Interesting Ruling on Arbitration and Attorney Fees

In re Cellphone Termination Fee Cases (2009) 180 Cal. App. 4th 1110, presents a novel issue. The parties settled a class action case and agreed that a mutually selected arbitrator would determine the plaintiffs' attorney fees within a range agreed by the parties. After a class member objected that he would not be able to participate in the fee arbitration, the trial court refused to enforce this part of the settlement agreement, holding that the fee arbitration provision was “void in its entirety because it improperly excluded the members of the class from the fee application process.” The trial court then determined the fees itself, within the range agreed on by the parties.

The Court of Appeal held that the trial court abused its discretion by refusing to send the issue out to arbitration, but affirmed the trial court's decision because the defendant failed to show actual prejudice resulting from determination of the amount of the attorney fee award by the court rather than by the arbitrator selected by the parties.