A New Wrinkle on Arbitration Clauses in Retainer Agreements

Many lawyers nowadays have arbitration clauses in their retainer agreements, whereby the Clients agree that any dispute that may arise out of the lawyers' representation of the clients shall be submitted to arbitration.  However, a recent case from the 4th District Court of Appeal puts a new wrinkle on the enforceability of such clauses. Depending on the circumstances, the lawyer seeking to compel arbitration may have to pay the arbitration costs to enforce that provision.

In Roldan v. Callahan & Blaine (4^th Dist. 2013) 219 Cal. App.4th 87, 161 Cal.Rptr.3d 493, the Plaintiffs (former clients) filed suit against their former lawyers based upon a claim that the settlement they reluctantly agreed to in the underlying action was inadequate. The lawyers successfully moved to compel arbitration based upon an arbitration clause in the attorney retainer agreement. The plaintiffs then filed a motion in the trial court seeking an order compelling the lawyers to advance the entire upfront cost of the arbitration, which the trial court denied. 

The appellate court reversed and remanded for the trial court to: 1) calculate the reasonable cost of the arbitration previously ordered; 2) determine whether the plaintiffs are financially able to pay their share of the anticipated costs; and 3) if any of the plaintiffs are unable to pay, issue an order specifying that the lawyers have the option of either paying or else waiving their right to arbitrate.Thus, the Appellate Court basically said that if the Court determines that clients cannot afford the costs of the arbitration, the attorneys' option is to pay "full freight" or waive the right to arbitration and proceed to trial in court.

(It should be noted that the Appellate Court in Roldan had a number of criticisms of the particular retainer agreement involved, including the observation that the plaintiffs had been required to initial all pages of the retainer agreement  except for the page including the arbitration clause, and that their signatures on the agreement were on a different page from the arbitration provision.  This may have factored into the Court's ultimate conclusion.)
  
This case is significant because the court invoked a "public policy" exception to compelling indigent clients to arbitrate. Despite a recent spate of cases from the US Supreme Court holding that Courts should "rigorously enforce" arbitration agreements, this California case seems to impose limits on the enforceability of arbitration provisions, similar to the holding in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 6 P.3d 669, 99 Cal.Rptr.2d 745, in the employment agreement context.

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Damages- Post Howell v. Hamilton Meats

As we've previously noted on this blog (or "blawg" as it were), the California Supreme Court in Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 567, 129 Cal.Rptr.3d 325, 344 ("Howell"), held that an injured plaintiff, whose medical expenses are paid by private insurance, can only recover as damages the amount of the medical bills actually paid by that medical carrier, not the amount initially billed by the medical provider(s).  The Supreme Court held that a plaintiff's pecuniary loss is limited to the amount paid or incurred for past medical services, so the plaintiff cannot recover damages in excess of that amount. [Id. at p. 555.]  In so doing, the Court in Howell approved the general rule from Hanif v. Housing Authority (1988) 200 Cal. App. 3rd 635, 246 Cal. Rptr. 192 (“Hanif”) and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298, 112 Cal.Rptr.2d 861 (“Nishihama”), in this regard. [Howell, supra, at pp. 553–555.]  

The issue, however, of what evidence is properly provided to a jury is complicated by the fact that evidence of insurance is inadmissible.  Notwithstanding the "amount paid" argument, the Court in Howell appeared to leave open the question whether the trial courts should permit evidence of amounts initially billed.  ("We express no opinion as to its relevance or admissibility on other issues, such as noneconomic damages or future medical expenses. The issue is not presented here because defendant, in this court, conceded it was proper for the jury to hear evidence of plaintiff’s full medical bills." [Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 567, 129 Cal.Rptr.3d 325, 344]) 

Thus, the Court in Howell appeared to uphold (or at least not reject) the rulings of lower appellate courts that held that it was proper for trial courts to simply admit the "full value" medical bills and then reduce the amount of a plaintiff's recovery by post-trial motion, as recognized in Olsen v. Reid (2008) 164 Cal.App.4th 200, 204 and Greer v. Buzgheia (2006) 141 Cal.App.4th 1150, 1157.

That "admit but then cut" approach appears to have been expressly rejected in a case from the 2nd District Court of Appeal in  Corenbaum v. Lampkin (2013) --- Cal.Rptr.3d ----, 2013 WL 1801996 ("Corenbaum") (The link to a PDF version of the decision is here- http://www.courts.ca.gov/opinions/documents/B236227.PDF)  There, the Appellate Court expressly rejected the idea that the amounts billed were at least admissible to show the "reasonable value" of the medical costs, and specifically held:

Although Howell, supra, 52 Cal.4th 541, did not directly so hold, we are persuaded by the carefully considered reasoning in Howell, and therefore do hold that evidence of the full amount billed for a plaintiff's medical care is not relevant to the determination of a plaintiff's damages for past medical expenses, and therefore is inadmissible for that purpose if the plaintiff's medical providers, by prior agreement, had contracted to accept a lesser amount as full payment for the services provided.

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We therefore conclude that evidence of the full amount billed for plaintiffs' medical care was not admissible for the purpose of determining plaintiffs' damages for their past medical expenses. (Emphasis added)

The Court in Corenbaum further held that the Howell reasoning extends to bar experts from relying upon the billed (but not paid) amounts of past medical expenses when proffering opinions regarding the amount of future medical expenses. On this issue, the Corenbaum court stated:

 Our conclusion that the full amount billed by medical providers for past medical services is not relevant to the value of the services provided also has implications for expert opinion testimony that may be offered on remand as to the reasonable value of medical services to be provided in the future. Because the full amount billed for past medical services provided to plaintiffs is not relevant to the value of those services, we believe that the full amount billed for those past medical services can provide no reasonable basis for an expert opinion on the value of future medical services. Evidence of the full amount billed for past medical services provided to plaintiffs therefore cannot support an expert opinion on the reasonable value of future medical services. (Emphasis added)

Further, the Corenbaum court held that billed amounts for past medical expenses are not relevant in determining future medical expenses, or for any other purpose. 

For example, Corenbaum further held that evidence of billed (but not paid) past medical expenses is not relevant in determining the amount of non-economic damage suffered by the plaintiff.  While Howell left the door cracked open on this issue, Corenbaum seems to close it by concluding (as did the Howell court) that the billed amount of past medical expenses "is not an accurate measure of the value of medical services" and therefore not relevant to determining non-economic damages.  Arguments advanced by Consumer Attorneys that the billed amount of expenses is relevant for the jury to consider in assessing the full harm (non-economic damages) suffered by the plaintiffs were rejected, with the Corenbaum court providing: 

As we have explained, the full amount billed for past medical services is not relevant to a determination of the damages for either past or future medical services if the medical providers had agreed to accept a lesser amount as full payment. We conclude that evidence of the full amount billed is not admissible for the purpose of providing plaintiff's counsel an argumentative construct to assist a jury in its difficult task of determining the amount of noneconomic damages and is inadmissible for the purpose of proving noneconomic damages.

This decision is clearly another clear victory for the personal injury defense bar, on the issue of recoverable damages in injury cases.  However, despite the restrictions imposed on the admissibility of evidence related to "amounts billed," it would appear that experts can still offer opinions on the "reasonable" costs of future medical care, provided that such opinuions are not based on amounts previously billed by a plaintiff's prior medical providers.   

Does "Aggressive" equal "Effective"??

For attorneys, does aggressive equal effective?  I was just reading an article entitled "Is An 'Aggressive' Lawyer An 'Effective' Lawyer? (the link is here, and it's a good read-http://benchandbarllc.com/aggressivelawyer/?goback=%2Egde_42966_member_224263744) that posited that exact question.  This topic may wander a bit from the supposedly subject specific nature of a personal injury blog, but since it got me thinking about my personal injury practice in general, I thought I'd add my perspective.

My take on the question: if "aggressive" means shedding the bounds of civility, then I think the answer is no.  

Sure, there are times, especially in the face of a hyper "aggressive" opposing counsel where we need to respond, and the first impulse when mud is flung your way is to fling it back.  But I believe the better approach is  to be "diligent" and thorough (in other words, how I prefer to handle every case) than to "respond in kind."  This practice philosophy is one that I developed from 2 very different sources.  

As a 1st or 2nd year lawyer, I was given a piece of advice from one of my mentors, and one of the truly best trial lawyers I know, and that advise has stuck: "never motivate your opposition."  First impressions with an opposing attorney can set the stage for how you deal with counsel throughout the case.  Hitting the "jerk button" from the get-go can only serve to motivate your opposing counsel. (Don't you feel and extra "edge" to be an opponent who was a jerk?) On the other hand, laying a foundation for respect and cooperation early on can pay dividends sown the road.  Don't get me wrong; once my opponent and I "step through the ropes," it's on, but let's do so with some measure of respect.   

I also hark back to my college days, working part time in the food service industry, when we were instructed to deal with particularly belligerent customers (yes, those do exist in food service), by being "extra nice."  In that scenario, you get one of you results: 

(1) by being nice you diffuse the situation (you never know, maybe this person dealt with a similar irritation and was simply lashing out in kind), where all the upset person needed was a kind word.  Why continue the cycle?; or 

(2) if the "jerk" you're dealing with is just built that way, his/her end game is to make you miserable too.  If you give every outward indication that he/she did not get to you, you've frustrated their purpose.  And, can't you take some satisfaction in that?

Bottom line: when I get ready for and start trial, I want to (and do) kick some tail.  But along the road to getting there, I prefer to act like a gentleman. And I've got the steady blood pressure history to prove it.   

“Joint” Offer Under CCP § 998 Offer Upheld

A recent case out of the 5^th District Court of Appeal has held that a “joint” offer of compromise to multiple plaintiffs in a wrongful death action was valid.  In McDaniel v. Asuncion (Cal. App. Fifth Dist.; March 27, 2013) 214 Cal.App.4th 1201, the Court determined that there was sufficient “unity of interest” between 2 heirs of a deceased that a single offer to them both was adequate.

The Court initially noted that “ ‘[i]n general, “a section 998 offer made to multiple parties is valid only if it is expressly apportioned among them and not conditioned on acceptance by all of them.” ’ (Burch v. Children's Hospital of Orange County Thrift Stores, Inc. (2003) 109 Cal.App.4th 537, 545 (Burch).)”  

The Court then noted, however, that there is “an exception to this general rule.”  Where there is more than one plaintiff, a defendant may still extend a single joint offer if the separate plaintiffs have a “ ‘unity of interest such that there is a single, indivisible injury.’ ”  (Peterson v. John Crane, Inc. (2007) 154 Cal.App.4th 498, 505.)

The 5^th District then pointed out that under California law, either the heirs or the personal representative on behalf of the heirs may bring a single joint indivisible action for wrongful death.  (Smith v. Premier Alliance Ins. Co. (1995) 41 Cal.App.4th 691, 696 (Smith).)  Any recovery for wrongful death is in the form of a lump sum, i.e., a single verdict is rendered for all recoverable damages.  (Smith, supra, 41 Cal.App.4th at pp. 696-697; San Diego Gas, supra, 146 Cal.App.4th at p. 1551.

Ultimately, the appellate court affirmed an award of expert costs, stating:  “In a wrongful death action, a single joint cause of action is given to all heirs and the judgment must be for a single lump sum.  A unitary verdict can easily be compared to a joint offer to determine whether the offering party has achieved a more favorable judgment. Thus, there is little, if any, justification for invalidating a joint Offer To Compromise made in a wrongful death case.” [McDaniel v. Asuncion (Cal. App. Fifth Dist.; March 27, 2013) 214 Cal.App.4th 1201.]

(Full opinion here- McDaniel v. Asuncion )

Assumption of Risk Doctrine Applies (Again)...

If you are a fan of bumper cars and other "thrill rides" at amusement parks, be careful.  You may not be able to sue if that extra bumping leaves you with an injury. On December 31, 2012, the California Supreme Court ruled that amusement parks cannot be sued for injuries that occur in rides such as bumper cars, finding that such thrill-seeking carries an "inherent risk" just like playing a sport.  

The issue presented was whether an amusement-park operator must take reasonable, or even utmost, precautions to protect patrons from injuries associated with bumper-car “bumps”?  According to the California Supreme Court, the answer is "No." 

In the case of Nalwa v. Cedar Fair, LLP, a decision filed December 31, 2012, the California Supreme Court ruled that the doctrine of "primary assumption of the risk" barred a plaintiff's claims of injury resulting from a "bumper car" accident.  

Plaintiff, Smriti Nalwa, fractured her wrist on a bumper car ride at the Great America amusement park in Santa Clara.  She then sued the park owner for negligence in not configuring or operating the bumper car ride so as to prevent her injury. The superior court granted summary judgment for defendant on the basis of the primary assumption of risk doctrine, under which participants in and operators of certain activities have no duty of ordinary care to protect other participants from risks inherent in the activity. (Knight v. Jewett (1992) 3 Cal.4th 296, 315-316.) The Court of Appeal reversed the trial court, holding that the public policy of promoting safety at amusement parks precluded application of the primary assumption of risk doctrine, and that the doctrine was inapplicable to bumper car rides in particular because that activity is “too benign” to be considered a “sport.”

The Supreme Court, however, reversed the Court of Appeal, concluding that the primary assumption of risk doctrine, though most frequently applied to sports, applies as well to certain other recreational activities including bumper car rides.  The Court further concluded that the doctrine applied to the ride in that case, even though amusement parks are subject to state safety regulations and even though, as to some rides, park owners owe participants the heightened duty of care of a common carrier for reward.

The Supreme Court decision also gave a useful summary of the history of the "assumption of risk" doctrine and how it developed.  (For those interested, the full Supreme Court decision is available here http://www.courts.ca.gov/opinions/documents/S195031.PDF.)