Perry v. Emerson, Supreme Judicial Court of Maine, October 26, 2010.
Facts: Emerson initiated a fee arbitration proceeding against her former attorneys, alleging that she never agreed to be responsible for the legal fees incurred in her divorce action and she was led to believe her husband would be responsible for the fees.
The arbitration panel determined that:
Emerson routinely asked Perry and K&P about her obligation to pay fees billed to her, indicating that she doubted that her husband would actually pay her fees, and that she "was fully cognizant of" the possibility that a provision requiring her then-husband to pay her attorney fees "might not be a part of the ultimate judgment or settlement agreement." The panel also found that Emerson was aware that the final divorce agreement did not require her husband to pay her legal fees.
Based on this determination, Emerson’s attorneys moved for summary judgment in a pending malpractice action. The lower court concluded that Emerson’s prior litigation of factual issues concerning her obligation to pay her own attorney’s fees before the arbitration panel precluded re-litigation in the form of a malpractice complaint. Emerson appealed.
Issues: Can the factual determinations of a fee arbitration committee preclude litigation of a pending malpractice action?
The findings made by a Fee Arbitration Panel, to the extent necessary to its determination, have preclusive effect for purposes of collateral estoppel. A valid and final award by arbitration has the same effect under the rules of res judicata as a judgment of a court, so long as the process contains the essential elements of "adjudication":
(1) adequate notice, (2) the right to present evidence and legal argument and to rebut opposing evidence and argument, (3) a formulation of issues of law or fact to apply rules to specified parties concerning a specified transaction, (4) the rendition of a final decision, and (5) any other procedural elements as may be necessary to constitute the proceeding a sufficient means of conclusively determining the matter in question.
The lack of de novo review of the panel’s decision is not a factor that is considered in determining the decision’s preclusive effect.
Based on this analysis, the Court held that Emerson’s claim of an oral agreement/contract with her former attorneys that she would not pay her own attorney’s fees was necessarily barred.
The Court also barred, for different reasons, Emerson’s claim of negligence against her former attorneys for their failure to include a provision in the settlement agreement providing that her husband would pay her attorney’s fees. The Court noted that the arbitration panel’s determinations would have no bearing on this issue, since it was not necessary to the resolution of the fee dispute. Rather, Emerson was estopped from pursuing her negligence claim because she failed to present necessary expert testimony:
The appropriate standard of care, and whether [the attorneys] breached a duty of zealous representation to Emerson by negotiating a divorce settlement that did not include a requirement that Emerson’s ex-husband pay all of her attorney fees, is not obvious or within a layman’s common knowledge and would have required expert testimony.
Lesson: A fee arbitration panel’s determinations will have preclusive effect on a pending or subsequent malpractice litigation, so long as those factual determinations were necessary to a resolution of the fee dispute. Expert opinion is necessary to contest whether or not an attorney adequately drafted a settlement agreement.
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