Supreme Court of California Justia
Citation 45 Cal.4th 557- original opinion 45 Cal.4th 1062a -opinion modified on March 11, 2009- no change in judgment

Schatz v. Allen Matkins etc.

Filed 1/26/09

IN THE SUPREME COURT OF CALIFORNIA

RICHARD A. SCHATZ,
Plaintiff and Respondent,
S150371
v.
Ct.App. 4/1 D047347
ALLEN MATKINS LECK GAMBLE
& MALLORY LLP,
San Diego County
Defendant and Appellant.
Super. Ct. No. GIN045182
___________________________________ )

Under the mandatory fee arbitration act (MFAA, Bus. & Prof. Code,
§ 6200 et seq.),1 when there is a fee dispute between an attorney and a client, the
client may choose to submit the matter to arbitration by a local bar association. If
the client elects such arbitration, the attorney must agree to arbitrate. The
arbitration will be binding, however, only if the attorney and client so agree in
writing after the dispute has arisen. Otherwise, either party may request a trial de
novo within 30 days after the arbitration has concluded.
We consider in this case the relationship between arbitration under the
MFAA, which authorizes a trial de novo, and a predispute contractual arbitration
agreement entered into by an attorney and client pursuant to the California
Arbitration Act (CAA, Code Civ. Proc., § 1280 et seq.). In Aguilar v. Lerner

1
All references are to this code unless otherwise indicated.
1


(2004) 32 Cal.4th 974 (Aguilar), as explained at greater length below, we
determined that a client who had not chosen MFAA arbitration could not oppose a
motion to compel contractual arbitration under the CAA by invoking the MFAA’s
right to a trial de novo, because in not choosing MFAA arbitration, the client had
waived any rights he or she may have had under the MFAA. We left undecided
the issue of whether a client who does choose MFAA arbitration may request a
trial de novo after that arbitration has concluded, when to do so would defeat the
attorney’s motion to compel contractual arbitration under the CAA.
Although the majority of the court declined to reach this question in
Aguilar, Justice Chin, joined by Justices Baxter and Brown, addressed the issue in
a concurring opinion. Justice Chin concluded, for reasons discussed below, that
the MFAA’s right to a trial de novo was not intended to override a contractual
obligation to arbitrate disputes pursuant to the CAA. He, therefore, would have
disapproved of a Court of Appeal case that held to the contrary, Alternative
Systems, Inc. v. Carey (1998) 67 Cal.App.4th 1034 (Alternative Systems).
The Court of Appeal in the present case declined to follow Justice Chin’s
concurring opinion and held that the MFAA’s right to a trial de novo after
statutory arbitration defeats any contractual obligation to arbitrate attorney-client
fee disputes. We granted review to resolve this issue.
We conclude that the Court of Appeal is incorrect. Although the language
of the statute is not entirely free from ambiguity, construing the statute in light of
the presumption against implied repeal leads to the conclusion that the MFAA
does not limit the ability of attorneys and clients to enter into binding contractual
arbitration. We reverse the judgment of the Court of Appeal.
2
FACTUAL AND PROCEDURAL HISTORY
The essential facts, as quoted from the Court of Appeal opinion, are not in
dispute. In a February 1999 agreement, Dr. [Richard A.] Schatz retained [the law
firm of Allen Matkins Leck Gamble & Mallory (Allen Matkins)] to represent him
in a dispute with [another doctor] concerning the assignment of income from a
partnership. The agreement stated it would also apply to “any additional matters
we handle on your behalf or at your direction.” The agreement contained an
arbitration section, which provided: “If you do not agree to arbitrate disputes with
us, simply line out this section. Arbitration is not a precondition to us representing
you. By signing this letter without deleting this section, you agree that, in the
event of any dispute arising out of or relating to this agreement, our relationship,
or the services performed (including but not limited to disputes regarding
attorneys’ fees or costs . . . ), such dispute shall be resolved by submission to
binding arbitration in San Diego County, California, before a retired judge or
justice. . . .” Dr. Schatz signed the agreement without lining out the arbitration
section.
In February 2000, without entering into another agreement, Dr. Schatz
retained Allen Matkins to represent him in an easement dispute with a different
party or parties affecting the rear access road to his Rancho Santa Fe home. Dr.
Schatz paid Allen Matkins $179,088.69 in fees and costs incurred in the matter,
but [stopped making payments approximately two months before trial]. Allen
Matkins proceeded to trial despite nonpayment, and in an April 2003 letter to Dr.
Schatz, it demanded [an additional] $169,917.42 in outstanding fees and costs so
“arbitration will not be necessary.”
Dr. Schatz did not respond, and Allen Matkins apparently did nothing for
some time. In a January 2004 letter to him, Allen Matkins invoked the arbitration
clause of the agreement in the [previous partnership dispute] matter. In a written
3
response, Dr. Schatz asserted his fee dispute concerned undisclosed conflicts of
interest in the easement matter. Dr. Schatz claimed the agreement’s arbitration
provision [did not apply] because it did not refer to the easement litigation and its
reference to additional matters was not highlighted or otherwise emphasized.
Alternatively, Dr. Schatz claimed the arbitration provision was illegal under
Alternative Systems, supra, 67 Cal.App.4th 1034. Dr. Schatz advised he wished to
exercise his ‘statutory rights to nonbinding fee arbitration, and, if he so elects, trial
de novo before a jury.”
Allen Matkins advised Dr. Schatz it believed the arbitration provision
applied], but it agreed to nonbinding arbitration under the MFAA through the San
Diego County Bar Association (Bar Association). Allen Matkins provided Dr.
Schatz with an application for the arbitration along with rules and instructions on
the procedure. Allen Matkins requested that Dr. Schatz notify it within 10 days if
he elected nonbinding arbitration.
At Dr. Schatz’s insistence, Allen Matkins then provided him with a
statutory “Notice of Client’s Right to Arbitration.” The notice provides a client
has 30 days from the date of its receipt to apply for arbitration.
The matter was arbitrated in April 2005 through the Bar Association, and
the following month the arbitrators ruled in favor of Allen Matkins. Dr. Schatz
then filed a complaint seeking a trial de novo, declaratory relief and refund of
attorney fees. In response, Allen Matkins petitioned to compel binding arbitration
under the preexisting agreement. In his opposition, Dr. Schatz argued that [the
MFAA, as construed by the Alternative Systems court,] invalidate[d] the binding
arbitration provision, and in reply, Allen Matkins argued that in Aguilar the
Supreme Court impliedly abrogated the holding in Alternative Systems, and
binding contractual arbitration would satisfy the MFAA’s de novo trial
4
requirement. The court agreed with Dr. Schatz and denied the petition to compel
arbitration.
The Court of Appeal, for reasons discussed below, agreed with the trial
court, and we granted Allen Matkins’s petition for review.
DISCUSSION
A. Overview of the MFAA and CAA
In
Aguilar, we contrasted the MFAA and CAA arbitration schemes. “The
CAA ‘represents a comprehensive statutory scheme regulating private arbitration
in this state. (§ 1280 et seq.) Through this detailed statutory scheme, the
Legislature has expressed a “strong public policy in favor of arbitration as a
speedy and relatively inexpensive means of dispute resolution.” ’ [Citation.] ‘The
statutes set forth procedures for the enforcement of agreements to arbitrate ([Code
Civ. Proc.,] §§ 1281.2-1281.95), establish rules for the conduct of arbitration
proceedings except as the parties otherwise agree (id., §§ 1282-1284.2), describe
the circumstances in which arbitrators’ awards may be judicially vacated,
corrected, confirmed, and enforced (id., §§ 1285-1288.8), and specify where,
when, and how court proceedings relating to arbitration matters shall occur (id., §§
1290-1294.2).’ [Citation.] . . .
“By contrast, the MFAA constitutes a separate and distinct arbitration
scheme. The MFAA was first proposed by the Board of Governors of the State
Bar of California in 1976 when, finding that disputes concerning legal fees were
the most serious problem between members of the bar and the public, the board
sought to create a mechanism for arbitrating disputes over legal fees and costs.
Recognizing the ‘disparity in bargaining power in attorney fee matters which
favors the attorney in dealings with infrequent consumers of legal services’
(Hargarten & Ardisson, Fine Tuning California’s Mandatory Attorney Fee
5
Arbitration Statute (1982) 16 U.S.F. L.Rev. 411, 415), that many clients could not
afford hiring additional counsel to litigate fee disputes in the civil courts (ibid.),
and that previous schemes that called for voluntary arbitration were ineffective (id.
at pp. 413-414), the Legislature enacted the MFAA. The original legislation
provided in pertinent part: ‘The Board of Governors [of the State Bar of
California] shall, by rule, establish, maintain, and administer a system and
procedure for the arbitration of disputes concerning fees charged for professional
services by members of the State Bar or by members of the Bar of other
jurisdictions.’ (Stats. 1978, ch. 719, § 1, p. 2249.) This mandate has been
expanded to include mediation, but is otherwise unchanged today. (§ 6200, subd.
(a).)
“In contrast to the CAA, which is governed by the Code of Civil Procedure,
the MFAA has its own rules and limitations, as set forth in the Business and
Professions Code. As one appellate court has described it, the MFAA ‘is a closed
system and the binding arbitration agreed to . . . is the arbitration conducted by [a]
local bar association under the MFAA, not some other private alternative dispute
resolution provided by another forum.’ (Alternative Systems[, supra,] 67
Cal.App.4th [at pp.] 1042-1043.) The primary limitation of the MFAA is that it
applies only to disputes concerning ‘[legal] fees, costs, or both’ (§ 6200, subd. (a))
and is specifically inapplicable to ‘[c]laims for affirmative relief against the
attorney for damages or otherwise based upon alleged malpractice or professional
misconduct’ (id., subd. (b)(2)). By contrast, virtually any civil dispute, including
claims of legal malpractice, can be the subject of arbitration under the CAA.
[Citations.] . . .
“The nature of the obligation to arbitrate under the MFAA differs from that
under standard arbitration in two important ways. First, the obligation to arbitrate
under the MFAA is based on a statutory directive and not the parties’ agreement.
6
Thus, a client may invoke the MFAA and proceed to arbitration despite the
absence of any prior agreement to do so. By contrast, standard arbitration requires
that both parties to a dispute agree to arbitrate. [Citation.]
“Second, section 6200, subdivision (c) provides: ‘[A]rbitration under this
article shall be voluntary for a client and shall be mandatory for an attorney if
commenced by a client.’ In other words, whereas a client cannot be forced under
the MFAA to arbitrate a dispute concerning legal fees, at the client’s election an
unwilling attorney can be forced to do so.
“The finality of an arbitration award under the MFAA also generally differs
from an award rendered pursuant to standard arbitration under the CAA.
Although parties choosing to resolve their dispute in standard arbitration pursuant
to the CAA ‘typically expect’ that the arbitrator’s decision will be final [citations],
an award rendered pursuant to an arbitration under the MFAA is nonbinding, and
either party may seek a trial de novo (§ 6204, subd. (a)). The MFAA, however,
also provides that the parties may agree in writing that the arbitrator’s award will
be binding. (Ibid.)” (Aguilar, supra, 32 Cal.4th at pp. 983-985.)
The MFAA does not explicitly refer to CAA arbitration and the relationship
between the two arbitration schemes is not immediately apparent. However,
section 6201, subdivision (a) states: “The rules adopted by the board of governors
shall provide that an attorney shall forward a written notice to the client prior to or
at the time of service of summons or claim in an action against the client, or prior
to or at the commencement of any other proceeding against the client under a
contract between attorney and client which provides for an alternative to
arbitration under this article, for recovery of fees, costs, or both.” The term “any
other proceeding . . . under a contract between attorney and client,” which was
added by a 1996 amendment (Stats. 1996, ch. 1104, § 13, p. 7911), can be fairly
7
inferred to include contractual arbitration under the CAA. (See Aguilar, supra, 32
Cal.4th at p. 991 (conc. opn. of Chin J.).)
Section 6201, subdivision (b) further provides in pertinent part: “If an
attorney, or the attorney’s assignee, commences an action in any court or any
other proceeding and the client is entitled to maintain arbitration under this article,
. . . the client may stay the action or other proceeding by serving and filing a
request for arbitration in accordance with the rules established by the board of
governors pursuant to subdivision (a) of Section 6200.” Subdivision (c) provides
in part: “Upon filing and service of the request for arbitration, the action or other
proceeding shall be automatically stayed until the award of the arbitrators is issued
or the arbitration is otherwise terminated. The stay may be vacated in whole or in
part, after a hearing duly noticed by any party or the court, if and to the extent the
court finds that the matter is not appropriate for arbitration under the provisions of
this article. The action or other proceeding may thereafter proceed subject to the
provisions of Section 6204.”2
Section 6204 in turn provides in subdivision (a) that “[t]he parties may
agree in writing to be bound by the award of arbitrators appointed pursuant to this
article at any time after the dispute over fees, costs, or both, has arisen. In the
absence of such an agreement, either party shall be entitled to a trial after
arbitration if sought within 30 days, pursuant to subdivisions (b) and (c),” with
one exception not relevant here. Subdivision (b) provides in pertinent part: “If
there is an action pending, the trial after arbitration shall be initiated by filing a
rejection of arbitration award and request for trial after arbitration in that action

2
The italicized language was also added by the 1996 amendment. (Stats.
1996, ch. 1104, § 13, p. 7911.)
8


within 30 days after mailing of notice of the award.” Subdivision (c) provides: “If
no action is pending, the trial after arbitration shall be initiated by the
commencement of an action in the court having jurisdiction over the amount of
money in controversy within 30 days after mailing of notice of the award. After
the filing of such an action, the action shall proceed in accordance with the
provisions of Part 2 (commencing with Section 307) of the Code of Civil
Procedure, concerning civil actions generally.”
B. Alternative Systems, Aguilar, and the Court of Appeal Opinion
Two cases are critical to understanding the Court of Appeal’s holding in the
present case. In Alternative Systems, supra, 67 Cal.App.4th 1034, a fee dispute
arose related to a 1995 contract calling for binding arbitration governed by the
American Arbitration Association (AAA). The attorney invoked the binding
arbitration clause, but the client demanded arbitration under the MFAA, and after
the arbitration, timely rejected the arbitration award and requested a trial. It then
sought unsuccessfully to stay the AAA arbitration and made a special appearance
at that arbitration to challenge the arbitrator’s jurisdiction. The arbitrator rendered
an award in favor of the attorney, and the client moved to vacate the award on the
grounds that contractual arbitration was ‘preempted’ by the MFAA with its right
to trial de novo. The trial court denied the motion.
The Court of Appeal reversed. The court noted that “[t]he Legislature
amended the MFA[A] in 1996, effective January 1, 1997. Client protections have
been strengthened so that the provisions for notice, dismissal and stays now
likewise apply to any other proceeding initiated by an attorney to resolve a fee
dispute. Under the current scheme, an attorney must also give mandatory notice
when he or she commences ‘any other proceeding against the client under a
contract between attorney and client which provides for an alternative to
arbitration under this article . . . .’ (§ 6201, subd. (a), as amended by Stats. 1996,
9
ch. 1104, § 13.) Failure to give notice is a ground to dismiss other proceedings as
well. And now the client can also invoke a stay of ‘any other proceeding’ for fees
commenced by the attorney. (Ibid.)” (Alternative Systems, supra, 67 Cal.App.4th
at p. 1042, fn. omitted.)
The court observed that “[t]he main public policy informing the MFA[A]
‘is to alleviate the disparity in bargaining power in attorney fee matters which
favors the attorney by providing an effective, inexpensive remedy to a client
which does not necessitate the hiring of a second attorney. [Citation.] The
process favors the client in that [unless the client agrees in writing to arbitrate all
fee disputes under the MFA[A]] only the client can elect mandatory arbitration of
a fee dispute; the attorney must submit the matter to arbitration if the client makes
that election.’ [Citation.]” (Alternative Systems, supra, 67 Cal.App.4th at p.
1043.) The court also noted that a formal advisory opinion of the Standing
Committee on Professional Responsibility and Conduct of the State Bar had
concluded that a binding arbitration agreement between client and attorney
“contravenes the letter and spirit of the MFA[A],” essentially because the statute is
“a consumer-oriented scheme” in which “the commitment to be bound by
arbitration” would appear to follow only after the client has been made aware of
the right to judicial review after an MFAA arbitration. (Ibid., quoting Cal.
Compendium on Prof. Responsibility, pt. IIA, State Bar Formal Opn. No. 1981-
56, p. 3.) The Court went on to note that “the 1996 amendments to the MFA[A]
resolve this point by requiring that written waiver of the right to trial de novo must
occur after the dispute arises. (§ 6204, subd. (a).)” (Alternative Systems, at
pp. 1043-1044.)
The court also rejected the attorney’s argument that “an AAA arbitration
proceeding would suffice as the ‘trial after arbitration’ within the meaning of
section 6204. . . . This is a farfetched notion and of course the statute does not so
10
provide. Indeed, section 6204 makes it clear that the trial is commenced by a
court action and proceeds in accordance with provisions generally pertaining to
civil actions. (§ 6204, subd. (c).)” (Alternative Systems, supra, 67 Cal.App.4th at
p. 1042, fn. 5.)
In Aguilar, supra, 32 Cal.4th 974, a dispute arose between an attorney and
client, with the latter suing the former for malpractice. In filing such an action, the
client waived his right to arbitrate the fee dispute under the MFAA. (§ 6201,
subd. (d).) The attorney moved to compel binding arbitration pursuant to the
CAA and added a claim for unpaid attorneys fees and costs. (Aguilar, supra, 32
Cal.4th at pp. 980-981.) The client contended that under the MFAA, arbitration
was optional for the client and could not be compelled, and that therefore the
motion to compel should not be granted. Like the lower courts, we concluded that
the client may not defeat a motion to compel, because in waiving his right to an
MFAA arbitration, he waived all rights that a client may have under the MFAA
scheme. (Id. at pp. 989-990.) The court expressly declined to decide whether the
client could have defeated the motion to compel arbitration at the conclusion of
the MFAA arbitration if the client had not waived his MFAA arbitration rights.
(Id. at p. 989, fn. 6.)
Justice Chin, in a concurring opinion joined by Justices Baxter and Brown,
addressed that precise issue. Justice Chin drew a very different lesson from the
1996 amendments discussed above than had the Alternative Systems court. He
quoted section 6201, subdivision (a), as amended in 1996, which requires an
attorney to inform the client of the client’s right to arbitration under the MFAA
“ ‘prior to or at the time of service of summons or claim in an action against the
client, or prior to or at the commencement of any other proceeding against the
client under a contract between attorney and client which provides for an
alternative to arbitration under this article . . . .’ ” (Aguilar, supra, 32 Cal.4th
11
974, 991 (conc. opn. of Chin, J.).) Justice Chin then stated: “The italicized
language acknowledges that the parties may agree to some proceeding to resolve
the controversy other than a judicial action, such as binding arbitration under the
CAA. The same section goes on to provide that if an attorney ‘commences an
action in any court or any other proceeding . . . , the client may stay the action or
other proceeding’ by requesting arbitration under the MFAA, which must be done
‘prior to the filing of an answer in the action or equivalent response in the other
proceeding . . . .’ (§ 6201, subd. (b), italics added.) If the client does request
nonbinding arbitration, ‘the action or other proceeding shall be automatically
stayed until the award of the arbitrators is issued or the arbitration is otherwise
terminated.’ (§ 6201, subd. (c), italics added.) This means that if the client
requests nonbinding arbitration under the MFAA, the judicial action or other
proceeding is stayed, but only until the nonbinding arbitration is finished. The
other proceeding is merely stayed pending the nonbinding arbitration, not
dismissed permanently.” (Ibid.)
Justice Chin acknowledged that “[i]n some respects, the MFAA statutory
language is not entirely clear. Section 6201, subdivision (c), also states that a
court may vacate the stay if it finds the matter not appropriate for nonbinding
arbitration under the MFAA, and that ‘[t]he action or other proceeding may
thereafter proceed subject to the provisions of Section 6204.’ Section 6204, in
turn, provides that the parties to the nonbinding arbitration may agree to be bound
by the arbitrators’ award, but, as it reads today, only after the controversy has
arisen. It also states that if there is no such agreement, ‘either party shall be
entitled to a trial after arbitration if sought within 30 days . . . .’ (§ 6204, subd.
(a), italics added.) The statute goes on to provide how ‘the trial after arbitration
shall be initiated’ both when an action is already pending and when no action is
pending. (§ 6204, subds. (b) & (c).) In the latter situation, ‘the trial after
12
arbitration shall be initiated by the commencement of an action in the court having
jurisdiction over the amount of money in controversy . . . .’ (§ 6204, subd. (c),
italics added.).” (Aguilar, supra, 32 Cal.4th at pp. 991-992 (conc. opn. of Chin, J.)
Yet Justice Chin rejected the inference the Alternative Systems court drew
from this language that the client’s right to trial de novo trumps contractual
obligations under binding arbitration. “Although this reading of section 6204 is
plausible if the section is viewed in isolation, the section does not exist in isolation
but is part of the MFAA, which includes section 6201. It is ‘a cardinal rule of
statutory construction, that “every statute should be construed with reference to
the whole system of law of which it is a part so that all may be harmonized and
have effect.” ’ [Citation.] The references to a trial and court action in section 6204
do not negate section 6201. In context, and in order to give effect to section 6201,
section 6204 must be construed as merely providing the procedure to follow if the
nonbinding arbitration is followed by a judicial action, not as prohibiting the
parties from agreeing to some other proceeding. The latter interpretation would
make meaningless section 6201’s acknowledgment that the parties may agree to
some form of dispute resolution other than judicial action, and its repeated
references to some proceeding other than a court action.” (Aguilar, supra, 32
Cal.4th at p. 992 (conc. opn. of Chin, J.).)
Justice Chin also rejected Alternative Systems because of what he viewed as
the illogical consequences of the decision. “We are holding today that a client who
does not request nonbinding arbitration has waived the MFAA’s protections, and
the binding arbitration agreement is enforceable. If Alternative Systems were to
remain valid, that would mean that a client who agreed to binding arbitration
could evade that agreement simply by requesting nonbinding arbitration. The
lesson future clients who had agreed to binding arbitration would learn from this
case is that if they want to evade their agreement, they must demand nonbinding
13
arbitration whether or not they otherwise want it. Future clients who wish to sue
in court despite an arbitration agreement will be forced to go to nonbinding
arbitration before they could do so. This situation would be unfortunate for two
reasons. First, it would permit a client to evade an arbitration agreement by a
simple procedural device, contrary to the letter and intent of the CAA. Second, it
would require, as a prerequisite to evading the arbitration agreement, that the
client pursue nonbinding arbitration. This would result in many sham nonbinding
arbitrations that neither party wanted or intended to accept.” (Aguilar, supra, 32
Cal.4th at pp. 992-993 (conc. opn. of Chin, J.).)
Justice Chin concluded: “We cannot reasonably conclude that the
Legislature created a system whereby clients who agree to binding arbitration may
evade that agreement, but only if they go through the charade of demanding and
obtaining a nonbinding arbitration that they may not want,” and would violate our
policy of giving effect where possible to arbitration agreements. (Aguilar, supra,
32 Cal.4th at p. 993 (conc. opn. of Chin, J).)
The Court of Appeal in the present case disagreed with the analysis in
Justice Chin’s concurring opinion. Noting Justice Chin’s observation that the
statutory language was ambiguous, the court looked to the legislative history.
After citing various items of legislative history showing that the original
legislation was consumer oriented, the court stated: “Given the Legislature’s
intent, we resolve any tension between sections 6201 and 6204 in favor of
upholding client protections under the MFAA. Under Justice Chin’s analysis,
section 6204’s right to trial de novo is rendered meaningless for clients who
signed retainer agreements with binding arbitration clauses before any fee dispute
arose. Since the Legislature sought to rectify disparities in bargaining power
between clients and attorneys that favor attorneys, and to foster clients’ trust in the
legal system, we do not believe it intended to deny the trial de novo protection to a
14
large percentage of clients. . . . [¶] In line with Alternative Systems, we conclude
section 6204, as amended in 1996, gives clients the right to trial de novo after
nonbinding arbitration under the MFAA even when they have signed prospective
waivers of trial after arbitration. In such situations the MFAA trumps the CAA.”
C. Statutory Language
In construing a statute “[o]ur task is to discern the Legislature’s intent. The
statutory language itself is the most reliable indicator, so we start with the statute’s
words, assigning them their usual and ordinary meanings, and construing them in
context. If the words themselves are not ambiguous, we presume the Legislature
meant what it said, and the statute’s plain meaning governs. On the other hand, if
the language allows more than one reasonable construction, we may look to such
aids as the legislative history of the measure and maxims of statutory construction.
In cases of uncertain meaning, we may also consider the consequences of a
particular interpretation, including its impact on public policy.” (Wells v.
One2One Learning Foundation (2006) 39 Cal.4th 1164, 1190.)
Here we must construe the meaning of sections 6201 and 6204 and the
interplay between them. The former section, adopted in 1976, has always
provided that, if the client invoked its MFAA rights, any pending fee litigation
would be automatically stayed. However, as noted above, the 1996 amendments
recognized that, by the time an attorney-client fee dispute arises, the parties may
have signed an agreement to forgo court litigation, and to resolve such matters by
“proceeding[s]” of another kind. (§ 6201, subd. (a).) Hence, the statute now
includes such “other proceedings” in its automatic stay provisions. (Id.,
subds. (b), (c).)
However, the statute makes clear that, once the MFAA arbitration process
is validly completed or terminated, leaving one or both parties dissatisfied, “[t]he
15
action or other proceeding may thereafter proceed subject [only] to the provisions
of Section 6204.” (§ 6201, subd. (c), italics added.) This “or other proceeding”
reference, also added in 1996, is a strong indication that, unless section 6204
clearly provides otherwise, binding arbitration, pursuant to a preexisting
agreement, may go forward once the MFAA arbitration process is over.
Schatz argues in effect that subdivision (a) of section 6204 provides a clear
indication that the binding arbitration is disallowed. We disagree. As noted, that
section provides that “[t]he parties may agree in writing to be bound by the award
of arbitrators appointed pursuant to this article at any time after the dispute over
fees, costs, or both, has arisen. In the absence of such an agreement, either party
shall be entitled to a trial after arbitration if sought within 30 days, pursuant to
subdivisions (b) and (c).” But the import of that section is merely that the parties
may agree, after the fee dispute has arisen, to give the MFAA arbitration process
binding effect, thus foreclosing any right of a dissatisfied party to carry the case
further by any means. On the other hand, the subdivision makes clear, if there is
no such agreement, the MFAA arbitration will be nonbinding, and a party
dissatisfied with the result may carry on with the dispute.
Thus, the focus of section 6204, subdivision (a) is how the parties may
confer binding effect upon an MFAA arbitration, and may thus forestall any and all
post-MFAA proceedings that one or the other of the parties might otherwise
invoke. The subdivision does not purport to speak to whether the parties to a
nonbinding MFAA arbitration may otherwise agree, or have agreed, on how to
resolve the case if the MFAA arbitration leaves one or both parties dissatisfied.
The subdivision does not foreclose the possibility that, under a general agreement
between the parties, the nonbinding MFAA process should be followed by binding
arbitration, rather than by a lawsuit.
16
As it has since its inception, subdivision (a) of section 6204 does state that
“[i]n the absence of [a postdispute] agreement” to make the MFAA arbitration
binding, the dissatisfied party is entitled to a trial. But in context, this language
appears to be simply designed to ensure that unless the parties agree to be bound
by the MFAA arbitration, and thus to end the dispute then and there, the case may,
following MFAA arbitration, proceed by normal means. As subdivisions (a) and
(c) of section 6201 suggest, those normal means may include not only court
litigation, but “other proceedings” such as binding arbitration pursuant to a
predispute agreement between the parties.
Furthermore, while the MFAA provides that “either party shall be entitled
to a trial after [MFAA] arbitration” (§ 6204, subd. (a)), the right granted is simply
to a trial in accordance with applicable law. The MFAA confers no immunity
from valid defenses, such as the existence of a contractual obligation to arbitrate.
This is clear from section 6204, subdivision (c), which provides that “[t]he action
shall proceed in accordance with the provisions of Part 2 (commencing with
section 307) of the Code of Civil Procedure concerning civil actions generally.
(§ 6204, subd. (c), italics added.) Included in part 2 are the laws providing for
demurrers (Code Civ. Proc., § 430.10 et seq.) and motions for summary judgment
(id., § 437c). Either a demurrer or a motion for summary judgment offers an
appropriate procedural vehicle, in addition to a motion to compel arbitration (id.,
§ 1281.2), for pointing out to the court that the plaintiff has no right to sue because
he or she has agreed to arbitrate. (Charles J. Rounds Co. v. Joint Council of
Teamsters No. 42 (1971) 4 Cal.3d 888, 899.) Therefore, a person who has agreed
in writing to arbitrate a dispute, the right to “a trial” (§ 6204, subd. (a)) granted in
the MFAA would appear to be subject to a demurrer or summary judgment motion
designed to compel contractual arbitration.
17
D. Did the MFAA Impliedly Repeal the CAA?
Moreover, to the extent there is ambiguity in the statute, because section
6201 provides implicitly that CAA arbitration may be stayed and proceed subject
to section 6204, but section 6204 refers only to “trial” after MFAA arbitration, that
ambiguity must viewed in light of the presumption against implied repeal.
When one subsequently enacted statute limits the scope of an earlier statute,
such limitation is designated a partial repeal. (See Stop Youth Addition, Inc. v.
Lucky Stores, Inc. (1998) 17 Cal.4th 553, 569.) Schatz is essentially arguing that
the MFAA partially repealed the earlier enacted CAA by limiting its operation for
those who have undergone an MFAA arbitration. In addressing this argument, we
first note the MFAA does not repeal the CAA expressly. Although the MFAA
refers to an “other proceeding,” which agrees encompasses a proceeding under the
CAA, section 6204 does not mention the CAA. It would have been very easy for
the Legislature, had that been its intent, to state in section 6204 or elsewhere in the
MFAA that the arbitration it creates is to the exclusion of any other arbitration.
But it did not do so.
Turning to the question of whether the MFAA impliedly repealed the CAA,
we first note that “ ‘ “[a]ll presumptions are against a repeal by implication.
[Citations.]” [Citation.] Absent an express declaration of legislative intent, we
will find an implied repeal “only when there is no rational basis for harmonizing
the two potentially conflicting statutes [citation], and the statutes are
‘irreconcilable, clearly repugnant, and so inconsistent that the two cannot have
concurrent operation.’ ” [Citation.]’ ” (Merrill v. Navegar, Inc. (2001) 26
Cal.4th 465, 487.) “Because the ‘doctrine of implied repeal provides that the most
recently enacted statute expresses the will of the Legislature’ [citation],
application of the doctrine is appropriate in those limited situations where it is
necessary to effectuate the intent of drafters of the newly enacted statute. ‘ “In
18
order for the second law to repeal or supersede the first, the former must constitute
a revision of the entire subject, so that the court may say that it was intended to be
a substitute for the first.” ’ ” (Professional Engineers in California Government v.
Kempton (2007) 40 Cal.4th 1016, 1038, italics added.) Courts “will infer the
repeal of a statute only when . . . a subsequent act of the legislature clearly is
intended to occupy the entire field covered by a prior enactment.” (Sutherland,
Statutory Construction (6th ed. 2002) § 23.9, p. 461, also quoted in Professional
Engineers, supra, at p. 1038.) “ ‘ “ ‘The courts are bound, if possible, to maintain
the integrity of both statutes if the two may stand together.’ ” ’ ” (Stop Youth
Addition, Inc. v. Lucky Stores, Inc., supra, 17 Cal.4th at p. 569.)
When this standard is applied, it is evident the MFAA did not impliedly
repeal the CAA. The two statutory schemes do not even govern the same subject.
The MFAA concerns nonbinding arbitration that the parties did not agree to in
advance, while the CAA concerns binding arbitration agreed to in advance.
Furthermore, the two statutes may be rationally harmonized. As Justice Chin
explained in his concurring opinion in Aguilar, “Nothing in the MFAA makes [a
binding] arbitration agreement . . . unenforceable. The MFAA and the CAA
create two very different types of arbitration. . . . Both may be given effect.
Clients may, if they wish, request and obtain nonbinding arbitration under the
MFAA. That arbitration may, and often will, resolve the dispute. But if the client
does not request nonbinding arbitration, or if it is held but does not resolve the
dispute, then the MFAA has played its role, and the matter would continue without
it. Either party may then pursue judicial action unless the parties had agreed to
binding arbitration. In that event, the CAA would apply, and the dispute would go
to binding arbitration. This conclusion is consistent with the statutory language of
both the MFAA and the CAA and the strong public policy in favor of binding
19
arbitration as a means of resolving disputes.” (Aguilar, supra, 32 Cal.4th at
pp. 990-991 (conc. opn. of Chin, J.) fn. omitted.)
Schatz cites in support of his position Alternate Systems, supra, 67
Cal.App.4th at pages 1043-1044, which notes that “the 1996 amendments to the
MFA[A] . . . requir[ed] that written waiver of the right to trial de novo must occur
after the dispute arises. (§ 6204, subd. (a).)” The statutory language to which the
Alternate Systems court referred is that “[t]he parties may agree in writing to be
bound by the award of arbitrators appointed at any time after the dispute over fees,
costs, or both, has arisen.” (§ 6204, subd. (a), as amended by Stats. 1996,
ch. 1104, § 16, p. 7914).) But whatever that statute may have meant in 1996, it
was amended in 1998 to add the phrase “pursuant to this article” to the first
sentence of section 6204, subdivision (a), so that sentence read, and now reads,
with the 1998 language in italics: “The parties may agree in writing to be bound
by the award of arbitrators appointed pursuant to this article at any time after the
dispute over fees, costs, or both, has arisen.” (Stats. 1998, ch. 798, § 1.) By
limiting its application to arbitration under the MFAA, the Legislature impliedly
recognized other possible forms of arbitration, thereby indicating that the MFAA
and CAA may stand together.
Construing the MFAA to impliedly repeal the CAA would not only be
contrary to the policies in favor of enforcing agreements to arbitrate and against
finding implied repeal, it would also create two anomalies that the Legislature
cannot have intended. One anomaly is identified in Justice Chin’s concurring
opinion in Aguilar, supra, 32 Cal.App.4th at pages 992-993. A client would be
permitted to evade its agreement to arbitrate, but only if it demands and goes
through with nonbinding arbitration under the MFAA. Thus, a client that wanted
no arbitration of any kind, but especially did not want binding arbitration, would
20
have to go through the charade of demanding and obtaining nonbinding arbitration
under the MFAA before it could go to trial.
The second anomaly arises from the fact that both parties agreed to binding
arbitration. Because only the client may invoke nonbinding arbitration under the
MFAA, attorneys could not unilaterally evade their agreement to arbitrate. But
attorneys, like clients, could do so if the client requested nonbinding arbitration
under the MFAA. Thus, a client that wished first to obtain what might be
particularly quick and cheap nonbinding arbitration under the MFAA, but that also
wanted to obtain the relatively inexpensive binding arbitration to which the parties
agreed if the MFAA arbitration failed to resolve the dispute, might hesitate to
demand nonbinding arbitration, opening itself up to the risks of a trial de novo. It
would be illogical, and contrary to the purpose behind both the MFAA and the
CAA, for the Legislature to permit attorneys to evade their agreement to arbitrate
if, but only if, the client invokes the MFAA. Yet that is what would occur under
the position Schatz advocates.3
In short, an adoption of Schatz’s position of implied repeal would result in
a statutory scheme that is quite illogical. Giving effect to both the MFAA and the
CAA, on the other hand would be consistent with the distinct purposes behind
both of those statutory schemes.

3
The Court of Appeal relied on the legislative history of the MFAA to
emphasize that it was intended to be a consumer-oriented piece of legislation
designed to address disparities in bargaining power between attorneys and clients.
While this is no doubt true (Aguilar, supra, 32 Cal.4th at p. 983), it does not
follow that the Legislature considered an implied repeal of the CAA to be part of
the MFAA’s pro-consumer initiative. Nothing in the legislative history we have
reviewed conclusively reveals an intent to limit the operation of the CAA other
than to permit the parties to temporarily stay its proceeding for purposes of
engaging in MFAA arbitration.
21



For all of the above reasons, we conclude that the MFAA does not stand as
an obstacle to the enforcement of a valid agreement to arbitrate pursuant to the
CAA.4
III. DISPOSITION
The judgment of the Court of Appeal is reversed and remanded for
proceedings consistent with this opinion.
MORENO, J.

WE CONCUR: GEORGE, C. J.
KENNARD,
J.
BAXTER,
J.
WERDEGAR,
J.
CHIN,
J.
CORRIGAN,
J.

4
Schatz also argues that his agreement for contractual arbitration applied
only to his engagement of Allen Matkins in the 1999 partnership dispute and not
the 2000 easement dispute from which the present fee dispute arises. Moreover,
he contends that for various reasons Allen Matkins is estopped from compelling
contractual arbitration. These issues were raised in the Court of Appeal but the
court did not address them because of its conclusion that contractual arbitration
was categorically unavailable. The Court of Appeal is to address these issues on
remand.
22


See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Schatz v. Allen Matkins Leck Gamble & Mallory LLP
__________________________________________________________________________________

Unpublished Opinion


Original Appeal
Original Proceeding
Review Granted
XXX 146 Cal.App.4th 674
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S150371
Date Filed: January 26, 2009
__________________________________________________________________________________

Court:

Superior
County: San Diego
Judge: Joel M. Pressman

__________________________________________________________________________________

Attorneys for Appellant:

Howard Rice Nemerovski Canady Falk & Rabkin, Pamela Phillips, Ethan P. Schulman, Sean M. SeLegue,
Jonas M. Nahoum; Rogers Joseph O’Donnell & Phillips and Zachary M. Radford for Defendant and
Appellant.

Cooley Godward Kronish, Paul A. Renne and Charles M. Schaible for Nine Law Firms as Amici Curiae on
behalf of Defendant and Appellant.

__________________________________________________________________________________

Attorneys for Respondent:

Joseph L. Schatz for Plaintiff and Respondent.


Counsel who argued in Supreme Court (not intended for publication with opinion):

Sean M. SeLegue
Howard Rice Nemerovski Canady Falk & Rabkin
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111-4024
(415) 434-1600

Joseph L. Schatz
201 California Street, Suite 490
San Francisco, CA 94111
(415) 677-9151


Document Outline

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Petition for review after the Court of Appeal affirmed an order denying a petition to compel arbitration. This case presents the following issue: Is enforcement of a preexisting arbitration agreement as to a fee dispute between an attorney and client precluded by the Mandatory Fee Arbitration Act (Bus. & Prof. Code, section 6200 et seq.)?

Opinion Information
Date:Citation:Docket Number:Category:Status:
Mon, 01/26/200945 Cal.4th 557- original opinion 45 Cal.4th 1062a -opinion modified on March 11, 2009- no change in judgmentS150371Review - Civil Appealclosed; remittitur issued

Parties
1Allen Matkins Leck Gamble & Mallory, Llp (Defendant and Appellant)
Represented by Sean M. Selegue
Howard Rice Nemerovski Canady Falk & Rabkin
Three Embarcadero Center, 7th Floor
San Francisco, CA

2Schatz, Richard A. (Plaintiff and Respondent)
Represented by Joseph L. Schatz
Attorney at Law
201 California Street, Suite 490
San Francisco, CA

3Cooley Godward Kronish, Llp (Amicus curiae)
Represented by Charles M. Schaible
Cooley Godward, Kronish, LLP
101 California Street, 5th Floor
San Francisco, CA

4Cooley Godward Kronish, Llp (Amicus curiae)
Represented by Paul A. Renne
Cooley, Godward, Kronish, LLP
101 California Street, 5th Floor
San Francisco, CA


Disposition
Jan 26 2009Opinion: Reversed

Dockets
Feb 21 2007Petition for review filed
  Allen Matkins Leck Gamble & Mallory LLP, Defendant and Appellant. Seal M. SeLegue, counsel (CRC, rule 8.25 (Fed Ex))
Feb 21 2007Record requested
 
Feb 21 2007Request for judicial notice received (pre-grant)
 
Feb 22 2007Received Court of Appeal record
  one doghouse
Mar 8 2007Opposition filed
  counsel for respondent opposition to Request for Judicial Notice
Mar 14 2007Answer to petition for review filed
  Richard A. Schatz, Respondent / CRC 8.25(b) by Joseph L. Schatz, counsel
Apr 12 2007Time extended to grant or deny review
  to and including May 22, 2007, or the date upon which review is either granted or denied.
May 9 2007Petition for review granted (civil case)
  Votes: George, C. J., Kennard, Baxter, Werdegar, Chin, Moreno and Corrigan, JJ.
May 23 2007Request for extension of time filed
  Counsel for appellant requests 45-day extension of time to file the opening brief on the merits.
Jun 1 2007Extension of time granted
  On application of appellant and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including July 23, 2007.
Jul 24 2007Opening brief on the merits filed
  Allen Matkins Leck, et al., defendant and appellant Sean SeLegue, counsel (timely per CRC 8.25)
Jul 24 2007Request for judicial notice filed (granted case)
  Allen Matkins Leck, et al, defendant and appellant
Aug 15 2007Request for extension of time filed
  counsel for respondent requests 30-day extension of time to 9-22-2007 to file the answer brief on the merits.
Aug 20 2007Extension of time granted
  On application of respondent and good cause appearing, it is orderd that the time to serve and file the answer brief on the merits is extended to and including September 22, 2007.
Sep 20 2007Request for extension of time filed
  counsel for respondent requests 15-day extension of time to 10-7-07 to file the answer brief on the merits.
Sep 25 2007Extension of time granted
  On application of respondent and good cause appearing, it is ordered that the time to serve and file the answer brief on the merits is extended to and including October 7, 2007.
Oct 9 2007Answer brief on the merits filed
  counsel for R. Schatz
Oct 9 2007Request for judicial notice filed (granted case)
  counsel for resp. R.Schatz
Oct 12 2007Request for extension of time filed
  counsel for appellant requests extension of time to 11-28-2007 to file the reply brief on the merits.
Oct 19 2007Extension of time granted
  On application of appellant and good cause appearing, it ordered that the time to serve and file the reply brief on the merits is extended to and includihg November 28, 2007.
Nov 28 2007Reply brief filed (case fully briefed)
  counsel for aplt.
Dec 28 2007Received application to file Amicus Curiae Brief
  Cooley, Godward, Kronish, LLP, et al., in support of appellant.
Jan 8 2008Permission to file amicus curiae brief granted
  Cooley, Godward, Kronish, LLP, in support of appellant. (non-party)
Jan 8 2008Amicus curiae brief filed
  The application of Cooley, Godward, Kronish LLP, for permission to file an amicus curiae brief in support of appellant is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Jan 29 2008Response to amicus curiae brief filed
  counsel for Richard A. Schatz, M.D. (8.25(b))
Sep 10 2008Case ordered on calendar
  to be argued Thursday, November 6, 2008, at 9:00 a.m. in Sacramento
Oct 30 2008Request for judicial notice granted
  Appellant's request for judicial notice, filed July 24, 2007, is granted. Appellant's request for judicial notice, filed February 21, 2007 is denied.
Nov 6 2008Cause argued and submitted
 
Jan 23 2009Notice of forthcoming opinion posted
 
Jan 26 2009Opinion filed: Judgment reversed
  and remanded. The judgment of the Court of Appeal is reversed and remanded for proceedings consistent with this opinion. OPINION BY: Moreno, J. ---- joined by George, C.J., Kennard, Baxter, Werdegar, Chin, and Corrigan, JJ.
Feb 18 2009Request for modification of opinion filed
  counsel for resp (Richard Schatz))
Feb 20 2009Time extended to consider modification or rehearing
  The finality of the opinion in the above-entitled matter is hereby extended to and incuding March 27, 2009.
Mar 11 2009Request for modification granted
 
Mar 11 2009Remittitur issued (criminal case)
 
Mar 11 2009Returned record
  records returned to CA 4/1 (1 file folder, briefs, transcript, appendix)
Mar 16 2009Received:
  receipt for remittitur from CA 4/1

Briefs
Jul 24 2007Opening brief on the merits filed
 
Oct 9 2007Answer brief on the merits filed
 
Nov 28 2007Reply brief filed (case fully briefed)
 
Jan 8 2008Amicus curiae brief filed
 
Jan 29 2008Response to amicus curiae brief filed
 
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