Benjamin, Weill & Mazer v. Kors (195 Cal. App. 4th 40, 2011)

Opinion

KLINE, P. J.

This case involves a fee dispute between a law firm, respondent Benjamin, Weill & Mazer, a professional corporation (BWM), and its former client, appellant Nancy Hurwitz Kors. After Kors refused to pay the full amount billed her, BWM sued her for breach of the parties’ fee agreement. Based on the arbitration clause in the agreement, Kors moved to compel arbitration under the California Arbitration Act (CAA) (Code Civ. Proc., § 1280 et seq.). The court granted the motion and directed binding arbitration pursuant to the rules of the Bar Association of San Francisco (BASF). After the arbitrators ruled in its favor, BWM petitioned the court to confirm the award. Opposing the petition, Kors moved to vacate the award due to the chief arbitrator’s failure to disclose “matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial,” as required by the CAA (§ 1281.9, subd. (a)). The trial court denied Kors’s motion and confirmed the award. Kors appeals from that ruling.

As originally briefed, the questions presented on appeal were whether the trial court erred in rejecting Kors’s claim that section 1281.9 required the chief arbitrator to disclose certain business relationships and in denying her request for attorney fees incurred in enforcing the parties’ arbitration agreement. As in the trial court, the only question the parties addressed with respect to disclosure was whether the matters Kors pointed to were required to be disclosed under section 1281.9.

The fundamental problem in this case, however, arises from an internal inconsistency in the arbitration clause, which states that “[a]ny dispute pertaining to the fees owed under this agreement . . . shall, to the extent permitted by law, be submitted to binding arbitration pursuant to the rules of the Bar Association of San Francisco, and shall take place in San Francisco.” While the duty to arbitrate imposed by this provision is enforceable under the CAA (§ 1281), and was enforced by the trial court under that act, the arbitration process it mandates is not that contemplated by the CAA, but the different process prescribed by bar association rules promulgated under the Mandatory Fee Arbitration Act (MFAA) (Bus. & Prof. Code, § 6200 et seq.). Under the MFAA and the BASF Rules of Procedure, Attorney/Client Fee Disputes, Arbitration and Mediation (rev. Apr. 30, 2007) (BASF Rules), a law firm cannot require a client to submit to binding arbitration to resolve a fee dispute before the dispute arises, as was done in this case. (Bus. & Prof. Code, § 6204, subd. (a); BASF Rules, rule 4.A.2,) Furthermore, the MFAA and BASF Rules do not appear to require arbitrators to make the disclosure mandated by section 1281.9. The briefs of the parties and our initial opinion did not adequately address these issues.

Before our initial opinion became final, we ordered rehearing on our own motion and directed the parties to file supplemental briefs on the applicability of the CAA disclosure requirement set forth in section 1281.9 to the arbitration in this case. Kors continued to maintain that that statute applied because the arbitration was under the CAA, and that it, or the standard it codifies, should apply in MFAA arbitrations as well. Kors pointed out that throughout the trial court and appellate proceedings related to her claim of nondisclosure, BWM had consistently acknowledged application of the CAA; the legal dispute was simply whether the chief arbitrator failed to provide the disclosure required by the CAA in section 1281.9, not whether section 1281.9 applied. BWM, however, changed its position, arguing for the first time that section 1281.9 cannot be applied to the arbitration conducted by BASF. BWM now argues that the arbitration was governed by the MFAA, not the CAA; that section 1281.9 does not apply in an MFAA arbitration; and that “Kors is estopped from challenging the consequences of the rules she deliberately chose” by moving to compel arbitration pursuant to the parties’ agreement. In response to our request for further briefing on the propriety of submitting this dispute for arbitration under BASF Rules, Kors argues that the portion of the arbitration provision calling for binding arbitration under the CAA should be enforced, but not the portion requiring arbitration under BASF Rules. BWM contends the arbitration provision is enforceable in its entirety and, in any event, any error by the trial court was invited by Kors and waived by her participation in the arbitration.

We shall conclude that the arbitration agreement is enforceable under the CAA and the trial court erred in directing arbitration pursuant to a process governed by the MFAA. In the circumstances of this case, Kors had the right to the disclosure required by section 1281.9. Because the trial court’s order for binding arbitration under BASF Rules erroneously deprived Kors of that right, we shall reverse the order confirming the arbitration award.

Kors also appeals from the order denying her request for an award of reasonable attorney fees for enforcing the arbitration agreement. We shall conclude that this order was also erroneous and remand the matter to the trial court with directions to grant Kors’s request for reasonable fees incurred in enforcing the arbitration clause of the fee agreement, in this court as well as in the superior court.

FACTS AND PROCEDURAL HISTORY

The Arbitration

In June 2004, Kors, a psychologist who serves as a professional adoption facilitator, was sued by Alette and Robert Temple after they learned that the putative birth mother they met through Kors had feigned her pregnancy and defrauded them out of several thousand dollars. In December 2004, Kors retained BWM to represent her. Five months later, after the parties clashed over a series of discovery and other disputes, the Temples voluntarily dismissed their complaint against Kors without prejudice. Kors thereafter filed a motion for an award of $224,564.74 in legal fees and costs under Family Code former section 8635, asserting that, by virtue of the dismissal, Kors was the prevailing party for purposes of that section. The trial court disagreed and denied the motion, and that ruling was affirmed by Division One of this court. (Temple v. Kors (Aug. 29, 2006, A112619) [nonpub. opn.].)

Kors had by that time paid BWM $227,537.75 in fees and costs, but had failed to pay a balance of $68,986.38 she had been billed by the firm. In March 2006, BWM served on Kors a notice of client’s right to arbitration under the MFAA. Kors applied for nonbinding fee arbitration under the MFAA pursuant to rules of the Contra Costa County Bar Association (CCCBA). BWM objected on the jurisdictional ground that no attorney who provided services to Kors in the Temple lawsuit ever maintained an office in Contra Costa County, also noting that Kors’s fee agreement with BWM specified that any fee dispute between the parties was to be resolved pursuant to the rules of the BASF. The CCCBA denied jurisdiction and, on May 1, 2007, BWM commenced this action for breach of contract in the Contra Costa Superior Court, seeking damages in the amount of $68,986.38.

Kors asked BWM to dismiss or stay the action and proceed to binding arbitration under the fee agreement. After BWM refused, Kors moved to enforce the arbitration clause under the CAA (§ 1281). BWM opposed the motion, arguing that Kors’s effort to commence nonbinding arbitration pursuant to the MFAA and rules of the CCCBA waived any belated request for binding arbitration under the CAÁ. Rejecting this argument, the trial court reasoned that Kors’s conduct “resulted only in waiver of [her] right to non-binding arbitration under the [MFAA]. [Kors] retained her right to enforce the parties’ agreement for binding contractual arbitration under the CAA.”

On September 28, 2007, the court granted the motion to compel arbitration and directed the parties to promptly submit their dispute to the BASF “for binding contractual arbitration under BASF’s Rules of Procedure for the arbitration of attomey/client fee disputes.” The order states: “BASF has jurisdiction to conduct the arbitration, and the Court is unaware of any reason why BASF would decline to exercise that jurisdiction.”

On October 23, 2007, Kors moved for attorney fees for services to enforce the arbitration agreement. Relying on Acosta v. Kerrigan (2007) 150 Cal.App.4th 1124 [58 Cal.Rptr.3d 865] (Acosta), she claimed immediate entitlement to such fees regardless of the outcome of the arbitration. The trial court denied the motion.

In December 2007, the BASF appointed a panel of three arbitrators, designating Sean M. SeLegue chief arbitrator. Under BASF’s Rules, the chief arbitrator “shall be responsible for the conduct of the arbitration and the writing of the Arbitration Award.” (BASF Rules, rule 7.D.) Also, the chief arbitrator “shall be the sole judge of the relevance of any offered evidence and the hearing procedures employed.” (BASF Rules, rule 9.E.)

The panel heard the matter on September 4, 2008, but did not issue its decision until February 25, 2009, 174 days later. The panel found “that the total amount of fee[s] and/or costs which should have been charged in this matter is $303,579.34, of which the client has paid $227,537.75, for a net amount of $76,041.59 in unpaid fees and costs.” (Fn. omitted.) Kors was also directed to pay $26,245.80 in accrued interest, so that the total award to BWM was in the amount of $102,287.39. Together with the previously paid $227,537.75, the total cost to Kors of BWM’s representation was $329,825.14 plus accruing interest on the unpaid portion. Although the 20-page arbitration award acknowledged Kors’s timely complaints that the aggressive strategy BWM devised was costing more than she was able to pay, and she was afraid to tell the partner of the firm representing her that he “was on the wrong course,” because she feared “ ‘he would go ballistic,’ ” the award nevertheless concluded that “while the overall total of BWM’s fee claim does indeed seem high, the fees are not out of character with the stakes or the complexity of the legal and factual issues. ... Dr. Kors persisted in her quest against the Temples even as BWM warned Dr. Kors that she was digging herself in deeper with no guarantee of a fee recovery from the Temples.”

On February 25, 2009, BASF mailed Kors the award together with a notice that she had 100 days within which to request that the award be vacated or corrected, as required by section 1288.2.

Trial Court Proceedings

On March 13, 2009, BWM filed a petition in the pending superior court action to confirm the award. On April 1, BWM submitted a proposed judgment confirming the award, representing that Kors had not responded and the time within which she was required to do so had expired. (See § 1290.6.) The court signed the judgment, which was thereafter entered. Kors moved to vacate the judgment and sought leave to file a response to the petition to confirm, arguing that BWM had failed to give notice of the time for a response to its petition. Kors also asked the court to vacate the arbitration award due to the arbitrator’s nondisclosure. Over BWM’s objection, on May 22, the court vacated the judgment on the ground that BWM had failed to serve Kors notice of a hearing on its petition to confirm, as required by section 1290.4. Kors’s request to vacate the arbitration award was denied without prejudice.

The parties then filed briefs on BWM’s petition to confirm and Kors’s request to vacate or correct the award. Though she also raised other issues, Kors’s request to vacate rested primarily on the chief arbitrator’s asserted failure to disclose “matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial,” as required by section 1281.9, subdivision (a). Kors relied upon section 1286.2, subdivision (a)(6)(A), which, as material, provides that “the court shall vacate the award if the court determines [that] [f] . . . HD (6) An arbitrator making the award . . . (A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware . . . .”

Kors’s nondisclosure claim was based upon information her counsel obtained shortly after issuance of the arbitration award. In April 2009, while reading the recent opinion of the Supreme Court in Schatz v. Allen Matkins Leek Gamble & Mallory LLP (2009) 45 Cal.4th 557 [87 Cal.Rptr.3d 700, 198 P.3d 1109] (Schatz), Kors’s counsel “fortuitously” noticed that SeLegue, the chief arbitrator, was counsel for the defendant law firm in Schatz, which was challenging the denial of its petition to compel arbitration of a fee dispute with a client. Making further inquiry, Kors’s counsel learned that SeLegue had represented the law firm in Schatz since at least February 2006, and had filed a brief in the Supreme Court shortly before his appointment as chief arbitrator in the present case. Shortly after he filed the Schatz brief, nine prominent law firms entered the case as amici curiae in behalf of SeLegue’s client. SeLegue personally argued the case in the Supreme Court six days after he presided over the arbitration hearing in this case. Kors’s counsel also learned that during December 2008, while he was writing the award in this case, SeLegue filed petitions for writs of mandate in behalf of another large law firm, DLA Piper US, LLP, in an action against it for attorney malpractice and related torts.

As an exhibit to her request to vacate the arbitration award, Kors produced a description of SeLegue’s legal practice set forth on his law firm’s Web page. The description states, among other things, that “[attorneys who face charges of misconduct. . . often turn to Mr. SeLegue and his colleagues,” and that “[h]is business litigation background and extensive experience with the unique issues and dynamics involved in claims against lawyers allow him to provide effective representation of his clients, which include some of the nation’s largest law firms.”

BWM’s response to Kors’s nondisclosure claim argued that Kors could not sustain her burden of proving bias. BWM’s brief maintained that SeLegue’s failure “to disclose that he was representing a prominent law firm in an attorney-client fee arbitration dispute” cannot, “under any stretch of the imagination, be considered a matter for disclosure” under section 1281.9. BWM argued, “Dr. Kors’[s] claim reduces to nothing more than an argument that any attorney who represents law firms should be considered biased in favor of law firms. If accepted, the result would be that all attorneys who represent major law firms are disqualified from arbitrating fee disputes,” and “[n]othing in reason or law supports the argument.”

Prior to the hearing and on the basis of the briefs, the court issued a tentative ruling granting BWM’s petition to confirm and denying Kors’s requests to vacate or correct the award. After Kors indicated her unwillingness to accept the tentative ruling, a brief hearing was held on July 10, 2009, and the court issued an order adopting the tentative ruling. A timely notice of appeal was filed on July 13, 2009.

STANDARD OF REVIEW

The appeal from the superior court’s decision on an award challenged due to the arbitrator’s alleged failure to disclose circumstances creating an appearance of partiality presents a mixed question of law and fact. (Haworth v. Superior Court (2010) 50 Cal.4th 372, 384-385 [112 Cal.Rptr.3d 853, 235 R3d 152] {Haworth).) Our review is de novo. {Ibid.)

DISCUSSION

I.

The Enforceability of the Fee Agreement

A.

The Provision of the Agreement Requiring Submission of the Fee Dispute to Binding Arbitration Pursuant to BASF Rules Is Legally Impermissible Under Those Rules and the MFAA

This case vividly illustrates the confounding problems that can be created by the failure of counsel to appreciate the significant distinction between the CAA and the MFAA with respect to predispute agreements to arbitrate.

“ ‘The CAA “represents a comprehensive statutory scheme regulating private arbitration in this state. (§ 1280 et seq.)” ’ ” (Schatz, supra, 45 Cal.4th at p. 564, quoting Aguilar v. Lerner (2004) 32 Cal.4th 974, 983 [12 Cal.Rptr.3d 287, 88 P.3d 24] (Aguilar).) Virtually any civil dispute can be the subject of CAA arbitration. (Schatz, at p. 565; Aguilar, at p. 984). “ ‘[T]he MFAA constitutes a separate and distinct arbitration scheme’ ” under which local bar associations conduct arbitrations specifically and solely dealing with attorney-client disputes over legal fees and costs. (Schatz, at pp. 564-565, quoting Aguilar, at p. 983.) Whereas arbitration under the CAA is based on the parties’ agreement to arbitrate, arbitration under the MFAA is based on a statutory directive; arbitration under the MFAA is voluntary for a client and mandatory for an attorney if initiated by a client. (Schatz, supra, 45 Cal.4th at p. 565, citation omitted; see Aguilar, supra, 32 Cal.4th at p. 984; Bus. & Prof. Code, § 6200, subd. (c).) Arbitration under the CAA is binding and “ ‘parties choosing to resolve their dispute in standard arbitration pursuant to the CAA “typically expect” that the arbitrator’s decision will be final, [but] an award rendered pursuant to an arbitration under the MFAA is nonbinding, and either party may seek a trial de novo (§ 6204, subd. (a))’ ” unless the parties agree after a dispute has arisen that the arbitration will be binding. (Schatz, at p. 565; Aguilar, at p. 985, Bus. & Prof. Code, § 6204, subd. (a).) A contractual right to binding arbitration survives if arbitration under the MFAA is waived or fails to resolve the dispute. (Schatz, at pp. 562, 574-575; Ervin, Cohen & Jessup, LLP v. Kassel (2007) 147 Cal.App.4th 821, 828-829 [54 Cal.Rptr.3d 685].)

As initially briefed, the main issue presented by the parties on this appeal, as in the trial court, was whether the arbitration award should be confirmed or vacated in light of Kors’s claim that the chief arbitrator failed to make disclosures required under section 1281.9. As we have said, BWM responded to Kors’s claims of inadequate disclosure by arguing that section 1281.9 does not require the disclosure she claimed necessary. In response to our rehearing order and request for supplemental briefing, however, BWM now contends that the arbitration in this case “was not under the CAA,” but rather under the MFAA. Section 1281.9 is altogether inapplicable, BWM now argues, because Kors’s petition to compel arbitration sought enforcement of an arbitration clause calling for arbitration under BASF Rules (which implement the MFAA), and section 1281.9 is not among the CAA provisions incorporated into those rules.

It is far too late for BWM to advance such an argument. “ ‘The rule is well settled that the theory upon which a case is tried must be adhered to on appeal. A party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant.’ ” (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1350, fn. 12 [82 Cal.Rptr.3d 229, 190 P.3d 586] [party could not argue on appeal that issue was governed by Federal Arbitration Act after litigating in trial court on theory that CAA controlled], quoting Ernst v. Searle (1933) 218 Cal. 233, 240-241 [22 P.2d 715].) Both parties litigated the disclosure issue at trial and on appeal (prior to rehearing) on the assumption the arbitration was subject to section 1281.9 and the trial court ordered “binding contractual arbitration under the CAA.” (Italics added.) Furthermore, by its own terms, the agreement authorizes submission of the fee dispute to the BASF for binding arbitration only “to the extent permitted by law.” This brings us to the nub of the matter: The provision of the fee agreement requiring binding arbitration under BASF Rules is “void and unenforceable” under those rules.

The MFAA 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.” (Bus. & Prof. Code, § 6204, subd. (a), italics added.) Consistent with this provision, the BASF Rules state that an arbitration clause in a fee agreement is “valid” and “consistent with California law” if it “contains a provision providing for Arbitration concerning Attorney’s fees and costs and does not require that such Arbitration be binding” and “[u]nder such provision, the Client may be compelled to participate in Arbitration under [the BASF] [p]rogram . . . .” (BASF Rules, rule 4.A.1, italics added.) An arbitration clause in a fee agreement is “invalid” under the BASF Rules, however, if it requires a client “to submit to Binding Arbitration to resolve a fee dispute before the dispute arises. Any provision in an Attorney Fee Agreement purporting to require the Client to submit to Binding Arbitration is considered void and unenforceable.” (BASF Rules, rule 4.A.2.) In short, the provision of the arbitration clause requiring the parties to submit any fee dispute for binding arbitration under BASF Rules is invalid under those very rules, as well as under the MFAA.

As noted, the fee agreement provided that any fee dispute between the parties shall be submitted to binding arbitration pursuant to the rules of the BASF only “to the extent permitted by law.” (Italics added.) The provision of the September 28, 2007 order directing “binding contractual arbitration under BASF’s Rules of Procedure for the arbitration of attomey/client fee disputes” was erroneous because such arbitration was not “permitted by law.”

Binding arbitration pursuant to BASF Rules would have required a postdispute agreement by Kors that never occurred. (BASF Rules, rule 5.A.) The BASF Rules provide that after a dispute has arisen a client may “voluntarily request or consent to Arbitration and may choose either Binding or Non-Binding Arbitration.” (BASF Rules, rule 4.A.2.) Where a predispute fee agreement requires binding arbitration, a client “is under no obligation to submit to Arbitration under [the BASF] Program.” (BASF Rules, rule 4.A.2.) Arbitration can be compelled only if the client has previously agreed in writing to nonbinding arbitration or if, after the attorney requests arbitration, the client “timely executes a Reply Form consenting to Arbitration.” (BASF Rules, rule 4.B.) Kors never agreed in writing to nonbinding arbitration under BASF Rules, nor did she agree to binding arbitration under those rules after the dispute arose. Contrary to BWM’s argument, Kors’s motion to compel binding arbitration did not constitute the sort of postdispute written agreement consenting to the jurisdiction of the BASF arbitration program that permits binding arbitration under BASF Rules. Kors’s pleadings sought “an order enforcing the parties’ agreement for binding arbitration of all disputes involved in this lawsuit and staying this action pending completion of any such arbitration, subject to dismissal if [BWM] does not initiate binding arbitration within a reasonable time.” Kors expressly relied upon the CAA, sections 1281 and 1281.2, as authority for compelling arbitration and emphasized the language in the fee agreement requiring “binding arbitration” without discussing the agreement’s reference to BASF Rules. Her motion to compel, and the pleadings she filed in support of that motion, did not ask the court to submit the dispute to the BASF for arbitration under its rules. Kors therefore cannot be viewed as having consented to binding arbitration under BASF Rules, rule 4.B, or as having invited the court’s error in ordering such arbitration.

The trial court properly determined that Kors’s effort to commence nonbinding arbitration pursuant to the MFAA and rules of the CCCBA did not waive her right to binding arbitration under the CAA. The court reasoned that Kors’s conduct “resulted only in waiver of [her] right to non-binding arbitration under the [MFAA]” and she “retained her right to enforce the parties’ agreement for binding contractual arbitration under the CAA.” This conclusion was correct. As our Supreme Court has explained, “[t]he 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 arbitration as a means of resolving disputes.’ (Aguilar, supra, 32 Cal.4th at p. 991 (cone. opn. of Chin, J.), fn. omitted.)” (Schatz, supra, 45 Cal.4th at p. 574.) Here, Kors requested nonbinding arbitration under the MFAA in Contra Costa County and her request was denied. It follows from Schatz that this did not extinguish her rights under the CAA.

Given the unenforceability of the contractual provision for binding arbitration under MFAA rules, however, the court’s finding “that BASF has jurisdiction to conduct the arbitration, and the Court is unaware of any reason why BASF would decline to exercise that jurisdiction,” is somewhat puzzling, as is BASF’s exercise of jurisdiction. BWM urges that Kors waived any challenge to arbitration under BASF Rules by participating in the arbitration. “[I]f a party believes the entire contractual agreement or a provision for arbitration is illegal, it must oppose arbitration on this basis before participating in the process or forfeit the claim. (Moncharsh [v. Heily & Blase (1992)] 3 Cal.4th [1,] 31 [10 Cal.Rptr.2d 183, 832 P.2d 899].) Reed v. Mutual Service Corp. (2003) 106 Cal.App.4th 1359, 1372-1373 [131 Cal.Rptr.2d 524], applied this rule to a claim of an unconscionable ‘statute of limitations’ in the arbitration procedure that a party invoked; ‘A contrary rule might tempt a party to “play games” with the arbitration and not raise the issue of illegality until and unless it lost.’ ” (Cummings v. Future Nissan (2005) 128 Cal.App.4th 321, 328 [27 Cal.Rptr.3d 10].)

To be sure, Kors did not point out to the trial court the unenforceability of the arbitration provision under the MFAA or the inconsistency in ordering CAA arbitration pursuant to BASF Rules. However, as we have said, neither did BWM nor BASF. Kors, at least, has been consistent in her position that the CAA governed this arbitration. She sought to compel arbitration under the authority of the CAA and participated in the arbitration after the court granted her motion; nothing in her participation reflects a waiver of rights under the CAA, including the right to disclosure required by section 1281.9.

In essence, since both parties contributed in some measure to the trial court’s error in ordering binding arbitration under MFAA/BASF Rules, we are called upon to determine which party must bear the greater cost of failing to make clear to the trial court the unenforceability of the arbitration clause under the act and rules. According to the representations of counsel at oral argument, neither party was aware of this problem until we ordered rehearing on our own motion. However, because it drafted the agreement, BWM created the problem. Additionally, requiring BWM to bear the greater responsibility—by severing the unlawful provision of the arbitration clause submitting the fee dispute to arbitration under BASF Rules and enforcing the remainder of the clause lawfully requiring binding arbitration (see discussion, post, at p. 60)—simply restores the parties to their prearbitration positions. If they rearbitrate the merits of their dispute, the ultimate result might again favor BWM, or it might favor Kors. Finding a waiver by Kors, by contrast, would leave the arbitration award standing despite possible unfairness in the arbitration proceeding. In making this observation, we do not mean to suggest SeLegue was in fact biased in any way, only that due to the erroneous arbitration order, he was not subjected to the CAA disclosure requirements.

BWM insists that an arbitration provision “virtually identical” to the one here was enforced in Aguilar, supra, 32 Cal.4th 974. The provision in Aguilar stated that any disagreement between the client and attorney concerning fees or other claims arising out of the representation would be submitted “to binding arbitration under the rules of the San Francisco Bar Association and the Code of Civil Procedure of the State of California.” (Id. at p. 980.) Aguilar held that this agreement to binding arbitration was enforceable under the CAA after the client waived his rights under the MFAA. (32 Cal.4th at pp. 989-990.) Although one of the client’s arguments was that he did not waive the protections of the MFAA because the arbitration agreement was entered before the dispute arose, the Aguilar majority expressly found this point irrelevant since the waiver of the MFAA resulted from the client’s filing of a malpractice action against the attorney (Bus. & Prof. Code, § 6201, subd. (d)), not from the arbitration agreement. (32 Cal.4th at p. 988.) The agreement in that case predated the amendment of the MFAA requiring that an agreement for binding MFAA arbitration be made after the dispute has arisen. (32 Cal.4th at p. 990, fn. 8; id. at pp. 993-994 (cone. opn. of Moreno, J.).) Prior to the 1996 amendment, Business and Professions Code section 6204, subdivision (a), simply stated that the parties “may agree in writing to be bound by the award” of the arbitrators; the amendment added the language critical here, “at any time after the dispute over fees, costs, or both, has arisen.” (Aguilar, supra, 32 Cal.4th at p. 988, italics omitted; Stats. 1996, ch. 1104, § 16, p. 7914.) Because its finding of waiver was not based on the language of the arbitration agreement, Aguilar stated, “whether [the client] entered his arbitration agreement pre- or post-dispute is irrelevant, as is which version of the statute applies to the agreement.” (Aguilar, at p. 988.) Aguilar did not consider the question presented here, whether predispute agreements for binding arbitration under the MFAA entered after the amendment to Business and Professions Code section 6204, subdivision (a), are enforceable under the MFAA, much less hold that such agreements are enforceable.

BWM quotes Justice Chin’s concurring opinion in Aguilar—“[T]he parties may agree to some form of dispute resolution other than judicial action . . ." (Aguilar, supra, 32 Cal.4th at p. 992 (cone. opn. of Chin, J.))—and urges that Justice Chin rejected the analysis of Alternative Systems, Inc. v. Carey (1998) 67 Cal.App.4th 1034, 1042 [79 Cal.Rptr.2d 567], that “would have found a pre-dispute agreement for binding arbitration to be invalid.” The question Justice Chin was addressing in the quoted passage was whether the MFAA’s provision for another proceeding following a nonbinding arbitration necessarily required a court trial or could be satisfied by a binding CAA arbitration if the parties so agreed. His disagreement with Alternative Systems was with its statement “that the references in section 6204 to a ‘trial’ and ‘an action in . . . court’ mean that after nonbinding arbitration, the dispute can only be resolved in court, and may not be resolved by binding arbitration even if the parties had agreed to such binding arbitration.” (Aguilar, at p. 992.) The court in Alternative Systems fotmd the provision for binding arbitration invalid because it viewed enforcing the arbitration provision as denying the client the de novo trial to which he was entitled under the MFAA. Justice Chin and Alternative Systems did not reach their conclusions on the basis of whether the binding arbitration provision was entered predispute or postdispute; in both cases, the fee agreement was entered before the amendment of Business and Professions Code section 6204, subdivision (a), adding the language that makes this distinction critical.

BWM also views Schatz, supra, 45 Cal.4th 557, as finding a predispute provision requiring binding arbitration enforceable. And so it did—but under the CAA, not under the MFAA. The agreement in Schatz provided 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.’ ” (Schatz, at p. 563.) Accepting Justice Chin’s reasoning in his Aguilar concurrence, and rejecting that of Alternative Systems, Schatz concluded that if MFAA arbitration is not requested or fails to resolve the parties’ dispute, a preexisting agreement for binding arbitration is enforceable. (Schatz, at p. 574.) As the court made clear, however, it is enforceable under the CAA, not the MFAA. “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.” (45 Cal.4th at p. 572.)

BWM’s suggestion that Aguilar and Schatz demonstrate that “pre-dispute binding arbitration provisions in fee agreements are permissible” is misleading. Such provisions are enforceable, as we have discussed, under the CAA. But they are plainly not enforceable under the MFAA. BWM cannot have it both ways. The predispute provision for binding arbitration was enforceable, but not in an MFAA arbitration under BASF Rules implementing the MFAA.

“ ‘Where a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest.’ (Civ. Code, § 1599.)” (MKB Management, Inc. v. Melikian (2010) 184 Cal.App.4th 796, 803 [108 Cal.Rptr.3d 899].) The provision of the predispute agreement requiring binding arbitration of any future fee dispute, which is lawful, has an object distinct from that of the provision submitting such a dispute to the arbitration process prescribed by the rules of the BASF, which, as we have explained, is unlawful. The reasons for severing or restricting illegal terms rather than voiding the entire agreement are “ ‘to prevent parties from gaining undeserved benefit or suffering undeserved detriment’ ” and “ ‘to conserve a contractual relationship if to do so would not be condoning an illegal scheme. [Citations.] . . . [Citation.]’ [Citation.]” (Id. at pp. 803-804.)

Since the effect of the provision of the arbitration clause submitting the fee dispute to arbitration under BASF Rules was unintended and indeed unknown to the parties, severing it from the agreement would not impose on either of them any undeserved benefit or detriment. Enforcement of the remainder of the clause, which requires binding arbitration of the parties’ fee dispute, achieves the paramount purpose of their contractual relationship without condoning any “illegal scheme.”

The remaining question, to which we now turn, is whether the denial of Kors’s right to the disclosure required of an arbitrator under the CAA requires us to reverse the order confirming the arbitration award. Reversal would be necessary only if application to SeLegue of section 1281.9 would have required him to provide the disclosure Kors claims; otherwise she would not have been prejudiced.

B.

Arbitration Under the BASF Rules Prejudicially Deprived Kors of Protections She Was Entitled to Under the CAA, and the Order Confirming the Award Must Therefore Be Reversed

The most astonishing aspect of this case is that everyone involved— the trial judge, Kors, BWM, the BASF, and the arbitrators—appears to have been oblivious to the fact that the arbitration SeLegue conducted was not permitted by the MFAA or the rules of the BASF. As an arbitrator selected by BASF to participate in its MFAA arbitration program, SeLegue apparently had no reason to believe he was subject to the CAA disclosure requirement. BASF Rules specifically incorporate certain provisions of the CAA, but section 1281.9 is not one of them. (BASF Rules, rule 2.B.) By submitting the case to the BASF for arbitration under its rules, which are prescribed by the MFAA, the trial court effectively relieved SeLegue of the duty to comply with section 1281.9. However, as we have said, it is necessary to determine whether the CAA would require the disclosure Kors claims, because it is only in that event that reversal would be required.

Section 1281.9, subdivision (a), imposes on arbitrators a duty to “disclose all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial, including all of the following: [f] (1) The existence of any ground specified in Section 170.1 for disqualification of a judge. . . . [f] (2) Any matters required to be disclosed by the ethics standards for neutral arbitrators adopted by the Judicial Council pursuant to this chapter, [f] (3) The names of the parties to all prior or pending noncollective bargaining cases in which the proposed neutral arbitrator served or is serving as a party arbitrator for any party to the arbitration proceeding or for a lawyer for a party and the results of each case arbitrated to conclusion . ... fit] (4) The names of the parties to all prior or pending noncollective bargaining cases involving any party to the arbitration or lawyer for a party for which the proposed neutral arbitrator served or is serving as neutral arbitrator, and the results of each case arbitrated to conclusion .... [1] (5) Any attorney-client relationship the proposed neutral arbitrator has or had with any party or lawyer for a party to the arbitration proceeding. [