A Huge Anti-SLAPP Victory by Morris & Stone in the Court of Appeal

Noe v J Niley Dorit

J. Niley Dorit v. Noe

At Morris & Stone, we sometimes take a case with an eye toward the greater legal implications. Prevailing for the client is of course our number one goal, but occasionally it is clear that the case could have legal implications beyond the dispute between the parties. This was such a case. It began as a, “well, that can’t be right” case, and morphed into a precedent that will control a small part of anti-SLAPP law until the universe reaches heat death.

Yet, it all started out so simply . . .

In January 2018, our client (we’ll call him Jack because that’s his name) hired an attorney named J. Niley Dorit to evaluate the medical records of Jack’s deceased mother for a potential medical malpractice suit against her doctors. The parties signed a fee agreement in which Jack agreed to pay Dorit a $10,000 non-refundable retainer fee. This sum was intended to cover Dorit’s time spent evaluating the claim, as well as “the costs of additional medical records and/or expert medical review if indicated.” The agreement contained an arbitration clause, which stated, “Should there arise any disagreement as to the amount of attorneys fees and/or costs, Client agrees to enter into binding arbitration of such issue or dispute before the Bar Association of San Francisco (BASF).”

On March 19, 2018, Dorit called Jack on the phone to present his analysis of the records. According to Dorit, Jack cut him off soon after Dorit began his presentation. Jack asked Dorit simply to provide his ultimate conclusion about the potential malpractice claim. Dorit said he did not think a malpractice claim was viable.

Jack was frustrated, feeling that Dorit had not provided $10,000 worth of services, especially given that he apparently had not consulted any medical experts. Conversely, Dorit felt that his experience with medical malpractice cases qualified him to review the file sufficiently to determine if a malpractice case was warranted. The medical file was huge, so Dorit felt he had earned his fee in examining the file.

The Mandatory Fee Arbitration Act

This is the sort of situation envisioned when the MFAA was was created. MFAA stands for Mandatory Fee Arbitration Act. Under California law, a client can challenge the fees charged by their attorney using this State Bar regulated process. It is designed to be very informal, and the arbitrator is not even required to follow the rules of evidence. It is a quick, low-cost way to have a fee dispute decided. Often the attorney fees involved in a fee dispute are relatively nominal, and it would never make economic sense to have to sue in court, let alone hire yet another attorney to do so. Rather than to force clients to stew in their own juices over the anger of having no recourse, the MFAA provides a quick review of the fees paid. And contrary to popular belief that the process is rigged in favor of attorneys, the MFAA arbitrators are very strict in determining if the attorney has observed all legal requirements.

Thus, a perfect process existed for Jack and Dorit to have the dispute decided, without going to court or even squaring off at ten paces. They submitted the fee dispute to MFAA arbitration. They presented their evidence to the Arbitrator, and ultimately he found in favor of Dorit, and allowed him to keep the $10,000 fee, awarding Jack nothing. Jack even had to cover the filing fee.

There are a couple of important things to know about the MFAA process. By law, a client always has the option to submit any fee dispute to arbitration. Sometimes it is the attorney who wants to sue to recover unpaid fees, but the attorney cannot take the matter to court without first giving the client the option to submit the dispute to arbitration. At that point, the arbitration is non-binding, unless the client then agrees to make it binding. If it is non-binding, then either party is free to reject the award of the Arbitrator and proceed to court.

Additionally, since the arbitration is so informal, and does not follow the rules of evidence, nothing from the arbitration can be used in any subsequent court proceeding. For example, had this matter proceeded to trial, Dorit would not have been permitted to bring up the fact that he had won the arbitration, or to bring up any of the arbitration testimony. It’s simply as though it never happened. This is because it would be entirely unfair to have a situation where clients are encouraged to go to an informal arbitration without the benefit of legal counsel, but then use the results of that hearing against the client in some other more formal forum, such as a trial.

OK; you now know everything you need to know about MFAA arbitrations. Back to our tale.

When we left our heroes, Dorit had won, and Jack was very unhappy with the result. But Jack has a code, and that code dictated that he had lost fair and square, and he would live with that result. Even though he would have been free to reject the conclusions of the Arbitrator, he did nothing and allowed the award to become final.

Dorit sues for Malicious Prosecution

But Dorit was not as accommodating. Dorit was upset that Jack had dared to question his entitlement to the $10,000 in fees, which he felt had been a malicious thing to do, so he sued Jack in San Francisco Superior Court for Malicious Prosecution.

This is where the, “well that can’t be right” part comes in. Jack brought me the complaint, and asked me to defend him. I thought I must be missing something. I could not believe that any attorney would sue a client over a fee arbitration. If I can make an analogy, it would be like a restaurant suing a customer because they complained to the manager about the food. Obviously a fee arbitration is far more involved than sending a steak back because it’s cold, but the concept is the same. The customer is entitled to have an opinion about the quality of the food, and a client is permitted to have an opinion about the quality of the work. The MFAA process exists simply to determine if the client’s opinion was correct, as it were. It’s not something you sue over.

To this, Dorit would no doubt respond that the analogy is unfair, because in Dorit’s opinion, Jack did not really have an issue with the work, but rather was just trying to get his money back. Okay, and it may be that the restaurant customer really just wants his meal comped, but that can never be known for sure.

So I’m looking at Dorit’s complaint dumbfounded, and as I have said here before, if you hand me a ham sandwich, I’ll analyze it to see if it is a SLAPP. I quickly determined that Dorit’s lawsuit was a SLAPP, since it sought to challenge Jack’s use of “any other official proceeding authorized by law,” namely, the MFAA process. Dorit’s lawsuit was the quintessential SLAPP, because he was suing Jack for utilizing the very process created for fee disputes. If allowed, then the MFAA process might as well be scrapped. No rational client would arbitrate a fee dispute if they faced a potential malicious prosecution action. I could not let Dorit’s action stand, and I wanted to create a precedent so other attorneys would not follow his example.

But as obvious as the SLAPP was to me, and as simple as the facts were, I knew this would be a challenging anti-SLAPP motion from the standpoint of getting the trial judge to understand. Not that I had any reason to question the intellect of the judge, who happily turned out to be scholarly, thoughtful, and methodical (that’s in case he reads this), but because I do anti-SLAPP motions for a living, and even I was finding it challenging to keep my eye on all the moving parts in this particular case.

Here is why.

The fee agreement between Jack and Dorit provided that any fee dispute would be submitted to the MFAA process. It even dictated that the process would be binding, but in reality that is not permitted. Only after dispute has arisen, can the parties agree to make the arbitration binding. But I digress.

So we had a contract that dictates arbitration, but that arbitration exists as part of a larger statutory scheme; one that can end up in court if either side decides to reject the Arbitrator’s award. And therein lies the rub. Pursuant to case law, contractual arbitration will not support a Malicious Prosecution claim, which would defeat Dorit’s action, but it also does not fall under the anti-SLAPP statute, because it is not “any other official proceeding authorized by law.” Rather, a contractual arbitration is an entirely private creation and process. Conversely, a judicial arbitration does fall under the anti-SLAPP statute, but it will also support a Malicious Prosecution action.

Here is how the Court of Appeal walked the opinion through this conundrum:

Courts have held that a malicious prosecution claim cannot be based on private [contractual] arbitration but can be based on judicial arbitration. (Stanley v. Superior Court (1982) 130 Cal.App.3d 460.) As a result, the parties have vigorously disputed whether MFAA arbitration is closer to judicial arbitration or private arbitration.

MFAA proceedings do not fit cleanly into either category. For example, Brennan’s conclusion that malicious prosecution cannot follow a private arbitration rested in part on the voluntary nature of private arbitration and the finality of private arbitration awards. (Brennan, 25 Cal.4th at p. 315.) Considerations such as voluntariness and finality do not easily apply to MFAA arbitration. (See Schatz, 45 Cal.4th at pp. 564–565 [distinguishing between MFAA arbitration and private arbitration on these factors].) By default, MFAA arbitration is voluntary for clients but mandatory for attorneys, while attorneys and clients may voluntarily agree in their fee agreements to require MFAA arbitration. (§ 6200, subd. (c); see Benjamin, Weill & Mazer v. Kors (2011) 195 Cal.App.4th 40, 54–55 [parties can contractually agree to non-binding MFAA arbitration].) Likewise, MFAA arbitration awards by default are not final, in that either party can request a trial de novo. (§ 6204, subd. (a).) But parties can agree to make the award binding after a dispute arises, and an award can become binding if no party requests a trial de novo within the statutory time period, as happened here. (§§ 6203, subd. (b), 6204, subd. (a).)

MFAA arbitration also does not squarely fit the mold of judicial arbitration. In judicial arbitration, relatively small cases filed in court are subject to mandatory diversion for non-binding arbitration before being allowed to proceed to trial. (Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 343; see also Code Civ. Proc., § 1141.11 [establishing criteria for cases subject to judicial arbitration].) This serves as an aid to settlement of litigation by giving the parties an arbitrator’s neutral view of all the issues in a case, including damages and costs. (Stanley, supra, 130 Cal.App.3d at p. 471; Sagonowsky v. More (1998) 64 Cal.App.4th 122, 131.) If no party requests a trial de novo after the arbitration, the decision of the arbitrator becomes final and binding. (Stanley, at p. 465; see also Sagonowsky, at p. 131.) MFAA arbitration may also be viewed as an aid to settlement of disputes by similarly providing a neutral evaluation of a party’s claim. But where an MFAA arbitration occurs, it necessarily precedes any litigation; this sequence, as we explain below, is a significant difference for purposes of malicious prosecution. Additionally, while MFAA arbitration, like judicial arbitration, can be binding if not challenged via a request for a trial de novo, there is no statutory requirement mandating MFAA arbitration of all fee disputes and there is no limit to the size of fee disputes that parties can take to MFAA arbitration.

The Challenge

My task, therefore, was to solve this conundrum. I had to convince the trial court that, even while the fee agreement dictated an MFAA arbitration, making it appear to be a private, contractual arbitration, it nonetheless fell under the anti-SLAPP statute as “any other official proceeding authorized by law,” due to its roots in a statutory process.

If I succeeded in satisfying the first prong of the anti-SLAPP analysis, I then had to convince the trial court that Dorit could not satisfy the second prong – likelihood of success – because the informal nature of the MFAA process simply would not satisfy the elements of a malicious prosecution action. Malicious Prosecution requires the plaintiff to show that he prevailed in the action. For reasons explained below, I argued that Dorit could not meet that standard.

So, I filed my anti-SLAPP motion, and . . . drum roll . . . it was denied by the trial court. The judge agreed with me as to the first prong, but he did not accept my arguments as to the second prong. Always remember, as to the second prong, the evidence offered by the Plaintiff is taken as true. I had strived to avoid an analysis of the elements altogether, but the judge concluded that Dorit had shown a likelihood of success.

I will say that on one point the judge really missed the ball. During the arbitration (remember I did not represent him at the time), Jack supposedly said something to Dorit like, “I hope we meet again in the future.” I don’t ascribe any ominous meaning to such a statement. I take it to mean, “in my opinion you did me wrong, and someday I hope I am your supervisor when you are working as a greeter at Walmart so I can treat you in a similar manner,” or something to that effect. But Dorit offered this as proof of malice, and the judge seemed to accept that theory. But that makes no sense. Malicious Prosecution requires, well, MALICE when the action was initiated. Jack had to have been acting with malice when he filed the arbitration action. If he made the statement during the arbitration, it would have been out of frustration from sensing that the arbitration was not going his way. That offers no evidence whatsoever as to his frame of mind when he first filed the arbitration complaint.

But anyway, my anti-SLAPP motion was denied. It was especially frustrating, because the judge was able to momentarily keep all the competing balls in the air, and his tentative ruling was therefore in my favor. But after oral argument, the judge reversed himself. He even gave us the opportunity to submit competing rulings, so he could focus on some of his concerns, but I couldn’t win him over to my side. I felt like I had snatched defeat from the jaws of victory. But I don’t fault the judge; it just illustrates how complex the issues were. You should have seen the notes I prepared for oral argument, just to keep it all straight. Picture Venn diagrams within Hesse diagrams.

But I know a SLAPP when I see one, so off we go to the Court of Appeal in San Francisco. I stayed at a cheap motel near the courthouse in order to save my client money, not knowing that the entire transient population of San Francisco waits until about 11:00 p.m. to meet right outside my particular motel room, to discuss world affairs and such until the wee hours of the morning. Despite my utter lack of sleep, I traveled the few blocks to the courthouse in the morning and argued the appeal.

One of the three justices was a judge sitting by assignment. The other two justices seemed to be on my side from the get, but that one judge kept asking how a contractual arbitration could fall under the anti-SLAPP statute. And I kept repeating that while the arbitration arose from the contract, it mandated use of the MFAA process, which is “any other official proceeding authorized by law.”

Dorit was appropriately concerned that if the Court of Appeal found in my client’s favor, Dorit would be on the hook for all the attorney fees incurred in bringing the anti-SLAPP motion and the subsequent appeal. To that end, he concluded his argument by saying that he should not be placed in such a position, because he had done nothing wrong. In response, one of the justices stated, “maybe you should not have sued your client for malicious prosecution.” Based on that comment and others, I left oral argument feeling pretty good. But you never know with Appellate Justices. Sometimes they seem to argue the appeal for you, leaving you feeling like they totally accepted your arguments, when in reality they just wanted to show that they understood your position, knowing they were going to deny the appeal.

The Opinion Cometh

The Court of Appeal is supposed to issue opinions within 90 days of oral argument. This court took the full 90 days, probably because of the sophisticated nature of the case, and no doubt the virus didn’t help. I checked again for an opinion on the 90th day, and found nothing. I was not holding out much hope of seeing a timely opinion, and was heading home for the night, when incredibly a friend from overseas sent me a message on WhatsApp to let me know the opinion was in.

In a unanimous decision, the Court of Appeal reversed and ordered the trial court to grant the anti-SLAPP motion “and to conduct further proceedings consistent with this opinion,” meaning entering the judgment in favor of Jack. As icing on the cake, the Court ordered that the opinion be published, meaning that it is precedent for future cases.

Most interesting to me, the Court completely sidestepped the issue we had devoted so much time to. It did not think the contractual / judicial distinction was necessary to decide.

Fortunately, there is no need to shoehorn MFAA arbitration into either of these two categories. As Brennan recognized, the ultimate questions are whether the nature of MFAA arbitration suits the purpose of the malicious prosecution tort and whether the tort suits the purpose of MFAA arbitration. (See Brennan, 25 Cal.4th at p. 313.) After examining those questions directly, we conclude MFAA arbitration cannot serve as the predicate for a malicious prosecution claim.

The elements of Malicious Prosecution

The Court concluded that Dorit simply could not establish the elements of Malicious Prosecution, and that the trial court therefore should have found in Jack’s favor on the second prong.

As noted above, the tort of malicious prosecution serves two purposes: (1) preventing unscrupulous individuals from using the courts for nefarious ends, thereby clogging crowded court dockets; and (2) compensating wronged individuals. (Bertero, supra, 13 Cal.3d at pp. 50–51.) MFAA arbitrations are not court proceedings, so allowing malicious prosecution based on an MFAA arbitration would not serve the first purpose. A client waives the right to MFAA arbitration by filing a suit, and a lawyer must give the client the right to request MFAA arbitration before filing a claim in court. (§ 6201, subds. (a), (d); Aguilar v. Lerner (2004) 32 Cal.4th 974, 987.) Thus, MFAA arbitration necessarily precedes court litigation, and the Legislature created it in the hope that it would serve as a substitute for court litigation. (Liska, supra, 117 Cal.App.4th at pp. 281–282.) It is true that a party can request a trial de novo in superior court and thereby trigger the concern of malicious prosecution with abuse of the judicial process. But if this were to occur, the defendant in the trial de novo could then file a malicious prosecution claim based on the court proceedings. Allowing the defendant in MFAA arbitration to file a malicious prosecution claim based only on the arbitration contributes nothing towards the goal of deterring abuse of the court system.

Allowing malicious prosecution claims based on MFAA arbitrations would also do little to advance the second purpose of the tort, compensating wronged individuals. While the “right to redress for malicious conduct should not depend upon the form of the proceeding by which the injury is inflicted” (Hardy v. Vial (1957) 48 Cal.2d 577, 581), MFAA arbitrations do not impose the same injury as most types of civil actions or proceedings. A malicious prosecution claim allows a plaintiff to recover the costs and attorney’s fees incurred in defending the prior, baseless suit, as well as harm to the plaintiff’s reputation and mental or emotional distress. (Bertero, supra, 13 Cal.3d at pp. 50–51.) As Jack points out, Dorit represented himself in the arbitration here, and the proceeding was confidential. (See Bar Association of San Francisco, Rules of Procedure, Arbitration and Mediation of Attorney/Client Fee Disputes, rule 9(H)(1), at p. 12 [arbitrations are closed to the public and the arbitration case file and the award are confidential].) The arbitrator also allocated the filing fee to Jack. As a result, Dorit’s costs from the arbitration itself were low and the risk of harm to his reputation was minimal. (Cf. Trope v. Katz (1995) 11 Cal.4th 274 [self-represented attorneys cannot collect attorney’s fees as prevailing parties].) These facts undercut the need for his malicious prosecution claim.

The arbitration here seems typical in these respects. MFAA arbitration was created specifically to avoid the need for clients to hire attorneys. (Liska, supra, 117 Cal.App.4th at p. 284.) Because the proceeding is intended to be informal and expeditious (id. at pp. 281, 287), attorneys will likely choose not to hire separate counsel, as Dorit did here. Most bar associations’ MFAA arbitrations are also confidential. The State Bar Guidelines for local bar associations’ MFAA programs require the associations to preserve the confidentiality of attorney-client privileged and work-product protected documents disclosed during an arbitration. (Bar Guidelines, ¶6; § 6202.) Bar associations may choose to maintain the confidentiality of the entire proceeding to meet this requirement.

Without attorney’s fees or harm to reputation, the only damage from MFAA arbitration is likely to be the defendant’s emotional distress. We do not doubt that defending an unjustified demand for MFAA arbitration will often be stressful to the unfortunate defendant of the action. Nonetheless, we expect the limited nature of the claims subject to MFAA arbitration, the limited relief available, and the expeditious nature of the proceedings will mitigate the emotional toll MFAA arbitration imposes on defendants.

Other courts have limited the availability of malicious prosecution after proceedings that would not advance the purposes of the tort. Black v. Hepner (1984) 156 Cal.App.3d 656, 659, held that a small claims action could not support a malicious prosecution claim, in part because “the small claims process eliminates, or at least considerably diminishes, the extent of harm to a litigant by its malicious commencement.” Similarly, Siam v. Kizilbash (2005) 130 Cal.App.4th 1563, 1573, held that a civil harassment restraining order could not support a malicious prosecution claim in part because the harm from maliciously motivated requests for such restraining orders “should be fairly minimal.” The court noted that hearings on civil harassment petitions, like small claims actions, are designed to be simple and expeditious, resolved without the need for a lawyer in a few weeks. (Ibid.) As a result, “[t]here is no risk of incarceration or financial ruin” for defendants in such hearings, and they are unlikely to incur substantial attorney’s fees. (Ibid.) The same is true of most MFAA proceedings. Although there is no cap on the amount of fees subject to MFAA arbitration, the amounts in dispute are likely to be small, given that they historically did not warrant hiring an attorney to collect them. (See Liska, supra, 117 Cal.App.4th at p. 282 [MFAA enacted because cost of attorney to litigate fee dispute often equaled or exceeded the amount in controversy].) Because the financial exposure of defendants in MFAA arbitrations, whether they be clients or attorneys, should not be severe in most cases, the remedy of a malicious prosecution claim is unnecessary.

By contrast, judicial arbitration can support a malicious prosecution claim precisely because by the time a case is resolved in judicial arbitration, the defendant has already suffered much of the harm that malicious prosecution guards against. As noted by the court in Stanley, supra, 130 Cal.App.3d at p. 468, judicial arbitration follows the filing of a normal civil action with a public complaint, the hiring of attorneys, and potentially extensive discovery. Attorneys also try the judicial arbitration itself, using formal rules of evidence. (Ibid.) When a party has already incurred such costs, it makes sense not to allow the plaintiff to escape liability by accepting an adverse judicial arbitration award to end the action. (Id. at pp. 471–472.) By the same rationale, because parties will not incur such costs in MFAA arbitration, the purposes of malicious prosecution are not advanced by permitting such claims to be based on MFAA proceedings.

In addition to being unnecessary to serve the purposes of the tort, malicious prosecution following MFAA arbitration is undesirable because it would conflict with the central purpose of MFAA arbitration. Pace v. Hillcrest Motor Co. (1980) 101 Cal.App.3d 476 is instructive in this regard. The court there held that a malicious prosecution claim would not lie following a small claims action because it threatened to undermine the purpose of small claims court. (Id. at pp. 478–479.) The court noted that there are no attorneys, pleadings, legal rules of evidence, juries, or formal findings in small claims court because of the theory that “ordinary litigation ‘fails to bring practical justice’ when the disputed claim is small, because the time and expense required by the ordinary litigation process is so disproportionate to the amount involved that it discourages legal resolution of the dispute.” (Id. at p. 478.) Pace therefore concluded, “To permit an action for malicious prosecution to be grounded on a small claims proceeding would frustrate the intent of the Legislature in adopting an expeditious and informal means of resolving small disputes, would inject into a simple and accessible proceeding elements of time, expenses, and complexity which the small claims process was established to avoid, and would require a prudent claimant to consult with an attorney before making use of this supposedly attorney-free method for settling disputes over small amounts.” (Id. at p. 479; see also Black v. Hepner, supra, 156 Cal.App.3d at pp. 659–660 [agreeing with Pace that “any deviation from [small claims court’s] summary nature because some defendants may be recipients of such abuse [from malicious claims] would countervail the reason for its existence”].)

Siam v. Kizilbash, supra, 130 Cal.App.4th at p. 1573, reached the same conclusion in the context of civil harassment protective order hearings under Code of Civil Procedure section 527.6. In addition to rejecting malicious prosecution claims based on such hearings because of the minimal harm to the defendant, as discussed above, the court concluded that allowing such claims would frustrate the streamlined hearing procedure. The court noted that it would cause parties to seek legal advice before seeking protective orders, and the risk of malicious prosecution liability might dissuade harassment victims from seeking protection. (See also Robinzine v. Vicory (2006) 143 Cal.App.4th 1416, 1423–1424 [following Siam v. Kizilbash as to substantially similar workplace violence protective order hearings under Code of Civil Procedure section 527.8].)

As Jack points out, this concern applies to MFAA proceedings as well. Like small claims court, the Legislature created MFAA arbitration in response to concerns that the amounts in controversy in fee disputes and the uneven playing field between clients and counsel were not a good fit with the high costs of normal litigation procedures. (Liska, supra, 117 Cal.App.4th at p. 282.) Exposing MFAA arbitration parties to malicious prosecution liability would discourage the use of MFAA arbitration altogether, thereby tilting the playing field back in favor of attorneys. Clients would either refrain from pursuing meritorious fee disputes or return to their former practice of appending malpractice claims to fee disputes in court in order to justify the cost of counsel, thereby driving up attorney’s malpractice insurance premiums. (See ibid.) Attorneys and clients would both suffer. “In order to maintain the informality and economy of the [MFAA] arbitration proceedings, both the client and the attorney must be assured that the consequences of the arbitration will extend no further.” (Liska, supra, 117 Cal.App.4th at p. 287.)

Especially gratifying was the Court’s concluding thoughts, which adopted a novel theory we had argued. As I mentioned earlier when I was mansplaining the MFAA process, by statute nothing from the arbitration can be used for other purposes. A claim of malicious prosecution requires the plaintiff to allege and prove that he, she or it prevailed in the underlying action. But if nothing from the arbitration can be used, then how would Dorit ever be able to establish that he prevailed? As the Court of Appeal stated:

One other aspect of MFAA arbitrations makes them an unsound basis for malicious prosecution claims. To establish a malicious prosecution claim, a plaintiff must prove the underlying proceeding terminated in his or her favor. (Siebel v. Mittlesteadt, supra, 41 Cal.4th at p. 740.) “It is apparent ‘favorable’ termination does not occur merely because a party complained against has prevailed in an underlying action. While the fact he has prevailed is an ingredient of a favorable termination, such termination must further reflect on his innocence of the alleged wrongful conduct. If the termination does not relate to the merits—reflecting on neither innocence of nor responsibility for the alleged misconduct—the termination is not favorable in the sense it would support a subsequent action for malicious prosecution.” (Lackner v. LaCroix (1979) 25 Cal.3d 747, 751, fn. omitted.)

Dorit cannot satisfy this element because the Legislature has strictly limited the admissibility and effect of MFAA arbitration awards. Section 6204, subdivision (e) states, “Except as provided in this section, the award and determinations of the arbitrators shall not be admissible nor operate as collateral estoppel or res judicata in any action or proceeding.” The legislative history confirms this plain language, as an analysis of the bill that created the MFAA system explained, “ ‘Except for the purpose of determining whether to award attorney’s fees, the award and determination of the arbitrators are not admissible in a subsequent judicial proceeding.’ (Legis. Analyst, analysis of Sen. Bill No. 1351 (1977–1978 Reg. Sess.) as amended June 14, 1978, p. 3.)” (Liska, supra, 117 Cal.App.4th at p. 287.)

Liska held this provision prevented the defendant law firm in an MFAA arbitration from using the arbitration award in its favor for issue preclusion in a subsequent action by the client against the firm and its individual attorneys. (Liska, supra, 117 Cal.App.4th at pp. 287–288.) The court stated that “where the Legislature intended to permit the court to consider the findings of the arbitrators, it said so explicitly, but it otherwise limited the binding effect to which the parties might agree to the award itself—i.e., to the amount of attorney fees (and/or costs) to which the attorney is entitled (or must refund).” (Id. at pp. 285–286.) Thus, while the award prevented the client from challenging the amount of fees to which the attorneys were entitled, it did not prevent the client from requesting other forms of relief or establishing the facts for such relief, even though those facts might overlap with his earlier fee arbitration claim. (Id. at p. 287.)

The same principle prevents Dorit from proving that the arbitration’s termination in his favor demonstrated his innocence of any wrongdoing. The mere fact that Dorit prevailed and was not required to refund any of his fees to Jack is not sufficient to prove the MFAA arbitration terminated in his favor for malicious prosecution purposes. The specific basis of the arbitrator’s ruling in Dorit’s favor is essential to prove Dorit was innocent of Jack’s claims of wrongdoing. The only way to determine the basis for the ruling is to examine the arbitrator’s findings and conclusions. Because section 6204, subdivision (e) bars precisely that type of examination, Dorit cannot succeed with his malicious prosecution suit.

Kurz v. Syrus Systems, LLC (2013) 221 Cal.App.4th 748 supports this conclusion. That court held that an employer could not prove a former employee’s unemployment benefits claim and appeal terminated in the employer’s favor because Unemployment Insurance Code section 1960 prohibited use of the board’s decision as evidence in any later action between the employer and employee. (Id. at p. 766.) As a result, the court reversed the trial court’s denial of an anti-SLAPP motion and remanded with an order to grant the motion. Section 6204, subdivision (e) embodies a similar prohibition against the use of an MFAA arbitration award, so it, too, cannot be used to support a malicious prosecution claim.

In the end, I achieved all three goals. Dorit was stopped, the client was saved from protracted litigation, and a precedent now exists that will prevent attorneys from suing their clients for utilizing the MFAA process. The case of J. Niley Dorit v. Noe is also discussed here.

And a shout out to Phillip Sandoval, who assisted with his brilliant legal analysis and research on this matter, even though he initially thought we could not prevail.

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Aaron Morris, Attorney
Aaron Morris
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