Filed 10/2/13 Ruby v. Allen Matkins et al. CA2/3
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                 DIVISION THREE



HOWARD F. RUBY, individually and                                           B243423
as Trustee, etc.,
                                                                           (Los Angeles County
         Plaintiff and Respondent,                                         Super. Ct. No. BC479860)

         v.

ALLEN MATKINS LECK GAMBLE
MALLORY & NATSIS LLP,

         Defendant and Appellant.




         APPEAL from an order of the Superior Court of Los Angeles County,

Mark V. Mooney, Judge. Reversed with directions.

         Jeffer, Mangels, Butler & Mitchell, Robert E. Mangels, Susan Allison and

Andrew I. Shadoff for Defendant and Appellant.

         Kinsella Weitzman Iser Kump & Aldisert, Dale F. Kinsella and

Jonathan Steinsapir for Plaintiff and Respondent.


                            _______________________________________
       Allen Matkins Leck Gamble Mallory & Natsis LLP (Allen Matkins) appeals an

order denying its motion to compel Howard F. Ruby to arbitrate a legal malpractice

action. Ruby is not a party to the engagement letter agreement between Allen Matkins

and its client R&B Realty Group, LP (R&B) containing an arbitration clause. We

conclude, however, that Ruby as a nonparty is nonetheless bound by the arbitration

agreement because he voluntarily accepted the benefits of Allen Matkins’s

representation under the engagement letter. We therefore will reverse the order with

directions to grant the motion to compel arbitration.

                  FACTUAL AND PROCEDURAL BACKGROUND

       1.     Factual Background

       R&B manages apartment buildings and corporate housing under the fictitious

business names Oakwood Worldwide and Oakwood. The Howard F. Ruby Trust

(Ruby Trust) is a general partner in R&B, a limited partnership. Ruby is trustee of the

Ruby Trust.

       R&B does not own the buildings that it manages. Instead, at the time of the

events in this case, many of the buildings were owned by separate partnerships (the

Property Partnerships) owned by partners only some of whom were general partners in

R&B.

       Partners in the Property Partnerships sought a means to cash out of their

investments without realizing taxable capital gains. They decided to accomplish this

through an umbrella partnership real estate investment trust (UPREIT) and entered into



                                            2
negotiations with the Archstone-Smith Trust (Archstone). R&B hired Allen Matkins as

its legal counsel in connection with the UPREIT transactions.

        Allen Matkins and R&B entered into an engagement letter agreement dated

December 5, 2001, for the provision of legal services “in connection with partnership,

tax and related matters for the Company [defined as Oakwood Worldwide] and its

affiliates.” The engagement letter included an arbitration clause stating, in relevant part,

“in the event of any dispute arising out of or relating to this agreement, our relationship,

or the services performed (including but not limited to disputes regarding attorneys’ fees

or costs and those alleging negligence, breach of fiduciary duty, fraud or any claim

based upon a statute), such dispute shall be resolved by submission to binding

arbitration . . . . ” Darby T. Keen signed the engagement letter as president of Oakwood

Worldwide.

        The UPREIT transactions were completed, including certain tax-related

agreements designed to indemnify the partners in the Property Partnerships against any

tax liability. The partners contributed their real property interests to a separate entity in

exchange for ownership interests known as units. The partners later allegedly were

forced to sell those units in connection with a “reverse merger” transaction and incurred

capital gains tax liabilities as a result. Archstone refused to indemnify the partners for

their tax liabilities.

        Ruby and others filed a complaint against several entities for damages relating to

their tax liabilities. The defendants successfully moved to compel arbitration based on

arbitration provisions in the tax-related agreements. The arbitration panel concluded

                                              3
that the tax-related agreements provided no tax protection to the partners in the event of

a reverse merger and that the partners were entitled to no indemnity.

       2.     Trial Court Proceedings

       Ruby, individually and as trustee of the Ruby Trust, filed a complaint against

Allen Matkins in February 2012 and filed a first amended complaint in April 2012.1 He

alleges that Allen Matkins represented him as a partner in the Property Partnerships in

connection with the UPREIT transactions. He alleges counts against Allen Matkins for

professional negligence and breach of fiduciary duty arising from such representation.

       Ruby alleges that he sought complete tax protection in the UPREIT transactions,

including an indemnity in the event that he realized any capital gains as a result of any

action by Archstone. He alleges that Allen Matkins assured him that it had secured

complete tax protection for him in the transactions. He alleges, however, that Allen

Matkins failed to secure complete tax protection for him because it failed to include

a “merger protection” provision in the tax-related agreements.

       Allen Matkins filed a motion to compel arbitration and stay the action pending

the completion of the arbitration. It argued that Ruby, individually and as trustee of the

Ruby Trust, was bound by the arbitration agreement in the engagement letter because

(1) he alleges that Allen Matkins acted as his attorney and (2) the firm performed all of

its services in connection with the UPREIT transactions pursuant to the engagement

1
       A trust is not a legal entity and has no capacity to sue or be sued. (Powers v.
Ashton (1975) 45 Cal.App.3d 783, 787; see Weil & Brown, Cal. Practice Guide: Civil
Procedure Before Trial (The Rutter Group 2013) ¶ 2:6, p. 2-3.) The proper party with
respect to the trust is Ruby as trustee. (See Code Civ. Proc., § 369, subd. (a)(2).)


                                             4
letter. Allen Matkins also argued that that the Ruby Trust as a general partner in R&B

was an agent of R&B and a beneficiary of the engagement letter and therefore was

bound by the arbitration agreement, and that Ruby individually was an agent and

beneficiary of the Ruby Trust and therefore was similarly bound by the arbitration

agreement.

       Ruby argued in opposition that he was not bound by the arbitration agreement in

the engagement letter because (1) he was not a party to the arbitration agreement and

(2) the claims alleged in his complaint did not arise from Allen Matkins’s representation

of R&B or its representation of Ruby as a general partner in R&B.

       Allen Matkins argued in reply that Ruby was bound by the arbitration agreement

because all of the work it performed allegedly as Ruby’s legal counsel it performed

pursuant to the engagement letter. It argued that Ruby had not shown that it represented

Ruby separate and apart from its representation of R&B. Allen Matkins also argued

that Ruby was bound by the arbitration agreement because he voluntarily accepted the

benefit of the legal services provided by Allen Matkins pursuant to the engagement

letter and because his claims were inextricably intertwined with those legal services.

       Allen Matkins filed a declaration by Keen in support of its reply stating that he

understood the reference to “affiliates” in the engagement letter to include the general

partners of the Property Partnerships, and that all of the work performed by Allen

Matkins as alleged in the complaint was performed pursuant to the engagement letter.

Ruby objected to the Keen declaration as untimely and on other grounds.



                                            5
       The trial court stated at the hearing on the motion to compel arbitration that it

was “not quite clear that these dots have been all connected to Mr. Ruby and his

position as a general partner with these property partnerships and this engagement letter

that was signed. I think that a compelling argument can be made that the advice and the

actions given regarding, regarding these property partnerships is somewhat different

than what was involved in the R&B Realty Group representation.” The court therefore

denied the motion in a minute order filed on August 7, 2012, and overruled Ruby’s

evidentiary objections. Allen Matkins timely appealed the order.

                                     CONTENTIONS

       Allen Matkins contends (1) Ruby is bound by the arbitration agreement because

the scope of legal services under the engagement letter expressly encompasses matters

involving R&B’s affiliates, and Ruby failed to show that Allen Matkins represented him

separately from its representation of R&B under the engagement letter; (2) Ruby is

bound by the arbitration agreement as a nonsignatory because he voluntarily accepted

the benefits of the legal services provided under the engagement letter; and (3) Ruby is

bound as a nonsignatory because he had a “preexisting relationship” with R&B and

because his claims are “inextricably intertwined” with the legal services provided under

the engagement letter.

                                      DISCUSSION

       Parties to an arbitration agreement can be compelled to arbitrate disputes that are

within the scope of the arbitration agreement. Code of Civil Procedure section 1281.2

states that on a petition filed by a party to a written arbitration agreement, a court must

                                             6
order a party to the agreement to arbitrate a controversy if it finds that an agreement to

arbitrate the controversy exists, unless a specified exception applies. The California

Arbitration Act (Code Civ. Proc., § 1280 et seq.) “reflects a ‘strong public policy in

favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’

[Citation.]” (Haworth v. Superior Court (2010) 50 Cal.4th 372, 380.)

         As a general rule, a person can be compelled to arbitrate a dispute only if he or

she has agreed to resolve such a dispute by arbitration. (Daniels v. Sunrise Senior

Living, Inc. (2013) 212 Cal.App.4th 674, 680; Benasra v. Marciano (2001)

92 Cal.App.4th 987, 990.) The strong public policy in favor of arbitration does not

support the compelled arbitration of a dispute that a party has not agreed to arbitrate.

(Victoria v. Superior Court (1985) 40 Cal.3d 734, 744.) Whether a nonsignatory is

bound by an arbitration agreement is a question of law that we review de novo if the

material facts are undisputed. (Suh v. Superior Court (2010) 181 Cal.App.4th 1504,

1512.)

         Courts have recognized certain exceptions to the general rule that only

a signatory to an arbitration agreement can be compelled to arbitrate. For example,

a nonsignatory to an arbitration agreement is bound by the agreement and can be

compelled to arbitrate if an agent entered into the agreement on his or her behalf.

(Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 706-709 [held that

a state employee was bound by an arbitration agreement in a group medical plan entered

into by a state employees’ retirement board as agent for the employees]; Garrison v.

Superior Court (2005) 132 Cal.App.4th 253, 264-267 [held that the plaintiffs in

                                              7
a wrongful death action were bound by arbitration agreements with a residential care

facility entered into by the decedent’s attorney in fact under a durable power of

attorney].)

       An arbitration agreement also may be binding on a nonsignatory in other

circumstances where the nature of the nonsignatory’s relationship with a party to the

agreement supports the implied authority of the party to bind the nonsignatory (Crowley

Maritime Corp. v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1070

(Crowley) [discussing cases where a preexisting relationship “gives the party to the

agreement authority to bind the nonsignatory”]; Matthau v. Superior Court (2007)

151 Cal.App.4th 593, 600 [stating that an arbitration agreement is binding on

a nonsignatory if a preexisting relationship “supports the implied authority of the party

to bind the nonsignatory”]) or where the nonsignatory receives the benefit of the

contract containing the arbitration agreement (NORCAL Mutual Ins. Co. v. Newton

(2000) 84 Cal.App.4th 64, 81-84 [held that after seeking and receiving the benefit of an

insurance policy, the insured’s wife was bound by the policy’s arbitration clause];

Harris v. Superior Court (1986) 188 Cal.App.3d 475, 478-479 (Harris) [held that

a doctor was bound by an arbitration agreement between a medical group and a patient,

both as an employee of the medical group and as a third party beneficiary of the

arbitration agreement]; see Epitech, Inc. v. Kann (2012) 204 Cal.App.4th 1365,

1371-1373 [held that secured creditors were not third party beneficiaries of the debtor’s

agreement with a financial advisor to obtain financing]).



                                            8
       Civil Code section 1589 states, “A voluntary acceptance of the benefit of

a transaction is equivalent to a consent to all the obligations arising from it, so far as the

facts are known, or ought to be known, to the person accepting.” Thus, a nonparty to an

arbitration agreement who knowingly and voluntarily accepts the benefits of the

contract containing the arbitration agreement is bound by the arbitration agreement and

can be compelled to arbitrate. (Harris, supra, 188 Cal.App.3d at p. 479 [stating that

a doctor’s acceptance of the benefits of a health plan agreement, to which he was not

a party, by obtaining patients “necessarily entailed acceptance of the agreement that

members’ claims would be subject to binding arbitration”] ; cf. RN Solution, Inc. v.

Catholic Healthcare West (2008) 165 Cal.App.4th 1511, 1520 [holding that an

employee who accepted the benefits of her employer’s agreement with another

company was “bound by the arbitration agreement both as an agent-employee . . . and as

a third party beneficiary” of the agreement and therefore was not a stranger to the

arbitration agreement for purposes of Code Civ. Proc., § 1281.2, subd. (c)].)

       Allen Matkins as counsel for R&B negotiated the UPREIT transactions with

Archstone. Those transactions were designed to allow partners in the Property

Partnerships, including Ruby, to cash out of their real property investments without

realizing taxable capital gains. Thus, Allen Matkins’s representation of R&B directly

benefited the partners in the Property Partnerships. This is true regardless of whether

Allen Matkins also separately represented Ruby in connection with the UPREIT

transactions. Ruby as a general partner in R&B was aware of this and voluntarily

accepted the benefits conferred on him. We conclude that having accepted the benefits

                                              9
of the representation provided pursuant to the engagement letter agreement, Ruby,

individually and as trustee of the Ruby Trust, is bound by the arbitration agreement

contained in the engagement letter. We therefore conclude that the denial of the motion

to compel arbitration was error and that the motion must be granted. In light of our

conclusion, we need not address Allen Matkins’s other arguments for compelling

arbitration.




                                           10
                                     DISPOSITION

       The order denying the petition to compel arbitration is reversed with directions to

grant the motion. Allen Matkins is entitled to recover its costs on appeal.



       NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS




                                                                      CROSKEY, J.

WE CONCUR:




       KLEIN, P. J.




       KITCHING, J.




                                           11
