Speetjens v. Larson, No. 3:05 CV 394 BN.
| Decision Date | 08 November 2005 |
| Docket Number | No. 3:05 CV 394 BN. |
| Citation | 401 F.Supp.2d 600 |
| Parties | Cynthia H. SPEETJENS, Cynthia H. Speetjens, Attorney, P.A., Thomas Roe Frazier, II, John Davidson, and Frazier Davidson, P.A., Plaintiffs, v. Janet LARSON, Defendant. |
| Court | U.S. District Court — Southern District of Mississippi |
Grover Clark Monroe, II, Dunbarmonroe, PLLC, Jackson, MS, Danny A. Drake, Mockbee, Hall & Drake, PA, Jackson, MS, for Cynthia H. Speetjens, T. Roe Frazer, John Davidson, Plaintiffs.
Mark H. Rosenthal — PHV, Law Offices of Mark H. Rosenthal, San Francisco, CA, for Janet Larson, Defendant.
This cause is before the Court on the following Motions:
1. Plaintiffs' Motion for Preliminary Injunction, Permanent Injunctive Relief and Order Compelling Arbitration; and
2. Defendant's Motion to Dismiss.
Having considered the Motions, Responses, Rebuttals and all attachments to each, as well as supporting and opposing authority, the Court finds as follows:
1. Plaintiffs' Motion for Preliminary Injunction, Permanent Injunctive Relief and Order Compelling Arbitration is well taken in part and not well taken in part and should be granted in part and denied in part;1 and
2. Defendant's Motion to Dismiss is not well taken and should be denied as moot.
This case arises out of a contractual relationship between Plaintiff Frazier Davidson, P.A. ("Frazier Davidson"), a Mississippi law firm composed of Plaintiffs Thomas Roe Frazier, II and John Davidson and one of its former associates, Plaintiff Cynthia Speetjens, and Defendant Janet Larson. In 2003, Larson believed her financial investor Michael Kimsey, also a California resident, had improperly advised her on how to invest her assets.2 A mutual acquaintance of Larson and Frazier Davidson who was aware of Larson's need for an attorney arranged a teleconference between the two parties.3 After the teleconference, Larson retained Cynthia Speetjens, an associate with Frazier Davidson, to represent Larson as well as two trusts that were established by Kimsey — the Janet E. Larson Irrevocable Trust and the Janet E. Larson Insurance Trust (collectively "the Trusts").4
Speetjens sent Larson a copy of a Frazier Davidson contingency fee agreement and Larson's brother, who is an attorney, reviewed the contract. On March 8, 2004, Larson signed and faxed the Attorneys' Contingent Fee and Cost Employment Agreement ("the Frazier Davidson Employment Agreement") to Speetjens. Exhibit "A" to the Complaint. Larson signed the Frazier Davidson Employment Agreement, but neither Speetjens nor any representative of Frazier Davidson signed it. The Trusts were never mentioned as clients or beneficiaries of the Frazier Davidson Employment Agreement.
Some time after Larson entered into the Frazier Davidson Employment Agreement, Speetjens left Frazier Davidson and started her own firm, Cynthia Speetjens, Attorney P.A. ("Speetjens Firm"). Larson allowed Speetjens to take the Kimsey matter to the new firm. On November 3, 2004, Larson entered into a second contingency fee agreement with the Speetjens Firm ("the Speetjens Employment Agreement"). Exhibit "A" to the Complaint. The Speetjens Employment Agreement was also reviewed by Larson's brother before Larson signed it. The Speetjens Employment Agreement also failed to mention the Trusts.
Speetjens associated another Mississippi attorney, Jesse Harrington, to help with the matter. Harrington traveled to California and met with Larson in late 2004 about the case. Larson alleges that she was informed that a complaint would soon be filed in California state court against Kimsey. Although a draft of a complaint was e-mailed to Larson, the complaint was never filed. Larson believed that Speetjens and Harrington had failed to pursue Larson's claim against Kimsey, and Larson became frustrated with their inaction. After allegedly contacting the two attorneys on numerous occasions and "not get[ting] a straight answer," Larson decided to have a California attorney look into the matter.5
After assessing the situation, the California attorney and Larson's current counsel, Mark Rosenthal, opined that the statute of limitations had run or would soon run on her claim against Kimsey. On April 25, 2005, Larson fired Speetjens. Rosenthal then sent a letter to Speetjens on May 18, 2005, informing Speetjens of his findings and that Larson might pursue a legal malpractice claim. In June 2005, Frazier Davidson and Speetjens demanded arbitration pursuant to the arbitration clauses ("the Arbitration Agreements") in both the Frazier Davidson and Speetjens Employment Agreements. Exhibit "C" to the Complaint. Larson subsequently refused to arbitrate, arguing that the Arbitration Agreements were unenforceable. Other than references to the individual firms, the Arbitration Agreements in both the Frazier Davidson and Speetjens Employment Agreements are identical. The subject provisions state,
[a]ny and all disputes and/or controversies relating to FRAZER DAVIDSON, p.a.'s or associated counsel's representation shall be resolved solely and exclusively by arbitration. The arbitration shall be conducted by a panel of three arbitrators. CLIENT will select one arbitrator who is a member of The Mississippi Bar and whose membership is active and in good standing. Our Law Firm will select an arbitrator who is a member of The Mississippi Bar and whose membership is active and in good standing. The two arbitrators will then select a third arbitrator who is a member of The Mississippi Bar and whose membership is active and in good standing. The arbitration shall be conducted in Hinds County, Mississippi. The powers and rulings of the arbitrators shall be exercised by a majority of their numbers. The rulings of the majority of arbitrators shall be binding on CLIENT and our Law Firm to the same extent that a jury verdict would be binding on CLIENT and our Law Firm. Thus, CLIENT and our Law Firm agree that the arbitrators rulings may be enforced and/or appealed in Hinds County circuit court and applicable appellate courts to the same extent that a Hinds County jury verdict can be enforced and/or appealed. CLIENT and Law Firm understand that by CLIENT signing this contingency fee employment agreement CLIENT and Law Firm are waiving their rights to a jury trial on disputes and/or controversies relating to fees and/or costs, and CLIENT and Law Firm agree to submit any and all disputes and/or controversies relating to fees and/ or costs payable hereunder including fees and/or costs involving associate counsel, to binding arbitration in the manner provided herein. CLIENT will be responsible for paying the fees and costs billed by independent counsel CLIENT may retain. Law Firm will be responsible for paying the fees and costs billed by independent counsel Law Firm may retain. All other fees and costs associated with the arbitration will be paid in the manner and by the party or parties directed by the majority of the arbitrators.
See Exhibit "A" to the Complaint.
On June 24, 2005, Plaintiffs filed this action against Larson requesting an order compelling arbitration pursuant to § 4 of the Federal Arbitration Act ("FAA"); 9 U.S.C. § 1, et seq. On June 30, 2005, Larson, in her individual capacity, and Larson and Near, as trustees of the Trusts, sued Plaintiffs for legal malpractice in California state court. See Exhibit "A" to Plaintiff's Motion for Preliminary Injunction, Permanent Injunctive Relief and Order Compelling Arbitration.
On July 19, 2005, Plaintiffs filed their Motion asking the Court to order arbitration and enjoin the California state court action. Defendant responded to Plaintiffs' Motion on August 16, 2005, and also moved for dismissal. Because the California state court suit has since been removed to the United States District Court for the Northern District of California, Plaintiffs in their Reply request a stay of the California suit pending the outcome of this action. See Plaintiffs' Reply Brief, p. 11.
Plaintiffs contend that because they have demanded arbitration and Defendant has refused, the Court should now compel arbitration pursuant to § 4 of the FAA. Defendant counters that the Arbitration Agreements are not enforceable for several reasons. First, Defendant avers that California statutory law renders the entire Employment Agreements unenforceable. Second, Defendant argues that the Arbitration Agreements are unconscionable because Defendant would be required to arbitrate in Mississippi, discovery would be limited, and the arbitrators would all be Mississippi attorneys. Third, Defendant claims the Arbitration Agreements promise a false right to an appeal. Finally, Defendant argues that her malpractice claim is not within the scope of the Arbitration Agreements.
Generally a two-step inquiry applies to actions to compel arbitration under the FAA. Webb v. Investacorp, Inc., 89 F.3d 252, 257 (5th Cir.1996).
The first step is to determine whether the parties agreed to arbitrate the dispute in question. This determination involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement. When deciding whether the parties agreed to arbitrate the dispute in question, courts generally ... should apply ordinary state-law principles that govern the formation of contracts. In applying state law, however, due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself must be resolved in favor of arbitration. The second step is to determine whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.
Id. at 257-58 (internal quotation marks and citations omitted...
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