Sunday, December 24, 2017
The Maine Supreme Judicial Court held an agreement to arbitrate legal malpractice was unenforceable against the former client absent informed consent
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.
The firm sought to compel arbitration citing language in a document attached to the retainer agreement
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.
The court below
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
The court here
The Maine Rules of Professional Conduct do not explicitly address the issue presented by this appeal: if, and to what extent, an attorney or law firm must inform a prospective client about the effect of a provision that prospectively requires the client to submit malpractice claims against that attorney or firm to arbitration. However, interpretations of the Rules by both the Maine Professional Ethics Commission and the ABA, expressed in advisory opinions, indicate that for such a provision to comply with the Rules, the client must be fully informed of its scope and effect.
...we now implement the public policy reflected by Maine Rule of Professional Conduct 1.8 cmt. (14) and the opinions of the Maine and ABA Ethics Commissions. Maine attorneys must obtain a client’s informed consent regarding the scope and effect of any contractual provision that prospectively requires the client to submit malpractice claims against those attorneys to arbitration. See M.R. Prof. Conduct 1.8 cmt. (14). To obtain the client’s informed consent, the attorney must effectively communicate to the client that malpractice claims are covered under the agreement to arbitrate. The attorney must also explain, or ensure that the client understands, the differences between the arbitral forum and the judicial forum, including the absence of a jury and such “procedural aspects of forum choice such as timing, costs, appealability, and the evaluation of evidence and credibility.” Me. Prof. Ethics Comm’n, Op. No. 202. Furthermore, to ensure the client is informed “to the extent reasonably necessary to permit the client to make [an] informed decision,” the attorney should take into account the particular client’s capacity to understand that information and experience with the arbitration process, as these factors may affect both the breadth of information and the amount of detail the attorney is obligated to provide.4
On this record
the undisputed evidence supports the conclusion that Bernstein did not fully inform Snow as to the scope and effect of the agreement to arbitrate, as is required by the Maine Rules of Professional Conduct and the Maine Professional Ethics Commission opinions interpreting those Rules. Therefore, the Superior Court did not err in concluding that the arbitration provision was unenforceable for violating public policy.