Court Opinion

ID: 4650443
Source: CourtListenerOpinion
Date Created: 2021-01-11 18:01:15.290284+00
Date Added: 2024-06-11T08:01:33.053522
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                  __________

                                      No. 20-1090
                                      __________

                    CRAIG SANFORD and MARY JO SANFORD,
                                       Appellants,

                                           v.

                                  BRACEWELL, LLP

                                      __________

                    On Appeal from the United States District Court
                       for the Eastern District of Pennsylvania
                               (D.C. No. 2:13-cv-01205)
                      District Judge: Honorable Joel H. Slomsky
                                      __________

                     Submitted Under Third Circuit L.A.R. 34.1(a)
                               on November 19, 2020

             Before: JORDAN, KRAUSE, and RESTREPO, Circuit Judges

                                (Filed: January 11, 2021)
                                       __________

                                      OPINION*
                                      __________

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
RESTREPO, Circuit Judge.

       Craig and Mary Jo Sanford hired Bracewell, LLP, a law firm, to recover $12.5 mil-

lion allegedly stolen from them by a man named Smith. When Bracewell failed to find

Smith, the Sanfords hired a new attorney. The new attorney found Smith and won judg-

ments against him. But by then the money was gone.

       The Sanfords sued Bracewell for breach of contract and legal malpractice. Based

on the parties’ engagement letter, the District Court ordered the parties to arbitrate. Even-

tually, an arbitration panel ruled for the Sanfords on the breach of contract claim but against

them on the legal malpractice claim. The District Court confirmed the panel’s determina-

tion, and the Sanfords timely appealed.

       The District Court had jurisdiction pursuant to 28 U.S.C. § 1332 and 9 U.S.C. § 10,

and we have jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(1)(D). Our

review of the District Court’s order compelling arbitration is plenary. Century Indem. Co.

v. Certain Underwriters at Lloyd’s, 584 F.3d 513, 521 (3d Cir. 2009). And our review of

the District Court’s order confirming the arbitration award is two-fold—we review its find-

ings of fact for clear error and its legal conclusions de novo. Id. at 521-22. For the follow-

ing reasons, we will affirm.

       To begin, the District Court correctly ordered the parties to arbitrate their dispute.

In their engagement letter, the parties agreed to arbitrate “any controversy, dispute or claim

. . . arising out of or relating to the engagement,” App. 99a, and the Sanfords concede here

“that this dispute would fall within the scope of the arbitration clause,” Appellant Br. 29.

We see no reason to disregard the will of the parties.

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       The Sanfords nevertheless insist that the arbitration clause is unconscionable and,

therefore, unenforceable. It is not.1 The procedure by which the parties formed their agree-

ment to arbitrate appears more-or-less ordinary. Both parties were relatively sophisticated.

Bracewell did not employ any untoward tactics. The clause appeared prominently in an

otherwise uncomplicated agreement. And nothing compelled the Sanfords to stick with

Bracewell. Indeed, the engagement letter encouraged the Sanfords to consult other counsel

for “independent advice concerning [the arbitration clause.]” App. 99a-100a.

       The substance of the arbitration clause appears satisfactory, too. Whether or not the

Sanfords preserved this argument, see App. 30a n.7, the clause did not unreasonably favor

Bracewell or impose onerous terms on the Sanfords. Both parties bore their own costs and

fees, and waived certain rights, including the right to a “trial de novo[] in a court of law.”

App. 99a. While some courts and scholars have questioned whether arbitration clauses in

1
  The parties’ engagement letter states that “New York law shall govern the substantive
issues relating to the engagement.” App. 99a. It is not clear whether New York law gov-
erns questions concerning the clause’s enforceability. The parties, the District Court, and
a previous panel of this Court all have deployed Pennsylvania law to explore whether the
clause is or would be unconscionable. See Appellant Br. 32; Appellee Br. 27-28; App. 36a
n.11; Sanford v. Bracewell & Guiliani, LLP, 618 F. App’x 114, 116 n.2 (3d Cir. 2015).
The District Court, sitting in diversity, should have applied Pennsylvania’s choice-of-law
rules to decide whether the parties’ designation of New York law governed questions con-
cerning the clause’s validity. See Gay v. CreditInform, 511 F.3d 369, 389 (3d Cir. 2007).
In any case, the result of a choice-of-law analysis is immaterial. Under both New York
law and Pennsylvania law, a contract term is unconscionable if the offeree lacks “mean-
ingful choice” to accept it and if it “unreasonably favors” the offeror. Salley v. Option One
Mortg. Corp., 925 A.2d 115, 119 (Pa. 2007); King v. Fox, 851 N.E.2d 1184, 1191 (N.Y.
2006).

                                              3
client engagement letters should be unenforceable, see App. 32a-37a, here no applicable

law makes that so.

       With the arbitration clause enforceable, the Sanfords next attempt to vacate the

panel’s award. To do so, they argue that the panel manifestly disregarded the applicable

law governing their legal malpractice claim. New York law governed the panel’s determi-

nations. See App. 99a. Under New York law, to recover damages for legal malpractice,

the Sanfords had to prove duty, breach, cause, and harm. Rudolf v. Shayne, Dachs, Stanisci,

Corker & Sauer, 867 N.E.2d 385, 387 (N.Y. 2007). And to establish causation, they had

to show that “but for” Bracewell’s alleged breach, they would not have incurred the dam-

ages they claimed. Id.

       No argument advanced by the Sanfords warrants vacating the panel’s conclusion

that Bracewell’s alleged breach did not cause them harm. First, while Bracewell allegedly

failed to pursue settlement with Smith, the Sanfords introduced no evidence that Smith had

the means to satisfy their demands, or that they would have accepted any achievable set-

tlement had Bracewell negotiated one. In addition, the panel’s conclusion that Bracewell’s

pursuit of injunctive relief may have been futile is reasonable. A court could have declined

to issue equitable relief because the Sanfords’ hands were unclean—they engaged Smith

only to shield their assets from a separate legal judgment. Finally, the arbitration panel did

not shoulder the Sanfords with the burden of proving anything beyond the elements of their

legal malpractice claim. As claimants, the Sanfords bore the initial burden to prove duty,

breach, cause, and harm. If they had, then Bracewell could have argued that a resulting

judgment would be uncollectable, an argument for which they would bear the burden of

                                              4
proof. Because the Sanfords did not prove their case, Bracewell’s downstream obligation

to show that proven damages could not have been collected never arose.

      For these reasons, we will affirm the District Court.

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