In a case which demonstrates the limits for judicial review of arbitration awards, the
California Court of Appeal, First District recently issued an opinion in Cotchett, Pitre &
McCarthy (2010)187 Cal.App.4th 1405 ("Cotchett Case") which affirmed the ruling of an
arbitrator who had awarded over $7,5000,000in fees and costs to a plaintiff counsel in a
real estate litigation matter. The ruling occurred in spite of the fact that the fees and costs
which were awarded by the arbitrator nearly exceeded the value of the settlement of the
underlying case in which the plaintiff counsel represented the client. The Cotchett Case is
notable in that it provides the limits of review of arbitration awards, and also demonstrates
the unwillingness of the Courts to strike down contingent fee agreements negotiated by a
sophisticated client represented by its own counsel.
The Cotchett Case concerned a fee dispute which arose following the conclusion of a
complex environmental litigation matter. As for the underlying matter, Universal Paragon
Corporation ("UPC"),a real estate development firm, acquired real property in the Brisbane
area which was located adjacent to what is known as the SeWage Lock site. The SeWage
Lock site was owned by Ingersoll-Rand Corporation and was apparently contaminated
with acid and fuel from railroad operations by the Southern PacificRailroad. UPC retained
the law firm of Cotchett, Pitre & McCarthy ("CPM") in regards to claims which it had
involving the SeWageLock site. After substantial negotiations, the parties agreed the law
firm would charge a reduced hourly rate, plus costs, and would receive a contingency fee
based upon the difference between the value of the Schlage Lock site and what UPC would
be required to pay for it. UPC was represented by its in-house counsel during negotiations
withCPM.
CPM later filed a lawsuit on behalf of upc. Ultimately, a settlement was reached in
that litigation whereby UPC was paid $6,000,000 by Ingersoll-Rand Corporation in
damages and received title to the SeWageLock property for essentially no money.
Thereafter, UPC and CPM were unable to agree on the value of the SeWageLock
site, which dictated the contingency fee. Essentially, UPC argued that the SeWage Lock
site was only worth $1,800,000in its present condition, which dictated a lower fee than
sought by CPM. UPC demanded a nonbinding fee arbitration, which resulted in an award
The Morrison Law Journal
November 2010
Volume V, Edition 11
Another Victory Under The California Arbitration Statute .... Court of Appeal Affirms
Petition To Confirm Award Of Arbitrator In Attorney-Client Fee Dispute Even Though
Contingent Fee Was Allegedly Equal To Or Exceeded The Consideration Paid In Settlement
By: Edward F. Morrison, Jr., Esq.
Calvin C. Schneider, III, Esq.
1
of nearly $5,000,000on a quantum merit basis. UPC rejected the award and requested that
a JAMS Arbitration occur pursuant to the parties' fee agreement. The JAMS Arbitration
then took place and resulted in an award of $7,554,149.13in fees to CPM. CPM then filed a
motion with the Trial Court to have the award confirmed as a judgment, which was
granted. On appeal, UPC argued that the Arbitrator had exceeded her powers and argued
that the Arbitration Award was uncon~cionable on its face because the Schlage Lock site
was only worth $1,8000,000in its contaminated state.
On appeal, the Court of Appeal noted that judicial review of an Arbitrator's Award
is very limited because of the strong public policy in favor of private arbitration citing,
among othet decisions, Cable Connection, Inc. v. DIRECTV (2008) 44 Cal.4th 1334 and
Burlage v. Superior Court (2009)178 Cal.App.4th 524,529. Based on this limited judicial
review, the Court of Appeal affirmed. In its holding, the Court of Appeal ruled that the
award did not violate an explicit legislative expression of public policy and noted that fee
disputes do not generally involve the public interest. The Court also found that the award,
even though it may have nearly exceeded the value of the underlying settlement, was not
unconscionable on its face and further noted that the client, UPC, was sophisticated and
was represented by its own counsel.
The Cotchett Case follows a trend demonstrating the limited judicial review of
arbitration awards and will likely have impacts on future disputes. The Cotchett Case also
demonstrates the unwillingness of the courts to strike down attorney fee contingency
arrangements involving sophisticated clients represented by counsel.
About the Authors: Edward F: Morrison, JI. is the founding partner and Calvin Schneider is Of
Counsel with The Morrison Law Group, a professional corporation. Their biographies can be viewed
at the website www.morrisonlawgroup.com.
Publication Note: The Morrison Law Group wishes to disseminate this publication to all
clients and colleagues of the Firm who wish to receive it. Should any recipient desire to be
removed from the distribution list, or wishes to have a colleague added, please contact Jim
Van Dusen at The Morrison Law Group at 213 356-5504 or
vandusen@morrisonlawgroup.com.
Disclaimer Note: The legal article Ipresented above is intended to provide general
information which may be of interest or use to clients and colleagues of The Morrison Law
Group and should not be construed as legal advice on any matter.
2