Abramson v. Wildman

¹⁹³ ZARNOCH, J. “Few modern actions against attorneys are for breach of a written or express contract.” Mallen & Smith, Legal Malpractice (2008) at § 8:6. This is one of them. This litigation began in August of 2004, when appellant Joel Abramson filed a breach of contract action against appellee Ronald Wildman in the District Court for Howard County. Abramson sought to recover more than $13,000 in unpaid legal fees due under a retainer agreement entered into by the parties.

In turn, in February 2005, Wildman filed a Counterclaim, alleging, among other things, that Abramson breached a contract to represent him in a “professionally responsive” manner, primarily in connection with the law firm’s handling of a custody dispute. 1 Wildman sought the return of $24,525 in legal fees he had paid. 2 Appellant had also previously prayed a jury trial, which led to the cases being transferred to the circuit court. There, answers were filed to the complaint and counterclaim and Abramson propounded interrogatories and made a request for production of documents. In April 2005, Abramson’s counsel made a written demand for arbitration of the claims of both parties pursuant to a provision in the retainer agreement. This was followed the next month by the filing of a Petition to Compel Arbitration and Motion to Stay Proceedings, which were denied after a ¹⁹⁴ hearing.

The cases went to trial before a jury in September 2007. The jury rejected Abramson’s fee claim and sided with Wildman on his counterclaim, awarding him the $24,525 he prayed. Post-trial motions were denied and this appeal followed. For reasons set forth below, we affirm the decision of the circuit court.

QUESTIONS PRESENTED Appellant has presented these questions for our review: I. Did the trial court err in denying Abramson’s Petition to Compel Arbitration?

II

Did Wildman fail to make a prima facie case of breach of contract against Abramson in proving the alleged breach of the subject contract?

III

Did the trial court err in providing the jury with a jury instruction concerning competence?

IV

Did the trial court improperly admit evidence of Abramson’s competency at the trial in this matter? V. Did Wildman fail to make a prima facie case of damages against Abramson in relation to Abramson’s alleged breach of the contract, or otherwise cause the jury to speculate as to damages? FACTS AND PROCEEDINGS The March 26, 2003 retainer agreement, written in letter form to Wildman and signed by both parties, is the starting point for our resolution of these issues. It begins: Thank you for expressing the desire for our firm and the attorneys herein, to represent you with reference to your marital difficulties.

You may expect our firm to be both sensitive and professionally responsive to your situation. (Emphasis added.). [3] ¹⁹⁵ After detailing billing and compensation requirements, the agreement stated: If in the course of our representation, if you believe that our advice, conduct or ethics is not satisfactory, you agree to communicate to us in writing promptly so we can attempt if appropriate to rectify the problem. [4] The agreement also provided: Should you decide to terminate our representation in this matter, such termination must be in writing. Until such written termination is received, you will continue to be responsible for all fees and expenses incurred as set forth above. We have no obligation to represent you on any appeal unless a fee arrangement for same is reduced to writing.

Client is aware that we make no warranties or representations concerning the success of your claim or the favorable outcome of any legal action that may follow. Nor do we make any representations as to the cost of representation as to [sic ] there are many unknown factors such as the efforts of any opposing party. (Emphasis added.). With respect to remedies and dispute resolution, the agreement stated: Should we have to bring suit to collect any monies, which are due, and owing to us under this Agreement, it is agreed that if the Court should rule in our favor, you shall pay an additional 15 percent of any said judgment for attorney’s fees incurred in prosecution of said case.

You agree in the event you have any complaint or controversy regarding our representation, either in terms of monies due and owing by you or the nature or competency of our representation, you agree to submit such issues to binding unappealable arbitration with the American Arbitration Association. You understand by agreeing to same you are waiving your rights to file suit and have a trial, jury and otherwise, to litigate and resolve these issues. (Emphasis added.) ¹⁹⁶ The arbitration issue was presented early in the litigation with Wildman arguing, among other things, that the right to arbitration had been waived by Abramson’s participation in judicial proceedings. In rejecting appellant’s contentions, the circuit court set forth two grounds: That contract can not be in derogation of public policy.

I think it is patently unfair for an attorney who has that advantage in training and in practice, to write such a one sided fee agreement and have someone who is coming in looking for representation to sign it. I can sue you but you can’t sue me. If I sue you you’re going to have to pay attorney fees. You’re going to have to do this, you’re going to have to do that but, you’re waiving your right to litigate and resolve these issues.

I, I just think, besides I don’t reach a waiver issue but I think that there is also a waiver. (Emphasis added.). Throughout the litigation, Abramson challenged Wildman’s breach of contract theory as a disguised attempt to press a legal malpractice tort. Not only was this defense advanced in an attempt to defeat appellee’s breach of contract claim, it was raised to challenge the court’s jury instructions on lawyer competence. 5 It also surfaced in Abramson’s attack on the trial court’s admission of evidence with respect to the lawyer’s competence. 6 The contract/competency issue also affected the ¹⁹⁷ damage claim as Wildman claimed he was entitled to contract damages equal to the previously-paid attorney’s fees. 7 DISCUSSION In essence, the five questions raised by Abramson can be distilled into two: whether arbitration was precluded or waived and whether appellee properly asserted a breach of contract action.

The two reasons given by the circuit court for rejecting arbitration were that the arbitration clause in the retainer agreement was so one-sided as to violate public policy and that appellant had waived arbitration by his actions in the ¹⁹⁸ judicial forum. 8 A. PUBLIC POLICY VIOLATION The “public policy” argument was not made before the circuit judge who ruled on the Petition to Compel Arbitration. Nor is it pressed with great force in this Court. It is possible that the circuit court was simply responding to appellee’s contention (made both in the circuit court and here) that the agreement’s provision for access to or denial of judicial remedies was so one-sided as to lack mutuality. Courts across the country have reached differing- results with respect to challenges to the validity or enforceability of mandatory arbitrary provisions in lawyer retainer agreements, particularly with respect to the arbitration of lawyer malpractice claims. 9 Compare Kamaratos v. Palias, 360 N.J.Super. 76 , 821 A.2d 531, 535 (2003)(citing Restatement (Third) on the Law Governing Lawyers (2000) at § 42, comment b(iv), for the proposition that “there is nothing inherently improper about a lawyer and a client agreeing to arbitrate a fee dispute ... ”); McGuire, Cornwell & Blakey v. Grider, 765 F.Supp. 1048, 1051 (D.Colo.l991)(“The arbitration provisions here do not prospectively limit lawyer liability to the client.

Rather, they merely shift determination of the malpractice claim to a different forum.”); Powers v. Dickson, Carlson & Campillo, 54 Cal.App.4th 1102 , 63 Cal.Rptr.2d 261, 266 (2nd Dist.l997)(Arbitration clause in retainer agreement was not a contract of adhesion.); and Derfner & Mahler, LLP v. Rhoades, 257 A.D.2d 431 , 683 N.Y.S.2d 509 , 510 (1999)(On its face, arbitration agreement did not violate rules of ethics), with In re Godt, 28 S.W.3d 732, 739 (Tex.App.2000) (Arbitra ¹⁹⁹ tion provision was not enforceable because the client did not act on the advice of independent counsel and independent counsel did not sign the agreement.); 10 Thornton v. Haggins, 2003 WL 23010100 (Ohio App.2003)(“We are persuaded by the cases finding such agreements unenforceable with regard to the malpractice disputes. [W]e agree that the best interests of the client require consultation with an independent attorney ... ”); Larrison v. Scarola Reavis & Parent LLP, 11 Misc.3d 572 , 812 N.Y.S.2d 243 , 248 (N.Y.Sup.Ct.2005)(A “one-sided” arbitration clause in a retainer agreement violated public policy and was unenforceable.); and Kamaratos v. Palias, supra, 821 A.2d at 539-540 (Fuentes, J. concurring)(“The insertion of a commercial arbitration clause in a retainer agreement inherently violates [the trust between a lawyer and his client] by pitting the lawyer’s interest against the client’s. The terms and features of an arbitration clause are designed, not for the client’s benefit, but to protect and advance the lawyer’s interest in a forum of his or her own choosing.”). See also Annot. Validity and construction of agreement between attorney and client to arbitrate disputes arising between them. 26 A.L.R. 5th 107 (1995).

The circuit court’s conclusion that the arbitration clause violated public policy differs from the situation presented in these cases in that it focused on the agreement’s apparent unfairness in allowing the lawyer to go to court to sue for his fees, while denying the client any resort to a judicial forum. 11 Appellant argues that although under the agreement there is an initial difference between the parties in access to judicial remedies, once appellee pressed his counterclaim, it forced both the fee dispute and the later breach of contract claim into ²⁰⁰ arbitration. Thus, Abramson contends that the agreement is neither one-sided nor unfair. As interesting as this question is, it is one we need not resolve, because we find that the circuit court was correct in its alternative holding that appellant waived his right to arbitration by his participation in the judicial forum. 12 B. WAIVER OF ARBITRATION A contracting party may intentionally relinquish his or her right to arbitrate. Brendsel v. Winchester Construction Co., 162 Md.App. 558, 574 , 875 A.2d 789 (2005).

A finding of such a waiver is highly factual and a decision by the circuit court premised on those facts will not be disturbed on appeal unless it is clearly erroneous. Id. On a number of occasions, Maryland appellate courts have addressed the issue of whether the right to arbitrate has been waived by participation in litigation that is inconsistent with an intent to insist upon enforcing arbitration. Participation in a judicial proceeding that results in a final judgment may, in certain circumstances, waive the right to arbitrate.

Charles J. Frank, Inc. v. Associated Jewish Charities of Baltimore, Inc., 294 Md. 443 , 450 A.2d 1304 (1982). Some “limited participation” in judicial proceedings does not constitute a waiver. Harris v. Bridgford, 153 Md.App. 193, 206 , 835 A.2d 253 (2003). Whether an answer directed to the merits is filed is a factor.

Brendsel, supra, 162 Md.App. at 576 , 875 A.2d 789 . Participation in “extensive” discovery is a factor in determining waiver. Commonwealth Equity Servs. Inc. v. Messick, 152 Md.App. 381, 400 , 831 A.2d 1144 (2003).

However, also relevant is whether a party utilized discovery devices that would not have been available in arbitration. Id. at 401 , 831 A.2d 1144 . Delay in attempting to compel arbitration, by itself, may not be conclusive, id. at 397-98 , 831 A.2d 1144 , although coupled with prejudice to the other party can support ²⁰¹ a finding of waiver. Id.

The filing of suit can be a “significant act in a waiver calculus, and in some instances it perhaps could be depositive.” Harris, supra, 153 Md.App. at 206 , 835 A.2d 253 . Nevertheless, if there is a legitimate reason for participating in litigation, it will not be deemed a waiver. See, e.g., Charles J. Frank, Inc., supra, 294 Md. at 454 , 450 A.2d 1304 (Litigation of an unrelated claim does not constitute a waiver of the right to arbitrate other claims.); and Harris, 153 Md.App. at 207-08 , 835 A.2d 253 (Filing suit after party withdrew from arbitration is not a waiver.) See also Annot. Defendant’s participation in action as waiver of right to arbitration of dispute involved therein, 98 A.L.R.3d 767 (1980).

Balancing the relevant factors contained in the record, the circuit court was not clearly erroneous in its finding that appellant had waived his right to arbitrate. Although appellant can point to the retainer agreement itself as expressly authorizing his right to sue, and excusing the arbitration of his claim for fees, this does not neutralize this factor. The agreement required Wildman to arbitrate any fee “controversy.” Even an Answer by appellee (or a Notice of Intention to Defend) contesting fee liability should have triggered a response by appellant that arbitration was required. 13 We believe that the circuit court could reasonably have concluded that appellant’s failure to initiate arbitration at that point was a factor favoring appellee’s opposition to arbitration. Abramson filed a Notice of Intention to Defend and later an Answer to Wildman’s Counterclaim.

Then, more than a month before petitioning to compel arbitration, appellant served on Wildman interrogatories and a Request for Production of Documents. 14 This discovery, although not “extensive”, was information that appellant could not have obtained in ²⁰² arbitration. Commonwealth Equity Services, Inc., supra, 152 Md.App. at 401 , 831 A.2d 1144 . Nearly four months passed between Wildman’s filing of his Counterclaim and Abramson’s filing of his Petition to Compel Arbitration. Wildman was unable to obtain discovery during this period and not until the circuit court in August, 2005 rejected the Petition to Compel Arbitration. 15 Finally, unlike those cases where a party’s involvement in some phase of litigation was legitimately explainable and thus, not inconsistent with an intent to arbitrate, see p. 10, supra, appellant has given no reason for persisting in the litigation.

The belated insistence on arbitration has all the markings of a simple strategic decision to deny appellee a judicial forum and a jury trial. For all of these reasons, we are unable to conclude that the circuit court was clearly erroneous in its finding that appellant had waived his right to arbitration by litigative actions inconsistent with an intent to enforce arbitration. 16 C. BREACH OF CONTRACT Abramson concedes that the retainer agreement contains “express contractual obligations” that Wildman