Snow v. Bernstein, Shur, Sawyer & Nelson, P.A.

• Decision Date: 21 December 2017
• Docket Number: Docket: Cum–17–54
• Citation: 176 A.3d 729
• Parties: Susan R. SNOW v. BERNSTEIN, SHUR, SAWYER & NELSON, P.A., et al.
• Court: Maine Supreme Court

176 A.3d 729

Susan R. SNOW

v.BERNSTEIN, SHUR, SAWYER & NELSON, P.A., et al.

Docket: Cum–17–54

Supreme Judicial Court of Maine.

Argued: October 25, 2017

Decided: December 21, 2017

Melissa A. Hewey, Esq. (orally), and Timothy E. Steigelman, Esq., Drummond Woodsum, Portland, for appellants Bernstein, Shur, Sawyer & Nelson, P.A., and J. Colby Wallace

Thomas F. Hallett, Esq., and Benjamin N. Donahue, Esq. (orally), Portland, for appellee Susan R. Snow

Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.

JABAR, J.

[¶ 1] Bernstein, Shur, Sawyer & Nelson, P.A., and J. Colby Wallace (collectively, Bernstein) appeal from a Superior Court (Cumberland County, Warren, J. ) order denying its motion to compel arbitration in a legal malpractice claim filed against it. Bernstein contends that the court erred when it concluded that Bernstein failed to obtain informed consent from its client, Susan Snow, to submit malpractice claims to arbitration, and that federal law does not preempt a rule requiring attorneys to obtain such informed consent from their clients. We agree with the Superior Court and affirm the judgment.

I. BACKGROUND

[¶ 2] The following undisputed facts are set forth in Snow and Bernstein's opposing affidavits filed in conjunction with Bernstein's motion to compel arbitration and Snow's motion to stay arbitration.

[¶ 3] In May 2012, Susan Snow retained Bernstein to represent her in a civil action. The firm presented for Snow's signature an engagement letter that, inter alia, set forth the scope of its representation. Located on the last page of that letter was a signature line, above which a bold-faced sentence provided: "I agree to the terms of this letter including the attached standard terms of engagement." Bernstein attached a document to the engagement letter titled "Standard Terms of Engagement for Legal Services." The provision at the heart of this dispute is found on the last page of that document and is titled "Arbitration." That provision provides, in pertinent part:

If you disagree with the amount of our fee, please take up the question with your principal attorney contact or with the firm's managing partner. Typically, such disagreements are resolved to the satisfaction of both sides with little inconvenience or formality. In the event of a fee dispute that is not readily resolved, you shall have the right to submit the fee dispute to arbitration under the Maine Code of Professional Responsibility. Any fee dispute that you do not submit to arbitration under the Maine Code of Professional Responsibility, and any other dispute that arises out of or relates to this agreement or the services provided by the law firm shall also, at the election of either party, be subject to binding arbitration . Either party may request such arbitration by sending a written demand for arbitration to the other. If a demand for arbitration is made, you and the firm shall attempt to agree on a single arbitrator. If no agreement can be reached within 30 days of the receipt of the demand, the party demanding arbitration may designate an arbitrator by sending a written notice to the other party. Within two weeks of that initial designation, the other party shall designate an arbitrator in writing. Thereafter, those two designated arbitrators shall meet promptly to select a third arbitrator. The arbitrators shall conduct the arbitration proceedings according to the procedures under the commercial arbitration rules of the American Arbitration Association and shall hold the arbitration hearing in Maine.... Either party shall have the right to appeal a decision of the arbitrators on the grounds that the arbitrators failed to properly apply the law.

(Emphasis added.)

[¶ 4] Snow subsequently signed the last page of the engagement letter.¹ At no time—before or after signing the letter—did Bernstein explain to her that, by providing her signature, she was agreeing to submit any future malpractice claims against the firm to binding arbitration.

[¶ 5] In August 2016, Snow filed a complaint and jury demand against Bernstein alleging that the firm committed legal malpractice in connection with its handling of her case. Shortly after, Snow filed a motion to stay threatened arbitration pursuant to 14 M.R.S. § 5928(2) (2016). In response, relying on the arbitration provision in the engagement letter, Bernstein filed a motion to compel arbitration.

[¶ 6] The court denied Bernstein's motion and granted Snow's. Relying on the Maine Rules of Professional Conduct, comments to those Rules, and opinions of the Maine Professional Ethics Commission that interpreted the Rules, the court concluded that, to include an agreement to arbitrate future malpractice claims against the firm in an engagement letter, Bernstein was obligated to fully inform Snow of the scope and effect of that agreement. Because Bernstein had failed to obtain informed consent, the court concluded that the arbitration provision violated public policy and was therefore unenforceable. The court further concluded that, because an attorney's obligation to obtain the informed consent of his clients does not apply solely to arbitration agreements, requiring informed consent in this context was not preempted by the Federal Arbitration Act (FAA), 9 U.S.C.S. §§ 1 – 307 (LEXIS through Pub. L. No. 115–90 ). Neither party moved for additional findings of fact pursuant to M.R. Civ. P. 52(b). Bernstein's timely appeal followed. See 14 M.R.S. § 5945(1)(A) (2016), (B); M.R. App. P. 2(b)(3) (Tower 2016).²

II. DISCUSSION

A. Standard of Review

[¶ 7] "We review the denial of a motion to compel arbitration for errors of law and for facts not supported by substantial evidence in the record." Saga Commc'ns of New England, Inc. v. Voornas , 2000 ME 156, ¶ 7, 756 A.2d 954. Here, the facts before the Superior Court were set out in affidavits executed by Snow and Bernstein. Because those affidavits did not contain any disputed facts, we determine de novo whether the court made any errors of law and whether the court's conclusion is supported by the facts. See id.

[¶ 8] This appeal requires us to determine whether the court erred when it concluded that (1) Bernstein's failure to obtain informed consent from Snow regarding an arbitration provision rendered that provision unenforceable as contrary to public policy, and (2) the Federal Arbitration Act does not preempt a requirement that attorneys obtain informed consent from their clients before contracting to submit disputes to arbitration.³

B. Enforceability of Agreement to Arbitrate

[¶ 9] Bernstein argues that the court erred in concluding that the arbitration provision concerning malpractice claims against the firm, contained in the engagement letter that Snow signed, is contrary to public policy and therefore unenforceable. Snow counters that the court correctly determined that public policy—as set forth in Maine's Rules of Professional Conduct—required Bernstein to "communicate adequate information and explanation to obtain [Snow's] informed consent to an arbitration." According to Snow, Bernstein's failure to obtain her informed consent rendered the arbitration agreement unenforceable. The parties' arguments before us center on two competing interests: the enforcement of arbitration contracts and the professional standards set forth in the Maine Rules of Professional Conduct.

1. Maine's Uniform Arbitration Act

[¶ 10] Maine's Uniform Arbitration Act (MUAA), 14 M.R.S. §§ 5927 – 5949 (2016), provides that "[a] written agreement ... or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable." 14 M.R.S. § 5927. Given the "Maine legislature's strong policy favoring arbitration," courts will ordinarily enforce arbitration agreements "if the parties have generally agreed to arbitrate disputes and if the party seeking arbitration is making a claim which, on its face, is governed [by the contract]." Westbrook Sch. Comm. v. Westbrook Teachers Ass'n , 404 A.2d 204, 207–08 (Me. 1979) (quotation marks omitted). Despite this strong presumption in favor of substantive arbitrability, see V.I.P., Inc. v. First Tree Dev. Ltd. Liab. Co. , 2001 ME 73, ¶ 4, 770 A.2d 95, the MUAA provides that agreements to arbitrate may be nullified "upon such grounds as exist at law or in equity for the revocation of any contract," 14 M.R.S. § 5927.

[¶ 11] One "such ground[ ]" upon which a court may invalidate an arbitration provision is where the agreement contravenes public policy. Id. ; see Allstate Ins. Co. v. Elwell , 513 A.2d 269, 272 (Me. 1986) ("A contract that contravenes public policy will not be enforced by our courts."); Corbin v. Houlehan , 100 Me. 246, 251, 61 A. 131 (1905) ("It is a fundamental and elementary rule of the common law that courts will not enforce ... contracts which are contrary to public policy ...."). "A contract is against public policy if it clearly appears to be in violation of some well established rule of law, or that its tendency will be harmful to the interests of society." Elwell , 513 A.2d at 272 (quotation marks omitted); see also State Farm Mut. Auto. Ins. Co. v. Koshy , 2010 ME 44, ¶¶ 42–44, 995 A.2d 651. The question before us, therefore, is whether an attorney's failure to obtain informed consent from a client regarding an arbitration clause for any legal malpractice claim against that attorney is contrary to public policy.

2. Public Policy as Expressed in the Rules of Professional Conduct

[¶ 12] Because nullifying a private, written contract provision should not be undertaken lightly, we look carefully at the argument that a provision contravenes an important public policy. The policy at issue here concerns the profession of law, which is uniquely within the purview of the courts.

[¶ 13] Effective August 1, 2009, we adopted the Maine Rules of Professional Conduct, which are styled after the American Bar Association's (ABA) Model Rules. See ...