Hagan v. Park Miller LLC

Background

Kevin and Laura Hagan sued Park Miller LLC to compel arbitration of claims involving their investment losses. The court previously compelled arbitration and ruled under California Civil Procedure Code § 1281.97 that Park Miller must pay the Hagans’ reasonable attorneys’ fees and costs for the entire arbitration.

The arbitration proceeded before arbitrator Howard L. Pearlman. In an interim order, he determined that the American Arbitration Association’s Commercial Rules applied and that Park Miller remained responsible for the Hagans’ reasonable attorneys’ fees and costs. He also concluded that neither those rules nor § 1281.97 authorized an interim fee award, so the fees and costs would be included in the final arbitration award. The Hagans then asked the court to award the fees before the arbitration ended.

Court’s Analysis

The court distinguished between gateway questions of arbitrability and procedural questions that arise during an arbitration. Gateway questions—such as whether a valid arbitration agreement exists or whether it covers a particular dispute—are generally for a court. Procedural questions that arise within the arbitration are generally for the arbitrator.

The court held that deciding whether and when to award interim attorneys’ fees was a procedural question, not a gateway question of arbitrability. The parties’ agreement required them to submit their dispute to arbitration under the American Arbitration Association’s rules. Those rules address attorneys’ fee awards and permit interim, interlocutory, or partial awards. The agreement therefore did not show that the court, rather than the arbitrator, should decide the timing of the fee award.

The court rejected the Hagans’ argument that their request arose from the court’s prior fee ruling rather than from the arbitration. The court explained that both the statute and its prior orders contemplated payment of fees and costs connected with the arbitration. The arbitrator had already addressed the issue, and neither the agreement nor the cited authorities allowed the court to second-guess that decision or cut short the arbitration process.

Disposition

The court DENIED the Hagans’ motion for interim attorneys’ fees. It took no position on whether § 1281.97 permits an interim fee award or whether such an award would be appropriate at that stage. The order clarified that the Hagans remained entitled to reasonable fees and costs for the entire arbitration under the court’s prior orders, but that the arbitrator would decide when those fees and costs would be awarded. Judge Charles R. Breyer also declined Park Miller’s request to relitigate the prior rulings concerning § 1281.97.