349 Ga. App. 592
Ga. Ct. App.2019Background
- Innovative Images retained Summerville and his firms in July 2013 and signed an engagement agreement containing a choice-of-law clause (Georgia) and an arbitration clause covering disputes under the agreement (fee disputes to State Bar fee arbitration; other disputes by agreed arbitrator or JAMS).
- Innovative sued the Summerville Defendants in October 2017 for legal malpractice (breach of professional negligence, contract, fiduciary duty). Defendants acknowledged service but did not file a timely answer.
- Defendants moved to stay discovery, compel arbitration, and dismiss; Innovative opposed, arguing the arbitration clause was unconscionable because counsel had not explained arbitration’s disadvantages. The trial court denied the motion to compel arbitration on unconscionability grounds.
- The trial court initially denied plaintiff’s motion for default judgment (finding the 60‑day waiver argument applied), then granted reconsideration that the Acknowledgment did not invoke OCGA § 9‑11‑4(d) waiver formalities, but nonetheless exercised its discretion to open the default under OCGA § 9‑11‑55(b) as a “proper case.”
- Defendants appealed the denial of arbitration; Innovative cross‑appealed the opening of default. The Court of Appeals reversed the denial of arbitration and affirmed the order opening default.
Issues
| Issue | Innovative's Argument | Summerville Defendants' Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clause (unconscionability/public policy) | Clause unconscionable because attorneys failed to explain arbitration disadvantages to client | Arbitration clause valid; no evidence of fraud or unfair inducement; GAC favors arbitration; no blanket duty to explain arbitration precludes enforcement | Reversed trial court: Clause enforceable — no per se rule that failure to explain makes clause unconscionable |
| Whether arbitration clause was optional or mandatory for non‑fee disputes | Clause optional; plaintiff could elect litigation instead of arbitration | Clause mandatory: language "will be submitted to arbitration" and enumerated selection methods for arbitrator | Held mandatory: clause’s plain language required arbitration for disputes under the agreement |
| Whether default should have been entered when defendants failed to file answer timely | Plaintiff: automatic default under OCGA § 9‑11‑55(a); Acknowledgment did not satisfy waiver formalisms to extend time to 60 days | Acknowledgment of service extended time (claimed operation under OCGA § 9‑11‑4(d)(5)); defendants timely filed answer before extended deadline | Trial court found Acknowledgment did not meet formal waiver requirements (so default occurred) but properly opened default under OCGA § 9‑11‑55(b); appellate court affirmed opening default |
| Whether trial court abused discretion in opening default (statutory preconditions and proper‑case test) | Plaintiff: defendants did not satisfy statutory preconditions (meritorious defense under oath; ready for trial) and no proper‑case justification | Defendants showed meritorious defense (arbitration defense, sworn affidavits), offered to plead instanter, announced readiness; delay explained by counsel misunderstanding and prior practice; acted promptly to cure | Held: statutory preconditions met; trial court did not manifestly abuse discretion in opening default as a "proper case." |
Key Cases Cited
- Kindred Nursing Centers v. Chrzanowski, 338 Ga. App. 708 (court must summarily decide arbitrability under GAC)
- Results Oriented v. Crawford, 245 Ga. App. 432 (Georgia public policy favors arbitration; arbitration clauses not per se unconscionable)
- Joja Partners v. Abrams Properties, 262 Ga. App. 209 (contract construction principles for arbitration clauses — choices among procedures do not render clause optional)
- Shelnutt v. Mayor & Aldermen of the City of Savannah, 333 Ga. App. 446 (plain contract language controls; "will" is mandatory)
- Jones v. Federated Mut. Ins. Co., 346 Ga. App. 237 (courts should cautiously declare contract terms void on public policy grounds)
- Nodvin v. State Bar of Ga., 273 Ga. 559 (Supreme Court has exclusive authority to govern practice of law — limits on judicial adoption of professional‑conduct rules as public policy)