Court Opinion

ID: 4205148
Source: CourtListenerOpinion
Date Created: 2017-09-21 17:00:45.845502+00
Date Added: 2024-06-11T07:45:36.526442
License: Public Domain

NOT PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
              ________________

                     No. 16-3357
                  ________________

               DARCY SMITH, PH.D.,
                          Appellant
                      v.

   CYNTHIA BORSELLA LINDEMANN, ESQ.,
    an attorney at law of the State of New Jersey;
 WEINSTEIN, SNYDER, LINDEMANN & SARNO;
   STEVEN URBINATO, ESQ., an attorney at law
     of the State of New Jersey; STARR, GERN,
DAVISON & RUBIN, P.C.; MARC A. CALELLO, ESQ.;
                ALFONSE A. DEMEO

                 ________________

      Appeal from the United States District Court
              for the District of New Jersey
        (D.C. Civil Action No. 2-10-cv-03319)
       District Judge: Honorable Kevin McNulty
                   ________________

      Submitted Under Third Circuit LAR 34.1(a)
                 September 19, 2017

Before: AMBRO, KRAUSE, and SCIRICA, Circuit Judges

          (Opinion filed: September 21, 2017)
                                    ________________

                                        OPINION *
                                    ________________

AMBRO, Circuit Judge

       Darcy Smith, Ph.D., hired and fired a string of four lawyers in connection with her

divorce. She later sued in the District of New Jersey all four attorneys and their

respective law firms for malpractice. Three settled, but one attorney, Marc A. Calello,

asked the District Court to enforce an arbitration provision in his representation

agreement with Smith. The District Court obliged, staying Smith’s action and

compelling arbitration.

       Smith contends that the provision is unenforceable because New Jersey law does

not permit the arbitration of malpractice claims against attorneys brought by their former

clients, and, even if New Jersey law did permit arbitration of her claims, this provision

fails because it does not specifically use the word “malpractice.” Accordingly, she asks

us to reverse the District Court or, in the alternative, to certify to the Supreme Court of

New Jersey the question whether arbitration provisions like the one in her agreement are

enforceable. The decision whether to certify a question of law to the Supreme Court of

New Jersey is left to our discretion. See Lehman Bros. v. Schein, 416 U.S. 386, 390–91

(1974).

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

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       Smith’s agreement with Calello contains the following provision, which

unambiguously requires arbitration of any quarrels between them:

       Arbitration of Differences Between the Client and the Law Firm.
       Should any difference[], disagreement, or dispute between you and the Law
       Firm arise as to its representation of you, or on account of any other matter,
       you agree to submit such disagreements in binding arbitration.

It goes on to specify the applicable arbitration procedures and concludes by advising that

       [s]igning of this Agreement will be deemed your consent to the methods of
       alternative dispute resolution set forth in this Section, and constitutes a
       waiver on your part and on the part of the Law Firm to have such disputes
       resolved by a court which might include having the matter determined by a
       jury.

       “The [Federal Arbitration Act (“FAA”)] federalizes arbitration law and ‘creates a

body of federal substantive law establishing and regulating the duty to honor an

agreement to arbitrate[.]’” John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 136

(3d Cir. 1998) (quoting Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 25 n. 32 (1983)). Thus, as the Supreme Court has repeatedly reaffirmed, “‘[w]hen

state law prohibits outright the arbitration of a particular type of claim, the analysis is

straightforward: The conflicting rule is displaced by the FAA.’” Marmet Health Care

Ctr., Inc. v. Brown, 565 U.S. 530, 533 (2012) (quoting AT & T Mobility LLC v.

Concepcion, 563 U.S. 333, 341 (2011)) (alteration in original).

       Yet an arbitration provision may be set aside “upon such grounds as exist at law or

in equity for the revocation of any contract.” 9 U.S.C. § 2. “This saving clause permits

agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such

as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration

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or that derive their meaning from the fact that an agreement to arbitrate is at issue.”

Concepcion, 563 U.S. at 339 (quoting Doctor's Associates, Inc. v. Casarotto, 517 U.S.
681, 687 (1996)). To determine whether grounds for revoking the contract containing the

arbitration provision exist, “[a] federal court must generally look to the relevant state law

on the formation of contracts[.]” Blair v. Scott Specialty Gases, 283 F.3d 595, 603 (3d

Cir. 2002).

       Smith makes two arguments why the arbitration provision cannot be enforced.

Neither is convincing.

       First, she contends that New Jersey law prohibits the enforcement of arbitration

provisions by attorneys facing malpractice claims brought by former clients. Even were

there support for her view of New Jersey law (Smith concedes no case in New Jersey

specifically bars the arbitration of attorney-malpractice claims), the FAA would preempt

it. See Marmet Health Care Ctr., 565 U.S. at 533. 1 Thus Smith’s first argument fails.

       Second, Smith argues that the arbitration provision cannot be enforced because its

inclusion in the representation agreement violated the New Jersey Rules of Professional

Conduct and thereby invalidated the entire agreement. See Jacob v. Norris, McLaughlin

& Marcus, 607 A.2d 142, 146 (N.J. 1992) (“Contracts that violate the [Rules of

Professional Conduct] violate public policy, and courts must deem them

1
  Smith places particular emphasis on a concurrence in Kamaratos v. Palias asserting that
“a retainer agreement that contains a commercial arbitration clause which waives the
client’s right to access the courts to resolve disputes arising out of the attorney/client
relationship must be viewed as inherently unenforceable and against public policy.” 821
A.2d 531, 540 (N.J. Super. Ct. App. Div. 2003) (Fuentes, J. concurring). This position is
clearly inconsistent with the U.S. Supreme Court’s later holding in Concepcion, 563 U.S.
at 341, that state law may not prohibit the arbitration of any particular type of claim.
                                              4
unenforceable.”). The Rules of Professional Conduct require an attorney to advise his

client of the implications of any retainer agreement. See Cohen v. Radio-Elecs. Officers

Union, Dist. 3, NMEBA, 679 A.2d 1188, 1196 (N.J. 1996); see also N.J. Rules Prof’l

Conduct R. 1.4(c) (“A lawyer shall explain a matter to the extent reasonably necessary to

permit the client to make informed decisions regarding the representation.”). And while

“[i]t is permissible under the [American Bar Association’s] Model Rules [of Professional

Conduct] to include in a retainer agreement with a client a provision that requires the

binding arbitration of . . . malpractice claims,” the client must be “fully apprised of the

advantages and disadvantages of arbitration” and “give[] her informed consent” to the

arbitration provision. ABA Comm’n on Ethics & Prof’l Responsibility, Formal Op. 02-

425 (2002). Because the arbitration provision at issue here did not specifically include

the word “malpractice,” Smith contends she could not have given her informed consent to

the agreement unless Calello orally warned her that she would have to arbitrate any

malpractice claims against him. And there is no evidence that he gave such a warning.

       The Supreme Court has held that the FAA requires courts to put arbitration

agreements “on equal footing with all other contracts” and that they may not interpret

state law differently in the context of arbitration. See DIRECTV, Inc. v. Imburgia, 136 S.

Ct. 463, 470 (2015) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,

443 (2006)). So, to the extent Smith seeks a more searching review of the advice

attorneys provide new clients when an agreement to arbitrate is at issue, her argument is

foreclosed by the FAA. See id. We need not decide that question, however, because she

                                              5
fails to explain why a written or oral warning that explicitly uses the word “malpractice”

is necessary as a matter of New Jersey law.

         The arbitration provision before us is straightforward: “[A]ny difference[],

disagreement, or dispute between [Smith and Calello] as to [his] representation of [her]”

shall be submitted to “binding arbitration.” J.A. 25. True, the New Jersey Supreme

Court has held in a different context that “[t]he absence of any language in [an]

arbitration provision that [a] plaintiff [i]s waiving her statutory right to seek relief in a

court of law renders the provision unenforceable.” Atalese v. U.S. Legal Servs. Grp.,

L.P., 99 A.3d 306, 309 (N.J. 2014) (emphasis in original). But the provision here makes

plain that arbitration means giving up the right to have a dispute resolved by a judge and

jury. J.A. 25 (agreement to arbitration constitutes a “waiver . . . to have such disputes

resolved by a court which might include having the matter determined by a jury”).

         Despite her contention that she did not give informed consent to the arbitration

provision, Smith does not argue that it is too narrow to cover malpractice claims.

Although she contends Calello should have used the word “malpractice” orally or in the

agreement itself, she never claims not to have known malpractice claims would fall

within the provision’s definition of “any difference[], disagreement, or dispute between

[her] and [Calello] . . . as to [his] representation of [her.]” J.A. 46. Nor does she claim to

have been surprised that her agreement to arbitrate meant giving up the right to go to

court.

         Indeed, Smith used the same clause to her advantage in a related matter.

Following his termination, Calello filed a civil action against Smith to collect unpaid

                                                6
fees. When she didn’t appear, Calello obtained a default judgment against her. Smith,

appearing pro se, then asked the court to vacate the judgment on the ground that Calello

was bound to arbitrate, rather than litigate, any claims against her, and the court granted

her request.

       Smith notes that “[a]n arbitration provision—like any comparable contractual

provision that provides for the surrendering of a constitutional or statutory right—must be

sufficiently clear to a reasonable consumer.” Atalese, 99 A.3d at 309. Although she

claims her attorney failed to advise her of the arbitration provision’s meaning, its

language is unambiguous. And Smith never says what wasn’t clear to her. Indeed, if the

record suggests anything, it’s that she was aware of the arbitration provision’s meaning

and consequences.

                               *      *       *      *      *

       A New Jersey rule prohibiting the inclusion of an arbitration provision in an

attorney-client representation agreement (whether inferred by this Court or the New

Jersey Supreme Court) would be preempted by the FAA, and Smith fails to state what, if

anything, made the arbitration provision so unclear as to preclude its enforcement. For

these reasons, we affirm the District Court’s order compelling arbitration and decline

Smith’s request to certify a question of law to the Supreme Court of New Jersey.

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