Opinion
Civil Action No. 3:01-CV-2185-D
April 5, 2002
MEMORANDUM OPINION AND ORDER
In this action by plaintiffs Robert E. Woolley and Minnesota Hotel Company, Inc., f/k/a Robert E. Woolley, Inc. (collectively, "Woolley") alleging claims for legal malpractice, breach of fiduciary duty, breach of contract, and unjust enrichment against defendants Clifford Chance Rogers Wells, L.L.P. and Rogers and Wells, L.L.P. (collectively, "Rogers Wells"), the question presented is whether the parties agreed to binding arbitration of all disputes arising from their attorney-client relationship or only disagreements concerning attorney's fees. Holding that they agreed only to arbitrate fee disputes, the court denies Rogers Wells' motion to stay proceedings pending arbitration.
I
Woolley entered into an attorney-client relationship with Rogers Wells for representation in six securities-related class action lawsuits filed in federal court in California. Woolley alleges that, despite instructions that no settlement include personal liability beyond tendering its interests in certain limited partnerships, Rogers Wells prepared settlement documents that were sufficiently ambiguous that they enabled the class action plaintiffs to argue that Woolley was obligated to purchase limited partnership units for cash. Thereafter, limited partners sued Woolley in California state court, alleging inter alia that it had breached the "best efforts" clauses of the class action settlement. Subsequent court decisions upheld the limited partners' rights to sue Woolley to recover cash for tendered partnerships units. During the pendency of the state court litigation, Woolley requested that Rogers Wells contribute to a settlement, but it refused. Woolley then settled the litigation on its own. It now seeks millions of dollars in damages that it contends it sustained due to lost business opportunities and damage to its reputation caused by the uncertainty of the state court litigation, the costs of defending the state court litigation, and the costs to settle the cases.
When Woolley retained Rogers Wells, the parties entered into a representation agreement that contained the following paragraph:
We seldom have disagreements with our clients concerning our fees, but some occasionally do occur. It is our desire to resolve any such disagreement through amicable discussion; unfortunately, such disputes cannot always be resolved in that way. Our experience is that, in such instances, it is in the interest of both the client and our firm that the dispute be resolved through binding arbitration rather than by legal action and the courts. To that end, you and we agree that any dispute under this representation agreement which cannot be resolved in a reasonable time by discussions between us shall be submitted to binding arbitration by the Los Angeles County Bar Association pursuant to California Business and Professions Code Section 6200 et seq. or, should that organization decline to arbitrate the dispute, before the American Arbitration Association pursuant to its rules. You and we also specifically agree that the prevailing party in such arbitration or any related court proceeding shall be awarded its reasonable costs and attorneys' fees incurred in connection with the dispute. Any arbitration award will be binding and enforceable in the Los Angeles County, California, Superior Court or the United States District Court for the Central District of California.
Nov. 15, 1989 Ltr. Agrmt. ¶ 6.
Rogers Wells moves the court to stay the present case, contending Woolley's claims are subject to binding arbitration under this provision of the agreement. Woolley counters that the arbitration clause applies only to disputes about the fees that Rogers Wells charged for representing Woolley, which is not at issue in the present litigation.
Although Woolley also contends that Rogers Wells has waived its right of arbitration, see P. Resp. at 1, it does not advance this contention in its usual sense ( i.e., that Rogers Wells engaged in litigation conduct that evinced an intent not to rely on its right to arbitrate). It apparently means only that Rogers Wells did not agree to arbitrate any claims other than disputes involving attorney's fees. Woolley does not brief the issue of waiver in any different sense. The court need not, therefore, address the part of Rogers Wells' reply brief that pertains to waiver in its traditional context. See D. Rep. Br. at 2-3.
II
Whether a contract's arbitration clause requires arbitration of a given dispute is a matter of contract interpretation, which is to be performed by the court. The court's interpretive function must be carried out with appropriate deference to the strong federal policy that favors arbitration over litigation and requires that arbitration clauses be construed generously, in favor of arbitration. The law imposes a presumption in favor of arbitrability which requires, whenever the scope of an arbitration clause is fairly debatable or reasonably in doubt, that the court decide the interpretation question in favor of arbitration. The Federal Arbitration Act, 9 U.S.C. § 2, by its terms leaves no place for the exercise of discretion by a district court, but instead mandates that the court shall direct the parties to proceed to arbitration on issues to which an arbitration agreement has been signed. Accordingly, arbitration should not be denied unless it can be said with positive assurance that an arbitration clause is not susceptible to an interpretation that could cover the dispute in issue. Notwithstanding judicial deference to arbitration, a party may not be required to arbitrate a dispute that it did not agree to arbitrate, and the controversy must come within the contract's arbitration provision before the court can order arbitration.Beckham v. William Bayley Co., 655 F. Supp. 288, 290-91 (N.D. Tex. 1987) (Fitzwater, J.) (citations omitted). Although it is well settled that the Federal Arbitration Act evinces a liberal policy favoring arbitration agreements and that doubts concerning the applicability of an arbitration clause should be resolved in favor of arbitration, see Satarino v. A.G. Edwards Sons. Inc., 941 F. Supp. 609, 611 (N.D. Tex. 1995) (Fitzwater, J.), it has also long been the rule that "[t]he strong federal policy that favors resolving doubts about an arbitration clause in favor of arbitration cannot serve to stretch a contractual clause beyond the scope intended by the parties[,]" Beckham, 655 F. Supp. at 291-92.
The court holds that Woolley did not agree in ¶ 6 of the representation agreement to binding arbitration of the claims it brings in the present lawsuit, because the clause applies only to fee disputes. of the six sentences that make up ¶ 6, Rogers Wells seizes primarily on part of one — the sentence that provides that "you and we agree that any dispute under this representation agreement . . . shall be submitted to binding arbitration[.]" (emphasis added). Although this assertion seems plausible when viewed in isolation, proper contract interpretation does not permit reading parts of a agreement in this manner. Instead, the intent of the parties must be determined by considering the agreement as a whole. Under California law, "[t]he principles concerning the interpretation of contracts are, of course, well settled. Paramount among these rules are the following: The contract must be construed as a whole and the intention of the parties must be ascertained from the consideration of the entire contract, not some isolated portion[.]" County of Marin v. Assessment Appeals Bd, 134 Cal.Rptr. 349, 352 (Cal.Ct.App. 1976). When ¶ 6 is considered in its entirety, it is apparent that Woolley and Rogers Wells agreed only to binding arbitration of fee disputes.
The same is true under Texas law, assuming arguendo that it applies here. The court's primary concern when interpreting a contract is to ascertain the parties' true intentions as expressed in the instrument. Parks v. DeWitt County Elec. Coop., Inc., 962 S.W.2d 707, 710 (Tex.App. 1998, no pet.) (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)). To achieve this objective, the court should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Id. (citing Coker, 650 S.W.2d at 393).
Paragraph 6 begins by addressing fee disputes. It states, "[w]e [Rogers Wells] seldom have disagreements with our clients concerning our fees, but some occasionally do occur." The next two sentences provide that Rogers Wells desires to resolve "any such disagreement," that is, a dispute concerning its fees, through amicable discussion and, failing, then by binding arbitration. Through the first three sentences of the six that make up ¶ 6, the subject matter treated by the provision is limited solely to disagreements about Rogers Wells' fees. While it is true that, in the fourth sentence, Woolley and Rogers Wells express agreement that "any dispute under this representation agreement which cannot be resolved in a reasonable time by discussions between us shall be submitted to binding arbitration," this follows the introductory clause, "To that end," ( i.e., "consequently," see William C. Burton, Legal Thesaurus at 1003), which refers back to the purpose of resolving fee disputes. Moreover, this language concerning arbitrating "any dispute under this representation agreement" precedes the part of the sentence that provides that such a disagreement "shall be submitted to binding arbitration by the Los Angeles County Bar Association pursuant to California Business and Professions Code Section 6200 et seq. or, should that organization decline to arbitrate the dispute., before the American Arbitration Association pursuant to its rules." Section 6200 of the Cal. Bus. Prof. Code Ann. (West 2002) is a statute that concerns resolution of attorney's fees disputes through arbitration. Among its provisions is § 6200(a), which states, in relevant part, that "[t]he board of governors shall, by rule, establish, maintain, and administer a system and procedure for the arbitration, and may establish, maintain, and administer a system and procedure for mediation of disputes concerning fees, costs, or both, charged for professional services by members of the State Bar or by members of the bar of other jurisdictions."
The fifth and sixth sentences of ¶ 6 neither support nor undercut either side's interpretation and need not be discussed specifically.
In its reply brief, Rogers Wells contends that the references to both the Los Angeles County Bar Association ("Bar Association") and the American Arbitration Association ("AAA") evince an intent to arbitrate more than attorney's fees disagreements. It contends ¶ 6 establishes in "precise, careful language" two different procedural paths and fora that depend on the nature of the dispute. See D. Rep. Br. at 4. The court disagrees. Under this proviso, resort to the AAA is permitted only if the Bar Association "decline[s] to arbitrate the dispute." The intent of the parties expressed in this sentence is more consistent with their exercising care in ensuring that there will be an alternate forum for resolving a fee dispute rather than, as Rogers Wells contends, providing for binding arbitration when a client seeks greater relief than the return of attorney's fees. It is not reasonable to interpret this single reference to arbitration before the AAA as vastly enlarging the scope of what is subject to binding arbitration, especially in light of other provisions that limit arbitration to fee disagreements.
The arbitration clause in the representation agreement is not fairly debatable or reasonably in doubt. The court is able to say with positive assurance that ¶ 6 is not susceptible to an interpretation that could cover the dispute in issue. Rogers Wells cannot stretch it beyond the scope intended by the parties.
Accordingly, the court holds that Woolley did not agree to arbitrate the claims at issue in the present lawsuit. Rogers Wells' February 26, 2002 motion to stay proceedings pending arbitration is denied.
SO ORDERED.