Castillo v. Arrieta, 020216 NMCA, 34, 108
| Judge | WE CONCUR: MICHAEL D. BUSTAMANTE, Judge, J. MILES HANISEE, Judge. |
| Parties | RAY CASTILLO, Plaintiff-Appellant, v. JOSE LUIS ARRIETA, MANUEL ARRIETA, THE ARRIETA LAW FIRM, P.C., and JOSE LUIS ARRIETA, P.C., Defendants-Appellees. |
| Date | 02 February 2016 |
| Court | Court of Appeals of New Mexico |
| Docket Number | 108,34 |
APPEAL FROM THE DISTRICT COURT OF DOÑA ANA COUNTY Lisa B. Riley, District Judge.
OPINION
{1} In 2006 Plaintiff Ray Castillo signed a document with a provision requiring him to arbitrate "any dispute" arising between him and his attorneys, who are now defendants in this case. The present lawsuit-alleging legal malpractice and related claims-can only proceed to a jury trial if, as a matter of contract, the arbitration clause does not apply, or if it is otherwise unenforceable.
{2} An arbitration clause in a fee agreement between attorney and client implicates unique legal and ethical concerns that are presently being debated, with other jurisdictions taking varied approaches to enforceability. See generally Terese M. Schireson, Comment, The Ethical Lawyer-Client Arbitration Clause, 87 Temp. L. Rev. 547, 557-64 (2015). For the reasons discussed in this Opinion, we hold that the plain text of this unusually broad arbitration provision reasonably applies to Plaintiff's malpractice claim, but that it is unenforceable if it was signed without Plaintiff's informed consent. We reverse the district court's decision compelling arbitration and remand for proceedings to determine the circumstances surrounding negotiation of the fee agreement.
I. BACKGROUND
{3} On August 7, 2006, Plaintiff signed a contingency fee agreement with Jose Luis Arrieta and the Arrieta Law Firm, P.C., which Plaintiff alleges was then also the firm of Jose's brother and co-counsel, Manuel Arrieta. The representation was related to injuries Plaintiff allegedly suffered less than a month earlier in a work site accident-the severity of which is now disputed by the parties. This dispute, along with most other factual disputes raised in the briefs, is not relevant to our analysis.
{4} The fee agreement at issue contains fourteen numbered paragraphs. The final numbered paragraph succinctly provides:
ARBITRATION CLAUSE: Should any dispute arise, Client and Attorney agree to submit their dispute to arbitration.
Plaintiff signed the fee agreement, affirming that he "read the foregoing terms and agree[d] to them without reservation." There is no other language in the agreement that discusses the scope or meaning of the arbitration clause or provides any explanation of arbitration generally. There is no indication in the agreement that Plaintiff was waiving his right to a jury trial should he sue his attorney for malpractice. Nor is there any suggestion that Plaintiff seek advice of independent counsel before agreeing to such a waiver.
{5} In 2013 Plaintiff brought this lawsuit against Jose, Manuel, and their law firms (collectively, Defendants), alleging that Defendants breached their obligations in the fee agreement, breached an implied covenant of good faith and fair dealing, and committed legal malpractice resulting in Plaintiff's inability to present his personal injury case. When Defendants moved to compel arbitration, Plaintiff opposed the motion on grounds that the arbitration clause was ambiguous, did not clearly apply to a legal malpractice claim, and was otherwise unconscionable and unenforceable as a matter of public policy. With respect to enforceability, Plaintiff argued, in part, that an attorney has fiduciary obligations to his client, which includes an obligation to explain the meaning and scope of an agreement to arbitrate, including the relative advantages and disadvantages of prospectively giving up the right to a jury trial for any future malpractice claim.
{6} Plaintiff and Defendants submitted conflicting affidavits related to the circumstances surrounding negotiation of the fee agreement. According to Defendants, each paragraph was reviewed with and explained to Plaintiff before the agreement was signed. Specifically, the defense affidavit states that Plaintiff was told that any dispute arising from the representation "would be subject to arbitration through a neutral arbitrator selected by both parties." In contrast, Plaintiff's affidavit states that Defendants never discussed anything about arbitration with him and that he was never told that he would be waiving his right to a jury trial if he sued Defendants for malpractice.
{7} Plaintiff sought leave to depose Defendants in order to investigate the factual dispute evinced by the affidavits. Without any evidentiary hearing, the district court-either believing the factual dispute to be irrelevant, or else resolving the dispute on the face of the conflicting affidavits-denied Plaintiff's request to conduct discovery and granted Defendants' motion to compel arbitration.
II. DISCUSSION
{8} Plaintiff makes several related arguments on appeal, which we summarize as: (1) the arbitration provision, which was included in an agreement dealing primarily with attorney fees, does not clearly apply to the malpractice claim; and (2) enforcement of the provision violates public policy unless Plaintiff was sufficiently informed "of the details of the arbitration process and the pros and cons of arbitration, " and given the opportunity to seek advice of independent counsel. "We review de novo the grant of the motion to compel arbitration in the same manner we would review a grant of a summary judgment motion." DeArmond v. Halliburton Energy Servs., Inc., 2003-NMCA-148, ¶ 4, 134 N.M. 630, 81 P.3d 573. As such, the question cannot be resolved as a matter of law if there remain disputed issues of material fact. See Campbell v. Millennium Ventures, LLC, 2002-NMCA-101, ¶¶ 13-14, 132 N.M. 733, 55 P.3d 429.
A. The Legal Malpractice Claim Is Within the Scope of the Arbitration Clause
{9} As an initial matter, we are asked to determine whether the arbitration provision relied upon is even intended to apply to Plaintiff's legal malpractice claim. See Clay v. N.M. Title Loans, Inc., 2012-NMCA-102, ¶ 14, 288 P.3d 888 ("[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." (internal quotation marks and citation omitted)). "Under contract law, the scope of an arbitration provision-whether the parties intended to submit to arbitration-is determined by applying the plain meaning of the contract language." Id. (alteration, internal quotation marks, and citation omitted). The clause in this case is included in an agreement that deals primarily with attorney fees, and is broadly worded to apply to "any dispute" that may arise between the parties. Plaintiff considers this language to be ambiguous, and asks us to construe any ambiguity strictly against Defendants.
{10} "We construe ambiguities in a contract against the drafter to protect the rights of the party who did not draft it." Heye v. Am. Golf Corp., 2003-NMCA-138, ¶ 14, 134 N.M. 558, 80 P.3d 495. But "[a]rbitration clauses such as the one before us are drafted with broad strokes and, as a result, require broad interpretation." Santa Fe Techs., Inc. v. Argus Networks, Inc., 2002-NMCA-030, ¶ 55, 131 N.M. 772, 42 P.3d 1221. "When parties voluntarily contract to arbitrate their grievances, an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Horne v. Los Alamos Nat'l Sec., L.L.C., 2013-NMSC-004, ¶ 46, 296 P.3d 478 (alteration, internal quotation marks, and citation omitted); see Heimann v. Kinder-Morgan CO2 Co., L.P., 2006-NMCA-127, ¶ 7, 140 N.M. 552, 144 P.3d 111 ("[A]mbiguity in arbitration clauses should be resolved to favor arbitration."). We will certainly not construe a broad but unambiguous arbitration clause in a manner counter to its plain text. See Clay, 2012-NMCA-102, ¶ 27.
{11} However, our prior cases dealing with broadly worded arbitration clauses have still required some relationship between the dispute at issue and the general substance of the underlying agreement. See id. ¶ 14 ("In order to fall within the scope of the arbitration clause, the claims at issue must bear a 'reasonable relationship' to the contract in which the arbitration clause is found."); Santa Fe Techs., 2002-NMCA-030, ¶ 52. Although the arbitration provision we examined in Clay-by its terms-applied only to matters that arose from or were related to the underlying agreement, we were nonetheless persuaded that "even the most broadly[]worded arbitration agreements still have limits founded in general principles of contract law, " and that courts should "refuse to interpret any arbitration agreement as applying to outrageous torts that are unforeseeable to a reasonable consumer in the context of normal business dealings." 2012-NMCA-102, ¶¶ 18, 22-23 (internal quotation marks and citation omitted).
{12} Thus, a party to even the most general arbitration agreement "may be assumed to have intended to arbitrate issues that are closely related to those governed by the agreement itself, but not those that are unrelated to the agreement, out of the context of the agreement, or outrageous and unforeseeable." Id. ¶ 20; see Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1516 (10th Cir. 1995) ("[I]f two small business owners execute a sales contract including a general arbitration clause, and one assaults the other, [it is] elementary that the sales contract did not require the victim to arbitrate the tort claim because the tort claim is not related to...
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