Sunday, December 24, 2017

Informed Consent Required To Enforce Arbitration Of Legal Malpractice Claim

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.

(Mike Frisch)

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