initiated nonjudicial foreclosure proceedings under the deed of trust.   This and Mordechai's quantum meruit lawsuit were consolidated.   (Kachlon II, at p. 324.)

In mid-2003, after their relationship with Spielfogel ended, plaintiffs hired Salvadore LaVina, of the law firm Dressler & LaVina LLP (collectively Dressler & LaVina).   Dressler & LaVina advised plaintiffs to continue with the nonjudicial foreclosure proceedings and handed the quantum meruit litigation over to a third attorney, Robert Gilchrest.

Plaintiffs suffered an adverse judgment in the litigation, the court ordering them to pay substantial damages and attorney fees.  (Kachlon II, at pp. 330-331.)   They then filed this malpractice lawsuit against their attorneys.   They alleged Spielfogel failed to advise them to drop the foreclosure proceedings and proceed only with the quantum meruit lawsuit, which “compromised” the quantum meruit lawsuit by “polluting” it with a wrongful foreclosure.

Plaintiffs alleged Dressler & LaVina negligently advised them to continue with foreclosure proceedings and negligently referred them to Gilchrest, who bungled the litigation.

Dressler & LaVina moved to compel arbitration of all matters at issue between “the parties” in the action, arguing “the parties” entered into a contract calling for the arbitration of all disputes.   The contract to which Dressler & LaVina referred comprised two engagement letters sent by Dressler & LaVina to plaintiffs on October 2003 and April 2004.   The letters provided, “Any ․ dispute arising under this Agreement or in connection with the provision of legal services to you pursuant to this Agreement, including, without limitation, any claim for breach of contract, professional negligence or breach of fiduciary duty, shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association.”   Spielfogel was not party to the agreement.   Dressler & LaVina prayed for an order compelling plaintiffs to arbitrate their claims against Dressler & LaVina.

Plaintiffs did not oppose the motion to compel arbitration but Spielfogel did.   Spielfogel argued Civil Code section 1281.2 authorized the court to refuse to enforce the arbitration agreement when a party to the arbitration would also be involved in pending litigation with a third party.   He argued that although an arbitration agreement existed between plaintiffs and Dressler & LaVina, he was not party to it and could not be bound by it, and “[a]s against Spielfogel, the Superior Court is the only proper venue for the case to proceed.”  (All caps typeface omitted.)  “What if the jury were to find that the Kachlons themselves insisted on pursuing the non-judicial foreclosure, and an arbitrator determined the converse?” he speculated.   It would be “improper for the court to order the entire action to arbitration and deny the third parties their right to a jury.”

The court denied Dressler & LaVina's motion on the ground that “Spielfogel was not a party to the arbitration agreement.”

On appeal,¹ Dressler & LaVina argues it sought arbitration only of the claims between it and plaintiffs, not between plaintiffs and Spielfogel.   Neither plaintiffs nor Spielfogel oppose the appeal.

DISCUSSION

A petition to compel arbitration based on a written arbitration agreement will be granted unless “[a] party to the arbitration agreement is also a party to a pending court action ․ with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.”  (Code Civ. Proc., §§ 1281, 1281.2, subd. (c).)  “The determination of arbitrability is a legal question subject to de novo review.  [Citation.]  We will uphold the trial court's resolution of disputed facts if supported by substantial evidence.   [Citation.]  Where, however, there is no disputed extrinsic evidence considered by the trial court, we will review its arbitrability decision de novo.   [Citation.]”  (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1277.)

That Spielfogel is not party to the arbitration agreement is no ground to deny arbitration as between plaintiffs and Dressler & LaVina.   Nothing in the record suggests Spielfogel is associated or in privity with Dressler & LaVina or that plaintiffs' claims against them arise from the same or related transactions.   The attorneys' alleged negligence occurred in different transactions-their respective (and successive) handling of plaintiffs' legal affairs.   And Spielfogel's exclusion from arbitration gives rise to no possibility of conflicting rulings on a common issue of law or fact.   Even if, as he postulated below, the arbitrator and court came to different conclusions regarding the cause of plaintiffs' injuries-one concluding plaintiffs were at fault and the other concluding their attorneys were-the rulings would not conflict because neither would have res judicata effect as to the other.  (See Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 835 [no nonmutual collateral estoppel in arbitration proceedings].)

Spielfogel did not directly disagree, below.   In his opposition to the motion, he contended only that as to him, the superior court was the proper venue, and he was entitled to a jury.

What we have here is failure to communicate.   Dressler & LaVina's notice of motion was ambiguous as to Spielfogel:  It sought an order compelling arbitration of all matters at issue between “the parties” to the action, which included Spielfogel, but did so on the ground that “the parties” had entered into a contract containing an arbitration clause, which Spielfogel had not.   Though Dressler & LaVina later implied they sought arbitration only against plaintiffs-”Plaintiffs have refused to arbitrate”;  “the Court should grant the instant Motion to compel [plaintiffs] to pursue arbitration of their controversies”-they nowhere said so outright.   They do now.

DISPOSITION

The order is reversed.   On remand, the trial court shall grant the petition to compel arbitration as among plaintiffs, Salvador LaVina, and Dressler & LaVina.   The parties are to bear their own costs on appeal.

NOT TO BE PUBLISHED.

We concur:

FOOTNOTES

FN1. An order denying a petition to compel arbitration is appealable.   (Code Civ. Proc., § 1294, subd. (a).).  FN1. An order denying a petition to compel arbitration is appealable.   (Code Civ. Proc., § 1294, subd. (a).)

ROTHSCHILD, Acting P. J. JOHNSON, J.