Desert Outdoor Advertising v. Superior Court
196 Cal. App. 4th 866
| Cal. Ct. App. | 2011Background
- DOA president Farahi and Jurich retained Murphy in 2004 for Oakland billboard dispute; initial fee agreement with Jacobs Spotswood had no arbitration clause.
- Murphy moves to Luce Forward in early 2006, sending a new seven-page engagement/fee agreement that adds a broad arbitration clause.
- Jurich signs the Luce Forward agreement January 31, 2006; Farahi signs February 3, 2006; the new agreement is sent to DOA's CEO and counsel.
- State and federal litigation proceeded unfavorably against petitioners; the later malpractice action against Murphy/Luce Forward was filed April 2010, and Murphy moved to compel arbitration under the new clause.
- Trial court granted arbitration; petitioners sought writ of mandate, which was denied; the Supreme Court ultimately directed reconsideration and affirmed denial of writ, upholding enforcement of the arbitration clause; the decision analyzed whether lack of reading or fiduciary duty excused arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether failure to read the Luce Forward agreement can defeat arbitration. | Desert Outdoor/ Jurich claim constructive fraud due to lack of disclosure and failure to read. | Arbitration clause enforceable; no duty to separately explain; failure to read is not a defense. | Arbitration enforceable; no fiduciary duty to separately explain the clause. |
| Whether Murphy had a fiduciary duty to separately disclose the arbitration clause. | Murphy owed broader fiduciary duties to explain the new terms. | No such duty under facts; clients sophisticated and warned to read. | No duty to separately explain; clause enforceable. |
Key Cases Cited
- Powers v. Dickson, Carlson & Campillo, 54 Cal.App.4th 1102 (Cal. Ct. App. 1997) (contract reading not required to enforce arbitration; fraud in execution requires misrepresentation or deception)
- Rosenthal v. Great Western Fin. Securities Corp., 14 Cal.4th 394 (Cal. 1996) (fraud in execution requires substantial deception; reasonable reliance)
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (Cal. 1992) (strong public policy favoring arbitration; enforceability constraints)
- Brown v. Wells Fargo Bank, N.A., 168 Cal.App.4th 938 (Cal. App. 2008) (fiduciary duties and reading contracts; reasonableness of reliance; reading standard)
- American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton, 96 Cal.App.4th 1017 (Cal. Ct. App. 2002) (attorney duties governed by Rules of Professional Conduct; relationship factors vary)