Robinson et al v. Faegre Baker Daniels, LLP

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
ARTHUR S. ROBINSON and ALLAN )
BEISWENGER, )
)
Plaintiffs, )
)
vs. )
)
FAEGRE BAKER DANIELS, LLP, )
) No. 3:13-cv-0086-HRH
Defendant. )
__________________________________________)
O R D E R
Motion to Compel Arbitration;
Motions for Summary Judgment
Defendant moves for summary judgment on plaintiffs’ complaint for the
appointment of arbitrators.1 This motion is opposed2, and plaintiffs’ cross-move for an
order compelling the appointment of arbitrators.3 Plaintiffs’ cross-motion, entitled a
1Docket No. 18.
2Docket No. 27.
3Docket No. 21.
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motion to compel arbitration, is opposed.4 In addition, plaintiffs have filed a motion for
summary judgment in the event that the court does not order arbitration,5 in which they
request summary judgment on the contract claims that they contend are subject to
arbitration. This motion is opposed.6 Oral argument was not requested on any of the
pending motions and is not deemed necessary.
Facts
Plaintiffs are Arthur Robinson and Allan Beiswenger. Defendant is Faegre Baker
Daniels LLP.
Plaintiffs were two of the principals in the law firm of Robinson, Beiswenger, and
Ehrhardt (RB&E). In June 1992, RB&E entered into a fee division modification agreement
(referred to herein as the “Fee Agreement”) with defendant’s predecessor, Faegre & Benson
(F&B).7 The Fee Agreement “concern[s] the division of attorney’s fees and payments of
costs in the ‘Glacier Bay’ oil spill case ... and the ‘Exxon Valdez’ oil spill case....”8 The Fee
Agreement’s “Association” clause provides that
4Docket No. 26.
5Docket No. 28.
6Docket No. 31.
7Exhibit A, Declaration of James E. Torgerson [etc.], Docket No. 19. The Fee
Agreement superseded two earlier agreements between the parties. See Exhibits B and C,
Torgerson Declaration, Docket No. 19.
8Fee Agreement at 1, Exhibit A, Torgerson Declaration, Docket No. 19.
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RB&E has retained the services of F&B to assist in the represen-
tation of clients in the Glacier Bay case and the Exxon case. The
relationship between F&B and RB&E, and the division of fees
herein are governed by Alaska Bar Rule 35(e), concerning fee
division between attorneys and Alaska Rule of Civil Procedure
81, and the ethics opinions adopted thereunder.[ 9]
Paragraph 4 of the Fee Agreement sets forth the parties’ agreement as to “Glacier
Bay Fees” and Paragraph 5 of the Fee Agreement sets forth the parties’ agreement as to
“Exxon Fees.”10 Only the division of “Exxon Fees” in Paragraph 5 is at issue here.
Paragraph 5(a) is entitled “Fee Division.” Paragraph 5(a)(i) provides that
“[a]ttorney’s fees for all claims, except those set forth in section (a)(ii) of this paragraph,
shall be divided on the basis of 70% to F&B and 30% to RB&E of the contingent fees
collected from the client.”11 Paragraph 5(a)(ii) provides:
All fees for claims originated by firms other than RB&E or F&B
and referred to either firm for representation after April 15,
1992, shall be divided (from the allocated share of fees paid to
F&B by other firms) on the basis of 90% to F&B, 10% to RB&E.
However, any and all Upper Cook Inlet set and drift net claims
so referred shall not be subject to this division and are subject
to the division of fees set forth in paragraph 5, section (a)(i)[.12]
9Id.
10Id. at 3.
11Id.
12Id.
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Paragraph 5(a)(iii) provides that “[a]ll hourly fees paid to both firms from the Exxon case
management fee structure approved by the court or from any other source shall be
allocated on the same basis, 70% F&B, 30% RB&E.”13
Paragraph 5(b) is entitled “Other Claims.”14 Paragraph 5(b) provides that “[a]ll
Exxon related claims of any type whether initiated by RB&E, F&B or other firms, arising
out of the Exxon litigation shall be subject to this Fee Agreement.”15
The Fee Agreement contains a severability clause that provides that “[i]f any clause,
or provision herein contained shall be adjudged to be invalid, it shall not affect the validity
of any other clause or provision of this agreement or constitute any cause of action in favor
of either party as against the other.”16 The Fee Agreement also contains a “governing law”
clause which provides that the “agreement shall be construed and interpreted in
accordance with, and governed and enforced in all respects by, the laws of the State of
Alaska and the Alaska Bar Rules.”17 And, the Fee Agreement contains a arbitration clause
that provides:
13Id. at 4.
14Id.
15Id.
16Id. at 5-6.
17Id. at 6.
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Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration in
accordance with the rules of the Alaska Bar Association.
Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.[18]
Under the terms of the Fee Agreement, F&B has paid RB&E $9,509,424.16 in Exxon
fees between December 2002 and December 2011.19
Several months prior to RB&E and F&B entering into the Fee Agreement, the court,
in the Exxon Valdez case, entered an order establishing the Consolidated Case Fund, which
became known as the 3% Fund.20 The 3% Fund was created “to compensate counsel
appointed by the courts pursuant to the orders of December 22, 1989, as well as counsel
performing administrative and substantive tasks at the direction of Co-Lead Counsel or the
Case Management Team.”21 The compensation order provided that “[t]hree percent of any
recovery received by any plaintiff, individually or as a member of a certified class, whether
by judgment, settlement or otherwise, after February 14, 1991, shall be contributed to” the
3% Fund.22 The compensation order further provided that
18Id.
19Exhibit Q, Torgerson Declaration, Docket No. 19.
20A copy of the order is attached as Exhibit D to the Torgerson Declaration at Docket
No. 19.
21Exhibit D at 1-2, Torgerson Declaration, Docket No. 19.
22Id. at 2.
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[c]ounsel who are active members of the CMT or who perform
administrative and/or other tasks benefitting the combined
plaintiffs at the request or direction of Co-Lead Counsel or the
CMT may apply for compensation from the [3%] Fund,
whether or not said counsel are also applying for compensa-
tion from the Class Action Attorneys Fee Fund or being paid
by their individual clients pursuant to engagement agree-
ments.[23]
The compensation order also established a Fee Committee of five attorneys who were
charged with “monitor[ing] all plaintiffs attorneys hours, disbursements and fee
investments (calculated by the lodestar method)....”24
In April 2009, plaintiffs’ lead counsel and All Plaintiffs’ Fee Committee in the Exxon
Valdez case moved for allocation of the 3% Fund.25 In that motion, the Fee Committee
proposed distributing $38,500 of the 3% Fund off the top to three firms and then dividing
the remainder of the 3% Fund among 22 firms on a percentage basis.26 The Fee Committee
proposed that F&B would receive 14.868415% of the 3% Fund.27 The Fee Committee’s
proposal included no distribution to RB&E because it had not characterized any of the time
23Id.
24Id. at 4.
25A copy of the motion is attached as Exhibit N to the Torgerson Declaration, Docket
No. 19.
26Exhibit N at 9, Torgerson Declaration, Docket No. 19.
27Id. at 10.
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it submitted to the Fee Committee as “P” time.28 “P” time was “for work claimed by
counsel to be for case management activity or for work done at the request of Lead Counsel
or the Executive Committee that benefitted both class and direct action claimants....”29 At
no time prior to the allocation motion being filed did RB&E object to the Fee Committee’s
proposal that it not receive any portion of the 3% Fund.
On November 6, 2009, the court issued an “Order for Allocation and Partial
Distribution of the 3% Fund.”30 The court ordered that 15% of the 3% Fund be reserved
because three firms had raised objections to the proposed allocation and those objections
had yet to be resolved.31 RB&E was not one of the three firms. The court ordered that the
remaining 85% of the 3% Fund be distributed to the 22 law firms,32 with F&B’s percentage
28Declaration of Matthew D. Jamin (April 30, 2009) at 15, ¶ 35, Exhibit L, Torgerson
Declaration, Docket No. 19. It was probably not surprising that RB&E did not submit any
“P” time because RB&E was a “direct-action firm” and “was not assigned roles on behalf
of all plaintiffs[.]” Declaration of Matthew D. Jamin (October 30, 2013) at 2, ¶ 6, Docket No.
20.
29April 30, 2009 Jamin Declaration at 7, ¶ 13, Exhibit L, Torgerson Declaration,
Docket No. 19.
30A copy of the order is attached as Exhibit O to the Torgerson Declaration, Docket
No. 19.
31Exhibit O at 9, Torgerson Declaration, Docket No. 19.
32Id.
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set at 14.749988%.33 After the disputes with the three objecting law firms were resolved,
the court issued a final disbursement order on February 22, 2011.34 Under the final order,
F&B received 14.64136% of the remaining funds in the 3% Fund.35
On June 1, 2011, Beiswenger wrote to Brian O’Neill of F&B advising that he
“believe[d] that the funds received by F&B from the case management pool should be
subject to the 70%/30% division that is provided for” in Paragraph 5(a)(iii) of the Fee
Agreement.36 Beiswenger stated that “[s]ince we have not previously discussed this, we
wanted to bring this to your attention and get your thoughts on the matter.”37
O’Neill responded to Beiswenger on June 17, 2011.38 He stated that it was F&B’s
view that this court had already resolved issues relating to the Fund’s allocation, a process
in which Beiswenger had chosen not to participate.39 O’Neill explained that it was F&B’s
33Id. at 9-10.
34A copy of the order is attached as Exhibit P to the Torgerson Declaration, Docket
No. 19.
35Exhibit P at 3, Torgerson Declaration, Docket No. 19. Plaintiffs allege that F&B and
defendant “collected at least $5,114,904.18 from the 3% Fund.” Complaint [etc.] at 2, ¶ 4,
Docket No. 1.
36Exhibit R at 1, Torgerson Declaration, Docket No. 19.
37Id.
38Exhibit S, Torgerson Declaration, Docket No. 19.
39Id. at 1.
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view that the Fee Agreement only applied to hourly fees and “that the Fund was not
allocated on an ‘hourly’ fee basis.”40 He also stated that case law “establishes that courts
are not bound by fee allocation letters, particularly in situations where one firm’s
contributions greatly exceed the allocation percentages, which is plainly the case here.”41
On August 21, 2012, Robinson submitted a demand for fees to defendant, requesting
“the payment of our[42] full share of attorneys fees under our fee division agreement which
includes a 70%/30% division of any fees received by F&B from any source. We contend
that F&B owes us 30% of any fees it received from the attorney’s fee pool in the Exxon
case.”43
On September 13, 2012, defendant “reject[ed] [Robinson’s] demand in its entirety”
because “Faegre has fully complied with the Fee Division Modification Agreement and all
other obligations related to the Exxon litigation. Faegre has paid to you all that was owed
to you, and we don’t intend to pay anything more.”44
40Id. at 2.
41Id.
42The third named partner of RB&E, Peter Ehrhardt, after receiving a copy of the
demand letter, informed Robinson that he was “opposed to this course of action” and
requested that Robinson not make any references that implied that Robinson represented
his (Ehrhardt’s) interests. Exhibit U at 1, Torgerson Declaration, Docket No. 19.
43Exhibit T at 1, Torgerson Declaration, Docket No. 19.
44Letter from William R. Busch, Faegre Baker Daniels LLP, to Arthur S. Robinson,
(continued...)
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On May 24, 2013, plaintiffs commenced this action by filing a complaint entitled
“Complaint for Appointment of Arbitrators Pursuant to Alaska Statute 09.43.030.”45
Plaintiffs allege that they are seeking enforcement of the arbitration clause in the Fee
Agreement.46 Plaintiffs allege that the issue of whether they, “as successors of RB&E”, are
entitled to 30% of the monies that F&B and defendant have collected from the 3% Fund is
an “arbitrable dispute.”47 Plaintiffs allege that “[a]t the arbitration”, they “intend to pursue
claims against [defendant] ... for an accounting, breach of contract, breach of fiduciary
duties, unjust enrichment, and other claims as may be just and proper.”48 In their prayer
for relief, plaintiffs request that
the court, in accordance with AS 09.43.030, and the arbitration
clause in the parties’ Fee Division Modification Agreement,
order arbitration of the parties’ dispute, and appoint and order
compensation for three arbitrators (two attorneys, including an
attorney chair, and one layperson) from the list of arbitrators
provided by the Alaska Bar Association....[49]
44(...continued)
Robinson & Associates, at 1, Exhibit V, Torgerson Declaration, Docket No. 19.
45Docket No. 1.
46Id. at 2, ¶ 4.
47Id.
48Id. at 8, ¶ 26.
49Id. at 9-10.
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Plaintiffs and defendant now cross-move for summary judgment on plaintiffs’ single
claim seeking an order compelling arbitration. Plaintiffs also move for summary judgment
on their contract claims should the court not order arbitration.
Discussion
Summary judgment is appropriate when there are no genuine issues of material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The
initial burden is on the moving party to show that there is an absence of genuine issues of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party meets
its initial burden, then the non-moving party must set forth specific facts showing that there
is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In
deciding a motion for summary judgment, the court views the evidence of the non-movant
in the light most favorable to that party, and all justifiable inferences are also to be drawn
in its favor. Id. at 255. “[T]he court’s ultimate inquiry is to determine whether the ‘specific
facts’ set forth by the nonmoving party, coupled with undisputed background or
contextual facts, are such that a rational or reasonable jury might return a verdict in its
favor based on that evidence.” T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass’n,
809 F.2d 626, 631 (9th Cir. 1987).
“A dispute is arbitrable under federal law if the agreement ‘creates a duty for the
parties to arbitrate the particular’ dispute.” Lexington Marketing Group, Inc. v. Goldbelt
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Eagle, LLC, 157 P.3d 470, 473 (Alaska 2007) (quoting AT & T Techs., Inc. v. Commc’ns
Workers of Am., 475 U.S. 643, 649 (1986)). “Alaska state law mirrors federal law and
provides that courts are the proper forum to determine whether a dispute is arbitrable.”
Id. Under Alaska law, “[a] written agreement to submit an existing controversy to
arbitration or a provision in a written contract to submit to arbitration a subsequent
controversy between the parties is valid, enforceable, and irrevocable, except upon grounds
that exist at law or in equity for the revocation of a contract.” AS 09.43.010(a).
Defendant first argues that the arbitration clause is unenforceable because the Exxon
Valdez litigation was a class action and thus the principles governing allocation of
attorney’s fees in class actions apply here. “In class actions, the district court has broad
authority over awards of attorneys’ fees[.]” In re FPI/Agretech Securities Litig., 105 F.3d
469, 472 (9th Cir. 1997). Fees in a class action “derive from principles of equity, not
contract.” Id. at 474.
[A] litigant or a lawyer who recovers a common fund for the
benefit of persons other than himself or his client is entitled to
a reasonable attorney’s fee from the fund as a whole. The
common-fund doctrine reflects the traditional practice in courts
of equity, and it stands as a well-recognized exception to the
general principle that requires every litigant to bear his own
attorney’s fees[.] The doctrine rests on the perception that
persons who obtain the benefit of a lawsuit without contribut-
ing to its cost are unjustly enriched at the successful litigant’s
expense. Jurisdiction over the fund involved in the litigation
allows a court to prevent this inequity by assessing attorney’s
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fees against the entire fund, thus spreading fees proportion-
ately among those benefitted by the suit.
Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980) (internal citations omitted). In class
actions, “[d]istrict courts may refuse to accept a fee allocation agreement whenever there
is good cause to do so.” In re FPI/Agretech Securities Litig., 105 F.3d at 473. For example,
“a court may reject a fee allocation agreement where it finds that the agreement rewards
an attorney in disproportion to the benefits that attorney conferred upon the class—even
if the allocation in fact has no impact on the class.” Id.; see also, Allapattah Srvcs., Inc. v.
Exxon Corp., 454 F. Supp. 2d 1185, 1227 (S.D. Fla. 2006) (declining to enforce fee allocation
agreement because it would “result in a grossly disproportionate award among the five law
firms in relation to services actually rendered, and benefits bestowed on the class”).
Defendant argues that in this case plaintiffs are seeking attorney’s fees from the 3%
Fund that are grossly disproportionate to the value of the services RB&E provided for the
benefit of all Exxon Valdez plaintiffs. Thus, defendant contends that plaintiffs’ reliance on
the Fee Agreement for its claim to a substantial share of the 3% Fund is inconsistent with
the equitable principles applicable to the court’s allocation of common funds. Defendant
also emphasizes the fact that the court has already determined in its Allocation Order that
F&B made substantial contributions to the litigation for the benefit of the class and that
RB&E did not make any contributions for the benefit of the class. Defendant argues that
this decision by the court should be given collateral estoppel effect and plaintiffs should
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not be allowed to disturb the allocations of the 3% Fund that the court has already made.
In short, defendant argues that plaintiffs’ request to arbitrate their rights to any portion of
the 3% Fund is an inappropriate attempt to circumvent the court’s exclusive authority to
determine fee allocations as to the 3% Fund.
“Alaska’s arbitration law closely follows federal arbitration law, and federal law has
clarified that arbitration clauses are severable from the underlying contracts for purposes
of challenges to the validity of the underlying agreement. Determinations as to the validity
of the underlying contract are a matter for the arbitrator to decide.” Lexington Mktg.
Group, 157 P.3d at 477. “[C]ourts may consider challenges of illegality to arbitration
agreements but not to the underlying contracts.” Id. at 475.
What defendant is arguing here is that the court should not enforce the Fee
Agreement as it pertains to any fees related to the 3% Fund because enforcing the Fee
Agreement could result in plaintiffs receiving over $1 million in attorney’s fees from the
3% Fund even though RB&E did no work that benefitted the class. This argument,
however, has nothing to do with whether plaintiffs’ contract claims are subject to
arbitration. Defendant’s argument does not go to the question of whether the arbitration
clause is enforceable, but rather is an argument that the Fee Agreement is unenforceable,
if it requires that fees be divided as plaintiffs contend. At this juncture, the court can only
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determine the enforceability of the arbitration clause; it cannot consider whether the rest
of the Fee Agreement is enforceable or not.
Defendant next argues that plaintiffs are prohibited from receiving a portion of
F&B’s payments from the 3% Fund because the Fee Agreement is subject to Alaska Bar
Rule 35(e). Alaska Bar Rule 35(e) provides:
A division of fees between attorneys who are not in the same
law firm may be made only if:
(1) the division is in proportion to the services performed by
each attorney or, by written agreement with the client, each
attorney assumes joint responsibility for the representation;
(2) the client is advised of and does not object to the participa-
tion of all the attorneys involved; and
(3) the total fee is reasonable.
Defendant argues that any division between F&B and RB&E of F&B’s payments from the
3% Fund would have to be “in proportion to the services performed by each attorney”
because F&B and RB&E did not have written agreements with each class plaintiff. Because
the court has already allocated the 3% Fund based on the contributions of the attorneys
involved in case management and did not award RB&E any funds, defendant contends that
RB&E is stuck with that allocation. Defendant argues that at a minimum, in order to ensure
that the class plaintiffs were adequately protected, any fee-splitting agreement affecting the
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common fund should have been brought to the specific attention of the court and approved
by the court before allocations from the 3% Fund were made.
As with defendant’s first argument, this argument too goes to the merits of
plaintiffs’ claims, which are based on a contention that, pursuant to Paragraph 5(a)(iii) of
the Fee Agreement, they are entitled to a portion of the fees that F&B collected from the 3%
Fund. This argument is not directed at the issue that is before the court, which is whether
plaintiffs’ contract claims are subject to arbitration. Defendant’s Alaska Bar Rule 35(e)
argument may be an argument that the arbitrator(s) can consider, but it is not an argument
that the court can consider in deciding whether plaintiffs’ contract claims are subject to
arbitration.
Defendant next argues that the parties did not agree to arbitrate any claims relating
to the 3% Fund. “Because arbitration is a matter of contract, parties can only be compelled
to arbitrate a matter where they have agreed to do so.” Lexington Mktg. Group, 157 P.3d
at 477. “[T]he court must interpret the arbitration clause to determine whether it extends
to the dispute at issue.” Id. at 475 n.27. The arbitration clause in the Fee Agreement
provides that “[a]ny controversy or claim arising out of or related to this Agreement, or
breach thereof, shall be settled by arbitration....”50 The scope of such an arbitration clause
is “quite broad.” Johnson v. Aleut Corp., 307 P.3d 942, 950 (Alaska 2013).
50Fee Agreement at 6, Exhibit A, Torgerson Declaration, Docket No. 19.
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But, defendant argues that it is not broad enough to encompass plaintiffs’ claim that
they are entitled to 30% of F&B’s share of the 3% Fund. Defendant argues that the
payments F&B received from the 3% Fund are not subject to the Fee Agreement and thus
do not “arise out of or relate to” the Agreement. Defendant argues that the Fee Agreement
only calls for the division of “contingent fees collected from the client” and “hourly fees
paid to both firms from the Exxon case management fee structure approved by the
court....”51 And, defendant argues that F&B’s payments from the 3% Fund do not fall into
either of these categories.
First, defendant argues that the 3% Fund payments were not “contingent fees”
collected from F&B and RB&E’s direct action clients. Rather, defendant contends the
payments were to compensate F&B for its work on the CMT and for its performance of
administrative and other tasks that benefitted All Plaintiffs. Second, defendant argues that
the payments from the 3% Fund were not “hourly fees paid to both firms from the Exxon
case management structure approved by the court” because the 3% Fund was not linked
to “hourly fees.” Defendant contends that disbursements from the 3% Fund did not
involve compensation of counsel on the basis of the recipients’ hourly rates multiplied by
the time they spent on the litigation. Rather, defendant contends that certain firms were
awarded a percentage of the 3% Fund based on equitable factors, although the court would
51Fee Agreement at 4, ¶ 5(a), Exhibit A, Torgerson Declaration, Docket No. 19.
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note that the number of hours the firms devoted to work that benefitted the class was the
starting point for determining the percentages.
Defendant also argues that Fee Agreement’s drafting history supports its contention
that payments from the 3% Fund are not covered by the Fee Agreement. Paragraph 5(a)(iii)
of the Fee Agreement provides that “[a]ll hourly fees paid to both firms from the Exxon
case management structure approved by the court or from any other source shall be
allocated on the same basis, 70% F&B, 30% RB&E.”52 Defendant contends that F&B and
RB&E included this paragraph in the Fee Agreement due to a concern that the court could
impose a lodestar structure on direct-action attorneys, which could have then voided F&B’s
and RB&E’s individual fee agreements with their direct-action clients. As proof of this,
defendant cites to O’Neill’s June 2011 letter to Beiswenger, in which O’Neill stated that
“[t]he purpose of this provision was to take care of possible imposition by the class of a
lodestar structure on direct action lawyers, voiding our client fee agreements. This was a
serious concern at the time, and was something the district court could have done.”53
The foregoing all has to do with how the 3% Fund was allocated and little to nothing
to do with the question of whether plaintiffs’ contract claims are subject to arbitration.
Defendant’s argument that the 3% Fund is not covered by the Fee Agreement goes to the
52Fee Agreement at 3-4, ¶ 5(a)(iii), Exhibit A, Torgerson Declaration, Docket No. 19.
53Letter from O’Neill to Beiswenger at 2, Exhibit S, Torgerson Declaration, Docket
No. 19.
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merits of plaintiffs’ underlying claims, rather than to the question of whether those claims
are subject to arbitration.
As to that question, the arbitration clause in the Fee Agreement provides that all
claims and controversies arising out or related to the Fee Agreement are subject to
arbitration. Plaintiffs’ claims, which are based on their contention that the Exxon fee
division provisions in the Fee Agreement entitle them to a percentage of F&B’s share of the
3% Fund, fall within the scope of this clause. Arbitrating these claims will not “limit ... the
exercise of a court’s inherent judicial function,” as defendant suggests. Calif. Trucking
Ass’n v. Brotherhood of Teamsters & Auto Truck Drivers, Local 70, 679 F.2d 1275, 1283 (9th
Cir. 1981). Having an arbitrator determine what RB&E’s and F&B’s private agreement was
intended to mean and how it applies between them in no way interferes with the court’s
authority to allocate the 3% Fund. Plaintiffs’ call for arbitration does not involve a review
of the allocation determination made by the court. Rather, plaintiffs seek to have
arbitrators decide whether the Fee Agreement provided that RB&E would be entitled to
a portion of the fees that the court allocated to F&B out of the 3% Fund.
Finally, defendant argues that plaintiffs are not entitled to an order compelling
arbitration because the arbitration clause is unenforceable due to impossibility. Under
Alaska law, impossibility of performance discharges a party from performance under the
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contract. N. Corp. v. Chugach Elec. Ass’n, 518 P.2d 76, 80 (Alaska 1974), vacated on other
grounds by 523 P.2d 1243 (Alaska 1974).
The arbitration clause provides that controversies and claims arising out of or
related to the Fee Agreement “shall be settled by arbitration in accordance with the rules
of the Alaska Bar Association.”54 The Alaska Bar Association, pursuant to its policy “to
encourage the amicable resolution of fee disputes between attorneys and their clients” has
established a “Fee Dispute Resolution Program ... for the arbitration of disputes concerning
any and all fees paid, charged, or claimed for professional services by attorneys.”55
Defendant argues that the arbitration procedures established by the Alaska Bar
Association apply only to fee disputes between attorneys and their clients. Since this is not
a fee dispute between an attorney and a client, defendant argues that it would be
impossible to arbitrate the parties’ dispute under the rules of the Alaska Bar Association.
Plaintiffs concede that the Alaska Bar Association Fee Dispute Resolution rules do
not apply because their complaint expressly seeks arbitration pursuant to AS 09.43.030.
Based on that statute, plaintiffs argue that arbitration clause is enforceable even if the
Alaska Bar Association cannot hear fee disputes between attorneys. AS 09.43.030 provides:
If the arbitration agreement provides a method of appointment
of arbitrators, this method shall be followed. If no method of
54Fee Agreement at 6, Exhibit A, Torgerson Declaration, Docket No. 19.
55Alaska Bar Rule 34(a).
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appointment is provided, or if the agreed method fails or for
any reason cannot be followed, or when before the hearing an
arbitrator appointed fails or is unable to act and a successor has
not been appointed, the court on application of a party shall
appoint one or more arbitrators. An arbitrator so appointed
has all the powers of one specifically named in the agreement.
The Alaska Supreme Court has never construed AS 09.43.030, but this provision is
similar to § 5 of the Federal Arbitration Act (FAA). Section 5 of the FAA provides:
If in the agreement provision be made for a method of naming
or appointing an arbitrator or arbitrators or an umpire, such
method shall be followed; but if no method be provided
therein, or if a method be provided and any party thereto shall
fail to avail himself of such method, or if for any other reason
there shall be a lapse in the naming of an arbitrator or arbitra-
tors or umpire, or in filling a vacancy, then upon the applica-
tion of either party to the controversy the court shall designate
and appoint an arbitrator or arbitrators or umpire, as the case
may require, who shall act under the said agreement with the
same force and effect as if he or they had been specifically
named therein; and unless otherwise provided in the agree-
ment the arbitration shall be by a single arbitrator.
9 U.S.C. § 5. In Reddam v. KPMG LLP, 457 F.3d 1054, 1057 (9th Cir. 2006), abrogated on
other grounds as recognized by Atlantic Nat’l Trust LLC v. Mt. Hawley Ins. Co., 621 F.3d
931, 940 (9th Cir. 2010)), the arbitration clause provided that “[a]ny arbitration under this
agreement shall be determined pursuant to the rules then in effect of the National
Association of Securities Dealers, Inc.” The NASD refused to take jurisdiction over the
arbitration because “no named party was a member or associated person of the NASD.”
Id. The defendants argued that the court should exercise its authority under 9 U.S.C. § 5
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to appoint a substitute arbitrator. The district court however held that the claims were no
longer subject to arbitration because the NASD would not hear them. Id. The court of
appeals reversed, holding that the arbitration clause did not become “unenforceable
between the parties when the NASD bowed out. There is no evidence that naming of the
NASD was so central to the arbitration agreement that the unavailability of that arbitrator
brought the agreement to an end.” Id. at 1061. The court compared its decision to its
“approach to forum selection clauses which choose a particular court as the litigation arena.
There we have not treated the selection of a specific forum as exclusive of all other fora,
unless the parties have expressly stated that it was.” Id.
Similarly here, the arbitration clause is not unenforceable. The Alaska Bar
Association Fee Dispute Resolution procedures cannot apply to this fee dispute between
two law firms, which means the parties’ agreed upon method of arbitration has failed. But,
that does not render performance under the arbitration clause impossible. Rather, it means
that this case is governed by AS 09.43.030. Pursuant to AS 09.43.030, the court can appoint
one or more arbitrators to hear the parties’ dispute. Contrary to plaintiffs’ contention,
however, the arbitrators do not have to be appointed from the Alaska Bar Association list
of arbitrators, which plaintiffs have attached to their complaint as Exhibit 4. Rather,
pursuant to AS 09.43.030, the court “shall appoint one or more arbitrators” based on the
parties’ application(s) for such an appointment. In sum, the arbitration clause is
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enforceable, and plaintiffs’ motion to compel arbitration pursuant to AS 09.43.030 is
granted.
Conclusion
Based on the foregoing, defendant’s motion for summary judgment56 is denied.
Plaintiffs’ motion to compel arbitration57 is granted. Plaintiffs’ cross-motion for summary
judgment58 is denied as moot.
The court will entertain the parties’ applications for the appointment of one or more
arbitrators pursuant to the Alaska Uniform Arbitration Act, AS 09.43.10-.180. Applications
for the appointment of one or more arbitrators shall be filed on or before April 16, 2014.
DATED at Anchorage, Alaska, this 26th day of March, 2014.
/s/ H. Russel Holland
United States District Judge
56Docket No. 18.
57Docket No. 21.
58Docket No. 28.
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