Harris v. Bridgford

¹⁹⁶ KENNEY, Judge. Augustus C. Hams appeals the decision of the Circuit Court for Frederick County granting a Motion to Stay Proceedings and Enforce Arbitration Award (“Motion to Arbitrate”) in favor of appellee, Clifford R. Bridgford, Esquire. That court directed the dispute to the Maryland State Bar Association Committee on the Resolution of Fee Disputes (“Committee”) for binding arbitration. Harris poses two questions on appeal, which we have re-worded as follows: I. Did the circuit court err in finding that Bridgford did not waive his right to arbitration by filing suit in District Court?

II

Are Harris’s counterclaims asserting fraud and breach of contract in regard to fees already paid within the scope of the arbitration agreement? For the reasons stated below, we shall hold that the circuit court did not err in finding that Bridgford did not waive his right to arbitration by filing suit in District Court and that Harris’s claims of fraud and breach of contract are within the scope of the arbitration agreement. FACTUAL AND PROCEDURAL BACKGROUND Harris retained Bridgford to represent him in a divorce action. He had paid Bridgford $26,000 for his services prior to Bridgford’s withdrawing as counsel.

When he withdrew, Bridgford claimed outstanding legal fees of approximately $27,000. Harris filed a complaint with the Committee, to resolve the fee dispute through binding arbitration. The Committee appointed Client Representative, Ronald J. Levasseur, Esquire, to aid Harris in the process. 1 Thereafter, both Harris and Bridgford signed and executed an “Attorney’s Consent to Arbitration” form with the" Committee. This form provided, in pertinent part, that the parties agreed ¹⁹⁷ to be legally bound by the rules, regulations, and decisions or award of the Maryland State Bar Association’s Committee on the Resolution of Fee Disputes.

Arbitration shall be conducted in accordance with the Regulations of the Committee on the Resolution of Fee Disputes and the Arbitration and Awards Subtitle, 3-201, et seq., of the Courts and Judicial Proceedings Article of the Annotated Code of Maryland, as amended. I realize by agreeing to such, the right to any further Court proceedings concerning the fee dispute, except enforcement of any possible award, is hereby waived. Upon receiving the executed consent forms, the Committee scheduled the arbitration hearing for November 23, 1999. The scheduled arbitration was cancelled for reasons unclear in the record, but was due to be rescheduled.

Prior to rescheduling, however, Harris wrote a letter to Levasseur on December 28, 1999, outlining his request to withdraw from arbitration and asking that Levasseur forward this request to the Committee. Bridgford, when notified over the telephone of Harris’s withdrawal, strongly objected to this course of action and argued that Harris should not be permitted to withdraw from the arbitration process. Nevertheless, by letter on February 28, 2000, the Committee dismissed Harris’s complaint for arbitration. Nearly eighteen months later, on June 18, 2001, Bridgford filed a complaint in the District Court of Maryland for Frederick County, alleging breach of contract by Harris for “failing to pay for all ... legal services and expenses through August 22, 1998.” Bridgford claimed $25,000 in damages. 2 Harris prayed a jury trial, and the case was removed to the Circuit Court for Frederick County.

On August 25, 2001, Harris answered the complaint and filed a counterclaim for breach of contract and fraud. Harris claimed, in pertinent part, that 3. Counterdefendant Bridgford failed to adequately discharge his contractual obligations to Harris by, among other ¹⁹⁸ things: failing to apprise Harris óf the status of and developments in his case; billing Hams for services not performed or performed duplicatively; excessively billing Harris for unnecessary or unreasonable services; failing to zealously represent Harris’s best interests; and breaching the implied covenant of good faith and fair dealing. Moreover, Harris alleged that Bridgford “fraudulently and intentionally misrepresented the nature, extent and amount of legal work he performed for Harris for the purpose of defrauding Harris by causing him to incur significantly higher legal bills than what was reasonable and proper under the circumstances.” Harris claimed $52,000, plus costs and interest, in compensatory damages and $100,000 in punitive damages.

On September 25, 2001, Bridgford filed the Motion to Arbitrate, arguing that, under Md.Code (1974, 2002 Repl.) § 3-206(a) of the Courts and Judicial Proceedings Article (“CJ”), an agreement to arbitrate is “irrevocable, except upon grounds that exist at law or in equity for the revocation of a contract.” He asked the circuit court to stay its proceedings pursuant to CJ § 3-209(a) and compel arbitration. Harris responded to the Motion to Arbitrate, arguing that Bridgford had waived arbitration by filing suit in the District Court. 3 On July 25, 2002, the circuit court held a motions hearing and granted Bridgford’s Motion to Arbitrate. The court stated: The rules of court clearly allow the court to stay proceedings pending the determination of another proceeding that may be affected or that may affect the issues raised in the action to be stayed. The Maryland Arbitration Act provides that the Court shall stay a proceeding involving an issue subject to arbitration if a petition to arbitrate has been filed.

Relying upon CJ § 3-206, the court also stated that “the consents [to arbitrate] entered into in this case are valid and enforceable and, in fact, [the statutory provision] further ¹⁹⁹ provides that they are irrevocable unless of course there’s some grounds for revocation. 4 Because the court found no grounds for revocation of the agreement to arbitrate, it ruled that the Committee should not have granted Harris’s request to withdraw from arbitration. Furthermore, the court found that Bridgford did not knowingly and intentionally waive his right to arbitration by filing suit in the District Court because “Mr. Bridgford was in a situation where he really had no choice because the action had been dismissed and essentially at that point left him no alternative but to file suit in court.” This timely appeal followed. Discussion Standard of Review Maryland Rule 8-131(c) provides: Action tried without a jury. When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence.

It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. The clearly erroneous standard, however, “does not apply to a trial court’s conclusions of law based on findings of fact.” Himelstein v. Arrow Cab, 113 Md.App. 530, 536 , 688 A.2d 491 (1997), aff'd, 348 Md. 558 , 705 A.2d 294 (1998). In that instance, the proper standard is whether the court was “legally correct.” Heat & Power Corp. v. Air Prods. & Chems, Inc., 320 Md. 584, 592 , 578 A.2d 1202 (1990). MSBA Arbitration By way of background, and according to its website, the Maryland State Bar Association (“MSBA”),. through its Committee, offers a “public service for clients who have a fee dispute with their attorney.” To that end, the Committee has ²⁰⁰ developed a set of regulations governing its arbitration of fee disputes.

According to the Regulations Governing the Resolution of Fee Disputes, the Committee has “jurisdiction” “over any disagreement concerning any fee paid, charged or claimed for legal services rendered by any attorney admitted to practice in this State....” 5 Its purpose is to “encourage the amicable resolution of fee disputes.” When a complaint is submitted to the Committee, a client representative is assigned to review it and conduct a preliminary investigation into its merits. If the client representative determines that there is no legitimate basis for the complaint, he or she writes a report to the Executive Council (“Council”) of the Committee, recommending its dismissal. The Council may accept or deny the client representative’s recommendation. If the client representative determines that there is a legitimate fee dispute, he informs the complainant and forwards a copy of the complaint to the attorney involved.

The parties are advised that the Committee has assumed jurisdiction but will delay any further steps until the expiration of a thirty day period during which the parties are urged to exert their best effort to reach an amicable resolution of their dispute. The client representative shall, during this period, attempt informally to amicably resolve the fee dispute by consulting with both the complainant and the attorney. After thirty days, the client representative asks the parties to execute a consent to arbitrate. 6 ²⁰¹ Upon receipt of the consents to arbitrate, the case is referred for arbitration. Amounts in dispute greater than $3,000 are referred to a panel of three arbitrators; disputes less than or equal to $3,000 are referred to a single arbitrator.

During the arbitration proceeding, each party is entitled to be heard, allowed to present evidence, and permitted to cross-examine witnesses. The hearing is then closed, and the arbitrators deliberate on an award. All proceedings pertaining to the arbitration, including any award, are confidential. In addition to the MSBA rules, the arbitration is subject to the Maryland Uniform Arbitration Act (the “Act”), codified at CJ §§ 3-201 through 3-234, which is expressly incorporated into the consent to arbitrate.

Waiver Hams challenges the circuit court’s decision to grant Bridgford’s Motion to Arbitrate, which was based on its finding that Bridgford did not waive his right to arbitration by filing suit in District Court. 7 Bridgford contends that he was only attempting to enforce the parties’ legally binding agreement to arbitrate and did not intend to waive his right to arbitration by filing suit. The Act “embodies a ‘legislative policy in favor of the enforcement of agreement to arbitrate.’ ” Allstate Ins. Co. v. Stinebaugh, 374 Md. 631, 641 , 824 A.2d 87 (2003) (quoting Gold Coast Mall, Inc. v. Larmar Corp., 298 Md. 96, 103 , 468 A.2d 91 (1983)). It confers jurisdiction on the courts “to enforce [an arbitration] agreement and enter judgment on an arbitration award.” CJ § 3-202.

In its enforcement of an ²⁰² arbitration agreement, the court essentially resolves a single issue—Is there an agreement between the parties to arbitrate? Specifically, CJ § 3-207 states: (b) Denial of existence of arbitration agreement.—If the opposing party denies existence of an arbitration agreement, the court shall proceed expeditiously to determine if the agreement exists. (c) Determination by court.—If the court determines that the agreement exists, it shall order arbitration. Otherwise it shall deny the petition.

On appeal, Harris does not contend that there was no agreement to arbitrate. In fact, both parties voluntarily signed and executed a consent to arbitrate in lieu of litigation. In so doing, they acknowledged the following statement included in the consent form, “I realize that by agreeing to [arbitration], the right to any further Court proceedings concerning the fee dispute, except enforcement of any possible award, is hereby waived.” The circuit court found the consents to arbitrate “valid and enforceable” and no grounds to revoke the agreement. The court based its determination on CJ § 3-206, which states: (a) Validity.—A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy arising between the parties in the future is valid and enforceable, and is irrevocable, except upon grounds that exist at law or in equity for the revocation of a contract.

Harris does not assign error to that determination. 8 Rather, Harris claims that Bridgford “waived” his right to arbitration by filing suit in District Court. Indeed, at oral ²⁰³ argument, he asserted that waiver was the central issue in the case and urged the adoption of a per se rule—that the filing of the suit automatically waived arbitration. Bridgford contends that waiver must be “knowing and intentional,” and that he did not intentionally waive his right to arbitration. The circuit court found that Bridgford’s verbal objections to the dismissal expressed his dissatisfaction with the Committee’s decision to dismiss Harris’s complaint and that filing the suit did not constitute a waiver.

Apparently it is unrebutted at this point that there was some objection by Mr. Bridgford when the dismissal was received. I find as a fact based on the status of the evidence in this case that he did object. Further, with respect to waiver, Mr. Bridgford was in a situation where he really had no choice because the action had been dismissed and essentially at that point left him no alternative but' to file suit in court. And I cannot find that he’s waived his right to enforce the consents to arbitrate and I can’t find any affirmative waiver by Mr. Bridgford which could be construed as a knowing and intentional relinquishment of his right to submit this dispute to arbitration.

Waiver is defined as the intentional relinquishment of a known right, or such conduct as warrants an inference of the relinquishment of such right, and may result from an express agreement or be inferred from circumstances. ‘[A]cts relied upon as constituting a waiver of the provisions’ of a contract must be inconsistent with an intention to insist upon enforcing such provisions. Charles J. Frank, Inc. v. Associated Jewish Charities, Inc., 294 Md. 443, 449 , 450 A.2d 1304 (1982) (quoting BarGale ²⁰⁴ Indus., Inc. v. Robert Realty Co., 275 Md. 638, 643, 343 A.2d 529 (1975)). Because “the right to arbitrate is a matter of contract,” the right can be waived. Id. at 448, 450 A.2d 1304 .

Moreover, “whether there has been a waiver of a contractual right involves a matter of intent that ordinarily turns on the factual circumstances of each case.” Id. at 449 , 450 A.2d 1304 (citations omitted). Harris heavily relies on Gold Coast Mall, Inc. v. Larmar Corp., 298 Md. 96 , 468 A.2d 91 (1983). In Gold Coast Mall, a landlord and tenant signed a lease agreement containing a provision that required arbitration for resolution of all disputes. That agreement stated, in pertinent part: Arbitration.

In the event of disagreement between the parties