Facts

On or about Nov. 29, 2012, Cigirex LLC and The Hecker Law Group entered into a written Attorney Services Engagement Agreement, or fee agreement, regarding the representation of Cigirex by Hecker in a federal lawsuit. In August 2013, Hecker served a Notice of Client's Right to Arbitration on Cigirex for outstanding fees and costs in the amount of $129,817.80, with respect to the services that it rendered on behalf of Cigirex in the underlying action. Cigirex did not respond to the Notice or commence an arbitration proceeding. Hecker filed a breach of contract action against Cigirex. After Cigirex failed to respond to the complaint, Hecker obtained a default judgment in the amount of $139,631.24 against Cigirex on May 24, 2014.

On Oct. 13, 2015, Cigirex filed for chapter 7 bankruptcy protection. Hecker filed a verified complaint in superior court for breach of contract against petitioners Redwood Scientific Technologies Inc., Owl Enterprises LLC, Messengers for Christ World Healing Center, People United for Christians Inc., Run Away Products LLC, Jason Cardiff, and Eunjung Cardiff, alleging that these entities were the alter-egos of Cigirex.

PLAINTIFF’S CONTENTIONS: Hecker claimed that Jason Cardiff and his wife, Eunjung Cardiff, owned and/or controlled the defendant entities, and that essentially these entities funded Cigirex. Hecker further alleged that these individuals and entities therefore were responsible to pay the fees that were owed to Hecker by Cigirex for $139,631.24. Hecker immediately applied for judgment debtor examinations against Jason Cardiff.

Hecker challenged defendant's right to mandatory LACBA arbitration, arguing that there was no jurisdiction or colorable legal basis for mandatory fee arbitration, and that after Hecker sued Cigirex and obtained its final judgment, Cigirex had never requested mandatory fee arbitration at any time. Therefore, Cigirex was barred from seeking mandatory fee arbitration.

Plaintiff dismissed defendants Messengers for Christ World Healing Center, Owl Enterprises, People United for Christians, Redwood Scientific Technologies, and Run Away Products. Plaintiff opposed the motion to compel binding arbitration by arguing that since it had dismissed these defendants, and dismissed by amendment its sole cause of action for breach of contract and replaced it with an equitable claim for alter ego, that the remaining named defendants, Eunjung Cardiff and Jason Cardiff, could no longer move to compel the arbitration provided for in the Hecker-Cigirex Retainer Agreement. Plaintiff's opposition justified its amended complaint on equitable grounds under Brenelli Amedeo, SPA v. Bakara Furniture, Inc. (1994) 19 Cal.App.4th 1828, 1840-1841.

Plaintiff dismissed defendants Messengers for Christ World Healing Center, Owl Enterprises, People United for Christians, Redwood Scientific Technologies, and Run Away Products. Plaintiff opposed the motion to compel binding arbitration by arguing that since it had dismissed these defendants, and dismissed by amendment its sole cause of action for breach of contract and replaced it with an equitable claim for alter ego, that the remaining named defendants, Eunjung Cardiff and Jason Cardiff, can no longer move to compel the arbitration provided for in the Hecker-Cigirex Retainer Agreement. Plaintiff's opposition justified its amended complaint on equitable grounds under Brenelli Amedeo, SPA v. Bakara Furniture, Inc. (1994) 19 Cal.App.4th 1828, 1840-1841.

DEFENDANTS’ CONTENTIONS: Defendants submitted a Client Petition for Arbitration to the Los Angeles County Bar Association naming the client as Cigirex and respondents as the attorneys. Defendants also listed Eunjung Cardiff, Jason Cardiff, Messengers for Christ World Healing Center, Owl Enterprises, People United for Christians, Redwood Technologies, and Run Away Products, as persons that didn't have an attorney-client relationship, but had agreed to be responsible for the fee. It also stated it may request arbitration to dispute the fee. The LACBA defendants requested that the petition be amended. The request created an automatic stay by operation of law pursuant to Business & Professions Code Section 6201. Defendants filed with this court a Notice of Stay of Proceedings to allow the matter of defendant's alter-ego liability for Cigirex's debt to proceed to mandatory fee arbitration before the Los Angeles County Bar Association.

Defendants argued that because Hecker claimed that defendants were all the alter-egos to the original client Cigirex, as such, defendants should be afforded the exact same rights of a client as does Cigirex. In this case, to have the matter of Hecker's fee dispute resolved by the Attorney-Client Mediation and Arbitration Services of the Los Angeles County Bar Association. Defendants further argued that Hecker couldn’t claim that defendants were the alter-egos of his client Cigirex to be sued for unpaid legal fees of Cigirex, while on the other hand, claim that defendants (and Cigirex) were precluded from acting as the defacto client by requesting fee arbitration through the bar. Defendants claimed that they were not the alter ego of Cigirex and therefore were not responsible for Cigirex's debt to Hecker.

LACBA determined that ACMAS (LACBA Attorney-Client Mediation and Arbitration Services) had jurisdiction over the mandatory fee dispute, and the respondents' objection to the jurisdiction of ACMAS to proceed with the fee arbitration in this matter was overruled. Moreover, the LACBA further ruled that, without a finding of alter ego, there could be no presumption that the Notice of Right to Arbitrate that Hecker sent to Cigirex was in fact tantamount to notice to the petitioners. LACBA also noted that no California appellate court had issued an opinion on such a matter.

ACMAS issued its Statement of Decision and Award (Non-Binding) finding all attorney fees and costs to Cigirex were reasonable and necessary, Cigirex was obligated to pay all attorney fees and costs that were not paid by Cigirex's insurance carrier, and defendants were not obligated to pay Cigirex's attorney fees because Hecker had failed to produce any probative evidence of alter ego. Hecker filed a Rejection of Award & Request for Trial after Attorney-Client Fee Arbitration, claiming that the alter-ego issues were for the superior court forum to decide, not the ACMAS forum. Hecker's claim in its denovo request is false, as Hecker argued defendants' alter-ego liability, and the arbitrators found Hecker failed to produce any probative evidence of alter ego.

Defendants notified Hecker, that the fee agreement mandates that any dispute or claim arising under the fee agreement be submitted to binding arbitration (under the auspices of the AAA. Defendants claimed plaintiff's claims for alter ego liability were within the reach of the arbitration clause, an alleged alter ego can compel an arbitration clause, and a nonsignatory sued as an agent of a signatory may enforce an arbitration agreement. On July 18, 2017, the court granted defendants’ Motion to Compel Binding Arbitration. The dismissed defendants threatened to sue Hecker for malicious prosecution, which resulted in a zero dollar settlement of the $139,631.24 claim.

Result

The parties settled for a zero amount on the $139,631.24 claim. The court issued a complete dismissal with prejudice of all the state court litigation. Defendants released Hecker of his malicious prosecution liability.

Other Information

ACMAS arbitrators Edwin Francis McPherson, Miguel F. Avila, and Eldonna Fernandez. The underlying lawsuit was filed in the Central District of California entitled Star Scientific, Inc. vs Cigirex, LLC, Case No. CV 12-7969-GW, for Federal Trademark Infringement (15 U.S.C. section 1114), Federal Unfair Competition and False Designation of Origin (15 U.S.C. section 1125), State Unfair Competition (Cal. Bus. & Prof. Code section 17200, and Declaratory Judgment.