Darcy Smith v. Cynthia Lindemann
710 F. App'x 101
3rd Cir.2017Background
- Plaintiff Darcy Smith sued four attorneys and their firms for malpractice after being hired and fired during her divorce; three settled and one (Marc A. Calello) moved to compel arbitration under a retainer agreement.
- The retainer contained a broad arbitration clause requiring binding arbitration of “any difference[], disagreement, or dispute between you and the Law Firm … as to its representation of you, or on account of any other matter,” and stated that signing constituted a waiver of court/jury rights.
- The District Court granted Calello’s motion, stayed the case, and compelled arbitration; Smith appealed and sought certification to the New Jersey Supreme Court on the enforceability question.
- Smith argued (1) New Jersey law bars arbitration of attorney‑malpractice claims by former clients, and (2) the clause was unenforceable because it did not expressly use the word “malpractice” and the attorney failed to obtain informed consent as required by professional conduct rules.
- The Third Circuit affirmed: it held that any New Jersey rule forbidding arbitration of such claims would be preempted by the Federal Arbitration Act (FAA), and the clause’s language was sufficiently clear to cover malpractice disputes and to constitute waiver of judicial forum.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether New Jersey law prohibits arbitration of attorney‑malpractice claims by former clients | Smith: New Jersey bars such arbitration as against public policy | Calello: Even if NJ disfavors it, the FAA preempts any state rule banning arbitration | FAA preempts any state rule outright prohibiting arbitration; claim is arbitrable |
| Whether the arbitration clause is unenforceable for failure to use the word “malpractice” and lack of informed consent under NJ professional rules | Smith: Clause didn’t explicitly say “malpractice,” so she couldn’t give informed consent as required by ethics rules | Calello: Clause covers disputes “as to his representation,” and Smith was aware of/used the clause; FAA prevents special treatment of arbitration clauses | Clause is sufficiently clear to cover malpractice disputes; no requirement to use the word “malpractice”; enforceable |
| Whether a retainer provision violating NJ Rules of Professional Conduct automatically voids arbitration agreement | Smith: Contracts violating RPC are against public policy and unenforceable | Calello: Any generally applicable contract‑defense must be shown; FAA treats arbitration agreements like other contracts | No showing that the clause violated RPC in a way that would void it; FAA bars special arbitration‑specific scrutiny |
| Whether certification to the NJ Supreme Court was warranted on the enforceability question | Smith: State court should decide novel state law issues about arbitration in attorney‑client context | Calello: Federal courts apply FAA and preemption principles; federal decision appropriate | Third Circuit declined certification and affirmed arbitration order |
Key Cases Cited
- John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132 (3d Cir.) (federal arbitration law federalizes arbitration principles)
- Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (Supreme Court) (FAA supremacy and federal policy favoring arbitration)
- Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (Supreme Court) (state rules that outright prohibit arbitration are displaced by the FAA)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (Supreme Court) (state law cannot single out arbitration for disfavored treatment)
- DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (Supreme Court) (arbitration agreements must be treated like other contracts under FAA)
- Blair v. Scott Specialty Gases, 283 F.3d 595 (3d Cir.) (federal courts look to state contract law to evaluate defenses to arbitration)
- Atalese v. U.S. Legal Servs. Grp., L.P., 99 A.3d 306 (N.J. 2014) (arbitration provisions must be sufficiently clear for consumers; waiver of statutory rights must be explicit)
- Jacob v. Norris, McLaughlin & Marcus, 607 A.2d 142 (N.J. 1992) (contracts violating the Rules of Professional Conduct are against public policy and unenforceable)