STATE OF MAINE

MAINE SUPREME JUDICIAL COURT SITTING AS THE LAW COURT

Law Court Docket No. CUM-17-54

SUSAN R. SNOW,

Plaintiff - Appellee

v.

BERNSTEIN, SHUR, SAWYER & NELSON, P.A., et al.,

Defendant - Appellants

APPEAL FROM THE CUMBERLAND COUNTY SUPERIOR COURT

REPLY BRIEF

Melissa A. Hewey, Bar No. 3587 Timothy E. Steigelman, Bar No. 4672 Drummond Woodsum 84 Marginal Way, Suite 600 Portland, ME 04101 Tel: (207) 772-1941 Counsel for Appellants

TABLE OF CONTENTS

TABLE OF CONTENTS .......................................................................................... i

TABLE OF AUTHORITIES ................................................................................... ii

DISCUSSION ........................................................................................................... 1

I. Public Policy Favors Arbitration ................................................................. 1

II. The BSSN Engagement Contract, On Its Face, Fully Informs The Parties That They Are Agreeing To Binding Arbitration ....................... 3

III. The Rules of Professional Conduct Do Not Establish A Public Policy Disfavoring Arbitration ................................................................... 8

IV. Even If The Rules Themselves Could Set Public Policy, Neither the Comments to the Rules, Nor Advisory Opinions of the Commission Can Do So ............................................................................. 11

V. Even Assuming There is A Heightened Standard For Enforceability of Arbitration Provisions Imposed by the Rules Such a Requirement Is Expressly Preempted ........................................ 13

CONCLUSION ...................................................................................................... 15

CERTIFICATE OF SERVICE ............................................................................... 17

1

TABLE OF AUTHORITIES

Cases

Anderson v. Banks, 2012 ME 6, 37 A.3d 915 ................................................................................. 2

Barrett v. McDonald Investments, Inc., 2005 ME 43, 870 A.2d 146 ............................................................................ 2

Bezio v. Draeger, 737 F.3d 819 (1st Cir. 2013) .............................................................. 2, 3, 6, 7

Doctors' Associates Inc. v. Casarotto, 517 U.S. 681 (1996) ............................................................................ 2, 14, 15

Lee v. Massie, 447 A.2d 65 (Me. 1982) ............................................................................... 11

Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012) ........................................................................ 2, 3, 14, 15

Roosa v. Tillotson, 1997 ME 121, 695 A.2d 1196 ........................................................................ 2

Shotts v. OP Winter Haven, Inc., 86 So. 3d 456 (Fla. 2011) ............................................................................. 15

Westbrook Sch. Comm. v. Westbrook Teachers Ass'n, 404 A.2d 204 (Me. 1979) ............................................................................... 2

Williams v. Mayor & City Council of Baltimore, 289 U.S. 36, 42 (1933) .................................................................................... 3

Rules

M.R. Prof. Conduct 1.0 ..................................................................................... 9, 12 M.R. Prof. Conduct 1.2 ........................................................................................... 9 M.R. Prof. Conduct 1.6 ........................................................................................... 9 M.R. Prof. Conduct 1.7 ......................................................................................... 10 M.R. Prof. Conduct 1.8 .................................................................................... 10,12 M.R. Prof. Conduct 1.9 ......................................................................................... 10 M.R. Prof. Conduct 1.11 ....................................................................................... 10 M.R. Prof. Conduct Preamble ............................................................. 12

11

Ethics Opinions

Me. Prof. Ethics Comm'n, Op. No. 170, 1 Maine Manual on Professional Responsibility 0-597 to 0-602 (Dec. 23, 1999) .......................................... 13

Me. Prof. Ethics Comm'n, Op. No. 202 (Jan. 9, 2011) ...................................... 13

Secondary Sources

Legal Ethics: Law. Deskbk. Prof. Resp. § 1.8-9 ................................................... 2

111

DISCUSSION

I. PUBLIC POLICY FAVORS ARBITRATION

All of Appellee Dr. Snow's arguments are premised on her position

that arbitration is bad public policy. This Court, however, is required to

start from the opposite premise: that arbitration is good public policy. Dr.

Snow opens her brief baldly asserting her policy view in emphatic terms:

Every day, millions of Americans unknowingly waive their constitutional right to a jury trial by agreeing to settle disputes in arbitration. Arbitration clauses are buried in the fine print of consumer contracts drafted by businesses of all varieties - from wireless telecommunications provider to social networking services-and frequently we enter into these agreements blindly, unknowingly, or electronically merely by clicking "I Agree" to a set of impenetrable "terms and conditions." But regardless of the context, the courtroom doors close -permanently-largely insulating would-be defendants from liability.

Brief of Appellee Dr. Snow ("Dr. Snow Br.") at 13. But, she argues,

agreements to arbitrate with lawyers are different: such agreements are

unenforceable unless the lawyer first explains these perceived "perils of

arbitration," Dr. Snow Br. at 11, and only after the prospective client comes

to an understanding that arbitration largely insulates the lawyer from

liability for malpractice, and agrees to arbitrate anyway, can such an

agreement be enforced.

Dr. Snow, of course, provides no support for her erroneous

proposition that an agreement to arbitrate is a prospective limitation on a

1

lawyer's liability, and this argument has been rejected by courts and

commentators alike. See, e.g., Bezio v. Draeger, 737 F.3d 819, 824 (1st Cir.

2013); Legal Ethics: Law. Deskbk. Prof. Resp. § 1.8-9.

More importantly this Court is required to accept "the Maine

Legislature's 'strong policy favoring arbitration."' Barrett v. McDonald

Investments, Inc., 2005 ME 43, il 16, 870 A.2d 146, quoting Westbrook Sch.

Comm. v. Westbrook Teachers Ass'n, 404 A.2d 204, 207-08 (Me. 1979); see also

Anderson v. Banks, 2012 ME 6, il 19, 37 A.3d 915; Roosa v. Tillotson, 1997 ME

121, il 3, 695 A.2d 1196. It is similarly required to accept the federal

legislative policy that favors arbitration, including the express preemption

of any law or policy disfavoring arbitration whether "of legislative or

judicial origin." Doctors' Associates Inc. v. Casarotto, 517 U.S. 681, 685 (1996);

see also Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530, 533 (2012)

(overturning a state supreme court decision hostile to arbitration as

contravening the Federal Arbitration Act ("FAA")). When public policy is

declared by democratically elected legislators, separation of powers

prevents the judicial adoption of a contrary public policy. This principle is

eloquently stated in the words of Justice Cardozo: "It is not the function of

a court to determine whether the public policy that finds expression in

2

legislation of this order is well or ill conceived ... Within the field where

men of reason may reasonably differ, the Legislature must have its way."

vVilliams v. lv1ayor & City Council of Baltimore, 289 U.S. 36, 42 (1933)

(Cardozo, J.).

Both state and federal law presume that arbitration agreements are

enforceable. See Bezio, 737 F.3d at 822 ("hostility to arbitration [ ] is

forbidden by both Maine law and the Supreme Court under the FAA").

The United States Supreme Court has thus overturned a state high court

decision based on the state's constitutional interest in providing jury trials

finding it hostile to arbitration in contravention of the FAA. Marmet Health

Care, 565 U.S. at 533 (vacating Brown v. Genesis Healthcare, 724 S.E.2d. 250,

270-71 (W.Va. 2001)(containing opinion section III. B., "The Constitutional

Right to a Trial")). Dr. Snow's attempt to rely on public policy in

contravention of the FAA and Supreme Court case law is simply an

invitation to commit error, and this Court should decline that invitation.

II. THE BSSN ENGAGEMENT CONTRACT, ON ITS FACE, FULLY INFORMS

THE PARTIES THAT THEY ARE AGREEING To BINDING ARBITRATION

Dr. Snow concedes that the engagement contract was sufficient to

inform her to the extent necessary to establish an attorney-client

3

relationship. She does not allege that she failed to read or understand the

terms of the engagement letter, and she specifically alleges that she signed

it. A.94 11 2. Her affidavit nonetheless ffiisleadingly alleges that "[a]t no

time before or after I signed the engagement letter did any attorney at

Bernstein Shur inform me that the engagement letter contained an

arbitration clause." A. 94 ii 4. However, she concedes in her brief that the

engagement letter did inform her of that fact, paraphrasing her allegations

with the sentence: "Outside of the engagement letter, Bernstein Shur did

not mention arbitration before agreeing to representation." Dr. Snow Br. at

38 (emphasis added). She then immediately reiterates her allegation that

she "was never informed" that "the engagement letter contained an

arbitration clause." Id. By this, and the other allegations in her affidavit, it

is clear that when she says that Bernstein Shur did not /1 inform" her, she

means that BSSN did not orally discuss those provisions with her.

Elsewhere in her brief, she concedes that an oral discussion is not

necessary. Thus, on page 36 of her brief, Dr. Snow specifically states that to

adequately inform her "Bernstein Shur could have (A) provided informed

consent in the engagement letter or (B) advised her independently from the

letter of the consequences of agreeing to arbitrate." Dr. Snow Br. at 36

4

(emphasis added). Thus, it is important to review how the arbitration

agreement informs Dr. Snow that she is agreeing to binding arbitration.

The arbitration agreement between Dr. Snow and BSSN takes almost

half a page, under the bold, underlined descriptive title "Arbitration."

A.107. Other than a single line choice-of-venue provision, the" Arbitration"

paragraph is the sole, lengthy entry on a page that is otherwise remarkable

for its blank space that draws the eye. Compare, e.g., A.104-106 (engagement

letter language) with A. 107 ("Arbitration" conspicuously present at top of

page, emphasis in original). It is difficult to comprehend how a section

entitled "Arbitration," with a bold and underlined paragraph heading can

be considered "inconspicuous"; nevertheless that is what Dr. Snow claims,

in writing, to this Court. Dr. Snow Br. 37, see also id. at 13-14.

Dr. Snow claims that:

The engagement letter contains a section defining the scope of representation and conflicts of interest. (A. 96-97.) It fails, however, to provide any mention of the arbitration clause contained in the appended Terms of Engagement. (A. 104-107.)

Dr. Snow Br. 37. This statement is misleading. The main engagement letter

begins on page A.96 (with law firm letterhead) and ends on A.99 (with

Attorney Lovell's signature and a blank signature line conspicuously

present in the center of the page). In the interim is a paragraph under the

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clear heading "Standard Terms of Engagement," with the first line reading

"Our Standard Terms of Engagement are enclosed." A.98 (bold and

underlined heading in original). At about three and a half pages it is not a

long letter. Dr. Snow's signature on that letter is later affixed immediately

below two lines of bold capital text:

I AGREE TO THE TERMS OF THIS LETTER INCLUDING THE ATTACHED STANDARD TERMS OF ENGAGEMENT

A. 111. Turning to the language of the arbitration provision itself, it clearly

covers both "[a]ny fee dispute" that the client does not submit to fee

arbitration under the Rules, as well as /1 any other dispute that arises out of

or relates to" the fee agreement. A.107. It then goes on to state "Either party

shall have the right to appeal a decision of the arbitrators on the grounds

that the arbitrators failed to properly apply applicable law." Id.

In response, Dr. Snow wants this Court to believe these clear terms

are ambiguous. Dr. Snow Br. 37. The First Circuit cleared up this very

argument four years ago in the forerunner case examining the same

arbitration agreement. "The argument that malpractice claims do not fall

within the broad coverage language of the contract is self-evidently

frivolous." Bezio, 737 F. 3d at 822.

6

The sole deficiency alleged by Dr. Snow, and erroneously accepted

by the Superior Court, is that the written engagement letter violated public

policy because it did not contain a more detailed arbitration-specific

explanatory statement. Simply to state the deficiency is to demonstrate

that if Maine law does require such a statement, that requirement is

preempted by federal law. See infra Section V.

According to Dr. Snow, the missing arbitration-specific explanatory

statement allegedly must address: the client's waiver of a right to a jury

trial; the private vs. public nature of an arbitration proceeding; the

potential differences in discovery; the limitations on appeal; and the

relative expense of arbitration vs. litigation. Dr. Snow Br. at 36; A. 8. In

other words, the BSSN provision, that was expressly enforced in similar

circumstances in Bezio, is only enforceable if something akin to the

following sentence is appended to the page: "By agreeing to arbitrate legal

malpractice claims, you waive you right to a jury trial, limit your rights of

appeal in the manner above stated, agree to a proceeding that could be

more private and less public then a judicial proceeding, that has potential

differences in discovery, and that has different relative expenses which are

impossible at this time to predict." Nothing in the Rules of Professional

7

Conduct requires this additional arbitration-specific explanatory statement,

and any such requirement would be preempted by federal law.

Ill. THE RULES OF PROFESSiONAL CONDUCT Do NOT ESTABUSH A PUBLIC POLICY DISFAVORING ARBITRATION

Dr. Snow devotes substantial effort to arguing that even a clear and

unambiguous arbitration agreement between lawyer and client is

unenforceable because the public policy established by the Maine Rules of

Professional Conduct requires an additional-though implicit-type of

arbitration-specific informatory statement about the "perils" of arbitration.

Dr. Snow Br. at 15-19. Dr. Snow thus urges this Court to judicially create a

duty for an attorney and every prospective client to have a lengthy

discussion in which the attorney speculates on all of the hypothetical issues

that might possibly be subject to arbitration, and how those issues might

play out differently in arbitration or in the courts. That suggestion is

neither required nor reasonably practicable.1

1 Under Dr. Snow's argument, there would be a corresponding informed consent requirement if an engagement letter were to include a choice of law provision because application of the laws of different states could have differing effects on the client's and the lawyer's rights and obligations. Lawyer and client are free agree that the law of any of the fifty states applies to the agreement yet no one would suggest that in order for such an engagement agreement with a choice of law provision to be enforceable, the attorney would need to explain the nuanced differences in law between all fifty states, so that the prospective client could be "fully informed" of the differences inherent in choosing Maine law. It is enough that the statement clearly informs the prospective client that Maine law will apply. The same standard applies to an agreement to arbitrate.

8

Setting aside whether such a speculative discussion is even possible,

the issue before the Court is not whether BSSN attorneys violated any rule

of professional conduct by failing engage in such speculation. Instead, this

Court is limited to addressing the issue of whether the plain language of

the BSSN engagement letter, without more, is unenforceable because it

violates public policy. The Maine Rules of Professional Conduct are thus

relevant to the issue before the Court only to the extent that they set public

policy regarding unambiguous arbitration agreements.

The Maine Rules of Professional Conduct, however, do not set public

policy regarding arbitration agreements. The Rules do set heightened

duties on lawyers to obtain "informed consent," a term of art expressly

defined in M.R. Prof. Conduct l.O(e), in certain areas where public policy

disfavors conduct that may benefit the client under certain circumstances.

For example, M.R. Prof. Conduct 1.2(c) requires "informed consent" of the

risks and benefits of a limited representation because public policy

disfavors a fiduciary who only represents some of its principal's interests,

but limited representation might benefit a client who could not obtain

representation that was not limited. Similarly, M.R. Prof. Conduct l.6(a)(i)

requires "informed consent" prior to divulging client confidences because

9

public policy disfavors a fiduciary divulging such confidences but the

client may benefit from disclosure in certain circumstances. And M.R. Prof.

Conduct l.7(b)(2) requires "informed consent" to initiate or continue

representation in the event of concurrent conflicts of interest because public

policy disfavors a fiduciary having an interest not fully aligned with its

principal, but that might be warranted in some instances. See also M.R. Prof.

Conduct 1.9(a)(same, as to former clients); M.R. Prof. Conduct

1.ll(a)(same, as to former government lawyers' subsequent

representations). Similarly, M.R. Prof. Conduct 1.8(a) prohibits a lawyer

from engaging in a "business transaction" with a client absent "the client

being advised in writing of the desirability of seeking ... advice of

independent legal counsel on the transaction, and the client giving

"informed consent" because public policy disfavors a fiduciary

simultaneously conducting unrelated arms-length business transactions

with its principal.2

2 While some early analyses of client engagement contracts would analyze such engagement contracts as a "business transaction" (thus resulting in long discussions about whether it was a business transaction with a client covered by the Rule or a prospective client not yet covered by the Rule), Courts have since recognized that the engagement of an attorney is not a "business transaction" within the meaning of 1.8(a). A rule that requires lawyers to advise a prospective client to have the proposed engagement reviewed by a different lawyer who, presumably would need to have his proposed engagement reviewed by a third lawyer, and so on, would be unworkable.

10

By contrast, there is no recognized public policy against a fiduciary

arbitrating an issue with a former principal. Thus, a requirement of an

arbih~ation-specific explanatory statement before attorney and client agree

to arbitrate any disputes that may arise between them is conspicuously

absent from the list of situations requiring "informed consent." Under

Maine's "well recognized" maxim of construction, expressio uni us est

exclusio alterius, Lee v. Massie, 447 A.2d 65, 68 (Me. 1982), because the Rules

expressly require informed consent in some instances, the absence of a

specific requirement for informed consent for arbitration shows that a

separate informed consent is not required. There is, therefore, no

requirement of "informed consent" contained in the Rules.

IV. EVEN IF THE RULES THEMSELVES COULD SET PUBLIC POLICY,

NEITHER THE COMMENTS TO THE RULES, NOR ADVISORY OPINIONS

OF THE COMMISSION CAN Do So.

Presumably because she cannot find support for her position in the

text of the Rules, Dr. Snow devotes most of her argument to a discussion of

comments to the Rules and advisory opinions of the Professional Ethics

Commission. However, even if the Rules themselves could set public

policy, neither the comments to the Rules, nor Advisory Opinions can do

so.

11

If public policy is to be set by the Court, it must be done by Rule, and

not by implication from the authors of the comments. The Rules

themselves describe how Rules were adopted by this Court (in its role as

the final rulemaking body for Maine's judiciary) after "study and

recommendation, public comment" and review by the Court. M.R. Prof.

Conduct Preamble, il lA. The comments and reporter's notes were not

adopted by this Court. Id.; see also id. at il 14A.3

While the Professional Ethics Commission may render "advisory

opinions" on the Rules. M. Bar R. 8(d)(l), if the Commission desires an

actual Rule change, it but must submit its proposed "recommendations to

the Board [of Overseers of the Bar] or to the Advisory Committee on the

Rules of Professional Conduct." Id. at 8(d)(3). This dichotomy shows that

3 The Superior Court improperly finds an arbitration-specific explanatory rule of informed consent "under the definition of 'informed consent' in Rule l .O(e) and comment [14] to Rule l.8(h)." App. at 13. Rule l.O(e) is nothing more than the definition of "informed consent" and Rule 1 nowhere applies that definition to any lawyer conduct. Comment [14] to Rule 1.8 addresses Rule l.8(h)(l) ("A lawyer shall not make an agreement prospectively limiting the lawyer's liability to a client for malpractice."), and states "This paragraph does not, however, prohibit a lawyer from entering into an agreement with the client to arbitrate legal malpractice claims, provided such agreements are enforceable and the client is fully informed of the scope and effect of the agreement." The comment is correct in so far as l.8(h)(l) does not even address agreements to arbitrate, except to the extent that it rejects the implicit argument made here by Dr. Snow that an agreement to arbitrate is a clandestine form of prospectively limiting liability, rather than simply choosing prospectively the forum to determine that liability. Beyond that, comment 14 cannot and does not create a duty not contained in the rule-nor can the comment set public policy regarding the enforceability of arbitration agreements, let alone reverse the strong public policy favoring arbitration.

12

the Commission and its members may not change the Rules or the

professional obligations the Rules impose by fiat in a mere "advisory"

opinion. In this advisory role, the Co1nrrdssion is completely without

authority to set public policy, let alone reverse the strong public policy

favoring arbitration.

Dr. Snow argues that Opinion # 202 announced a different and

opposite rule from Opinion # 170. See, e.g., Dr. Snow Br. at 19-23. The

Superior Court similarly stated its view that the Ethics Commission "has

evolved" from "largely unqualified approval" of arbitration agreements in

Opinion #170 to "the rule in Opinion #202 that arbitration agreements can

be included only if the requirement of informed consent is strictly observed.". See

BSSN Br. at 29-34 (quoting Superior Court, A. 11-12)(emphasis added).

Given the lack of authority in the Commission to change the Rules of its

own volition, however, ethical requirements cannot have changed and so

this argument must be rejected.

V. EVEN ASSUMING THERE IS A HEIGHTENED STANDARD FOR

ENFORCEABILITY OF ARBITRATION PROVISIONS IMPOSED BY THE

RULES, SUCH A REQUIREMENT Is EXPRESSLY PREEMPTED.

If Maine's Rules of Professional Conduct, or the comments thereto, or

the advisory opinions of the Commission, do create a judicially imposed

13

requirement of special notice for arbitration provisions not applicable to

attorney-client contracts generally-which they do not-such provisions,

whether /1 of legislative or judicial origin," would be preempted by the

Federal Arbitration Act. Casarotto, 517 U.S. at 685; Marmet Health Care, 565

U.S. at533.

As the Supreme Court explained in Marmet Health Care, the West

Virginia law that prohibited pre-dispute arbitration provisions between

nursing homes and their patients /1 is a categorical rule prohibiting

arbitration of a particular type of claim, and that rule is contrary to the

terms and coverage of the FAA." Marmet Health Care, 565 U.S. at 533

(vacating Brown v. Genesis Healthcare)(per curiam). The Marmet court explains

how any state law creating a /1 public policy" against arbitration is expressly

preempted by the FAA. Id. at 533-34.

In this case, Dr. Snow asks this Court to adopt a rule that would

enforce the terms of an arbitration agreement, without more, in most

contracts, but would make the same terms unenforceable as against public

policy when applied to a claim by a client against her lawyer for

14

malpractice.4 Legal malpractice actions between client and attorney would

be /1 a particular type of claim" under Marmet Health Care, 565 U.S. at 533, so

a state law that would otherwise prevent such arbitrations absent specific

additional written or oral explanation, whether the requirement is /1 of

legislative or judicial origin," must be equally preempted. Casarotto, 517

U.S. at 685. There can be no valid /1 public policy" grounds upon which a

court can invalidate an arbitration agreement, when that /1 public policy"

argument is merely a subterfuge for anti-arbitration bias. See, e.g., Dr. Snow

Br. at 29 (citing Shotts v. OP Winter Haven, Inc., 86 So. 3d 456, 458 (Fla. 2011)

for its /1 public policy" rationale, expressly rejected by the Supreme Court in

the later Marmet Health Care decision); see also Dr. Snow Br. at 13

(rehearsing all the policy complaints against arbitration generally).

CONCLUSION

Maine law and federal law presume arbitration agreements like this

one are enforceable. Underpinning virtually all of Dr. Snow's arguments in

this case is the notion that arbitration is against public policy, which

argument is foreclosed under state law and preempted by federal law. For

4 Dr. Snow suggests that additional pages of written explanation might have made the unambiguous terms enforceable for this type of claim by client against lawyer, see supra Section II, but it is exactly these types of heightened requirements that have been held to be preempted by federal law. See Casarotto, 517 U.S. at 684.

15

all the reasons above, and contained in its initial brief, BSSN requests this

Court reverse the trial court, and order this matter to arbitration as agreed.

Dated: June 23, 2017

Melissa A. Hewey, Bar No. 39 7 Timothy E. Steigelman, Bar N . 4672 DRUMMOND WOODSU, 84 Marginal Way, Suite 600 Portland, ME 04101 Tel: (207) 772-1941 Counsel for Appellants

16

CERTIFICATE OF SERVICE

I, Melissa A. Hewey hereby certify that on this 23rd day of June, 2017,

filed one (1) original and nine (9) copies of the foregoing Reply Brief of

Appellant with the Clerk of Court and further certify that two (2) copies of

the foregoing were hand-delivered to the following:

Thomas F. Hallett, Esq. Benjamin N. Donahue, Esq. Hallett, Zerillo & Whipple P.A. 6 City Center, Ste. 208 Portland, ME 04101 Counsel for Appellee

.:.,,

Melissa A. Hewey, Bar No. Timothy E. Steigelman, Bar o. 4672 DRUMMOND WOODSUM 84 Marginal Way, Suite 600 Portland, ME 04101 Tel: (207) 772-1941 Counsel for Appellants

17