What happens if the person you thought was your lawyer isn’t permitted to practice law? If you are in the entertainment business and there’s a contract and money involved, expect the dispute to wind up in the courts.

That’s the lesson learned by actor and screenwriter Michael Bacall, whose credits include “Inglorious Basterds,” “Scott Pilgrim vs the World” and “21 Jump Street.” In a possibly less welcome role, he was also the plaintiff in a recent decision by the California Court of Appeal (Bacall v Shumway).

For many years Bacall was represented by Jeffrey Shumway as his lawyer and talent manager, first when Shumway was with a law firm and later through Timaeus Group, which Shumway formed in 2011.

In 2014, according to court documents, Shumway changed his status with the State Bar of California to “inactive,” but allegedly did not inform Bacall of this change. An attorney on inactive status is not permitted to practice law.

Two years later, Bacall signed a representation agreement with Shumway’s company which said Timaeus Group would provide “Chief Content Officer” services as well as management, producing, and business affairs services, for a fee of $243,750 plus a 10% management commission.

The agreement was renewed in 2017. Bacall terminated it in May of that year when he learned of Shumway’s inactive status with the state bar.

Timaeus Group filed a demand for arbitration, as called for in the agreement.

Bacall then sued Shumway and Timaeus Group in Los Angeles Superior Court, alleging fraud, legal malpractice, breach of fiduciary duty, and other claims. He asked the court to rescind the 2016 and 2017 agreements as unlawful and against public policy.

The core of Bacall’s complaint was that Shumway had represented himself as a lawyer and had provided legal services to Bacall despite not being authorized to practice law.

The trial court allowed Shumway to submit his claims to arbitration.

After a hearing, the arbitrator affirmed the cancellation of the 2016 and 2017 agreements, and ordered Shumway to pay Bacall $438,000 plus fees and costs.

The arbitrator ruled that Shumway had rendered unlicensed legal services, such as negotiating contracts with other attorneys. For this reason, the arbitrator said, “the contract between the parties was properly ended, for good and valid reasons” when Bacall canceled it, and Shumway was not entitled to any fees after that.

Although Shumway should not have received payment for legal services, the arbitrator decided, he was entitled to be paid $406,000 for his activity as “Chief Content Officer” over the 16 months the agreements were in effect.

The arbitrator ordered Shumway to repay $201,000 in legal and management commissions, deciding that the two services were too intertwined to separate. He also awarded Bacall $237,000 in attorney fees and costs.

Shumway and his company asked the trial court to set aside the arbitrator’s ruling, arguing that the arbitrator exceeded his authority. The trial court rejected the request, and Shumway and Timaeus Group appealed.

The former lawyer fared no better with the appellate court, which disagreed with all of his arguments.

Shumway’s contention that the arbitrator exceeded his authority was irrelevant, the appellate court said.

It pointed out that, because arbitration is intended to be a quick and final alternative to litigation, “an arbitrator’s decision is not generally reviewable for errors of fact or law.” This holds true even if an arbitrator’s error “causes substantial injustice to the parties.”

The reason for this is that parties who enter into an arbitration agreement are presumed to know that a decision by the arbitrator will be final and binding. Without that finality, arbitration would simply be a pointless prelude to courtroom litigation rather than an alternative to it.

However, this is an exception to this rule: arbitrators cannot enforce an illegal contract. Shumway asked the higher court to set aside the arbitrator’s ruling because Shumway had asked the trial court to determine the legality of the agreements.

But the appellate court pointed out that it was Shumway who asked the trial court to send the dispute to arbitration, and that during the arbitration Shumway never argued that the arbitrator lacked the authority to determine the legality of the agreements.

In his appeal, Shumway also contended that only the State Bar, not the arbitrator, could determine whether he engaged in the unlawful practice of law or impose discipline on him for doing so.

The justices disagreed. The arbitrator did not usurp the role of the Bar, they said. He simply concluded that Shumway’s unlicensed practice of law rendered portions of the agreements illegal.

The justices affirmed the decision of the trial court, and instructed the lower court to decide whether Bacall is entitled to attorneys fees on appeal.

The moral of this story is clear: when you render legal services, even if they are intertwined with other services, you must have a law license.

By Laurie Murphy