A federal appeals court weighed whether a law firm can keep a client’s malpractice claim out of court if the two sides have a contract calling for arbitration of all disputes.
On Monday, the U.S. Court of Appeals for the First Circuit heard Douglas Bezio’s appeal of a Maine federal judge’s dismissal of his case against Portland, Maine-based Bernstein, Shur, Sawyer & Nelson and three of its lawyers.
Bezio hired Bernstein Shur for a case involving a regulatory dispute with the state of Maine. His contract with the firm stated that fee disputes or “any other dispute that arises out of or relates to this agreement or the services provided by the law firm” were subject to binding arbitration if either side opted for it.
Bezio’s December 2012 lawsuit claimed the Maine Rules of Professional Conduct barred the firm from forcing him to arbitrate malpractice claims. Bezio also sued Scot Draeger, the firm’s securities and financial services industry group practice leader, of counsel John Paterson and associate Caleb DuBois.
There is no consensus among states regarding whether attorney-client contracts can require the arbitration of legal malpractice claims, according to court papers filed by Bezio’s attorney, Valeriano Diviacchi. He pointed to “persuasive authority” from California, Florida and Louisiana, where courts have held that arbitration clauses in attorney-client contracts should not apply to malpractice disputes unless there’s specific language stating that they do apply.
Legal malpractice attorney Michael Downey, who is not involved with the Bezio case, said that most states allow arbitration clauses that relate to fee disputes but that “courts often do not like arbitration clauses that relate to malpractice claims.” Downey, a partner at Armstrong Teasdale, said that courts view lawyers as having a much greater understanding of the risks of the agreement than the client.
U.S. District Court Judge Nancy Torresen’s dismissal of Bezio’s case in July 2013 said the Federal Arbitration Act and the terms of the contract called for arbitration of Bezio’s malpractice claim.
On Monday, Chief Judge Sandra Lynch sat on the panel with judge Juan Torruella. Senior Judge Norman Stahl was not able to attend oral argument but would participate in the decision, Lynch said. The judges’ questions focused on the contract’s wording and the Maine Rules of Professional Conduct.
Torruella asked Diviacchi, a Boston solo practitioner, why the contract’s language that noted “any other dispute” would not include malpractice.
Diviacchi said ethics rules require a client’s informed consent about the terms of a contract, which, he argued, Bezio did not give on this issue.
“The attorney here has a specific duty to tell his client enough information so he can make an informed decision,” Diviacchi said.
Lynch noted that the client was a securities industry salesman who had been involved in arbitrations. She asked what contractual language Diviacchi thought the firm should have used.
“No matter what criteria I come up, with it’s not in there,” he said.
The firm’s lawyer George Dilworth, a partner at Drummond Woodsum in Portland, Maine, countered that Maine law “does not require any type of informed consent for the enforcement of a contract … or an arbitration provision.”
Dilworth added, “He’s asking the court to impose a special rule that Maine has not imposed on its own lawyers.”
Dilworth also said Bezio understood that he could amend the agreement and did so in other ways.
He also said the dispute would be over if it had been arbitrated.
“This is troubling to my clients,” Dilworth said. “We wanted a quick resolution.”
Sheri Qualters can be contacted at email@example.com.