Patton v. Johnson

915 F.3d 827

Rickie PATTON and Cathleen Marquardt, Plaintiffs, Appellees,

v. Barry JOHNSON, Defendant, Appellant,andSteven Johnson, Individually and as Law Offices of Steven M. Johnson d/b/a The Johnson Law Firm, Co-defendants.

No. 18-1750

United States Court of Appeals, First Circuit.

February 11, 2019

Samuel D. Zurier, Providence, RI, for appellant.

Matthew S. Dawson, with whom Lynch & Pine, Attorneys at Law, LLC, Providence, RI, was on brief, for appellees.

Before Barron, Circuit Judge, Souter,^* Associate Justice, and Selya, Circuit Judge.

SELYA, Circuit Judge.

Over time, this case has become a procedural motley. In its current iteration, defendant-appellant Barry Johnson emphasizes his association with the Johnson Law Firm (JLF) in attempting to compel the plaintiffs, Rickie Patton and his wife Cathleen Marquardt, to arbitrate various tort claims (including their claims of legal malpractice). The district court, adopting a magistrate judge's report and recommendation (R&R)¹ and applying principles of collateral estoppel derived from Rhode Island law, determined that the appellant was barred from relitigating his contention that the claims should be heard before an arbitrator. The appellant assigns error. After threading our way through the labyrinth of prior proceedings, we affirm.

I. BACKGROUND

We briefly rehearse the background and travel of the case. In 2007, the plaintiffs retained defendants JLF and Steven M. Johnson to represent them in a products liability suit concerning an allegedly defective hernia mesh device (Kugel Mesh).²

The parties executed an Attorney Representation Agreement (the ARA), which contained a three-paragraph arbitration provision. The plaintiffs did not, however, initial or otherwise specifically acknowledge the arbitration paragraphs.

JLF filed the plaintiffs' products liability suit in the United States District Court for the Southern District of Texas. As part of a centralized multi-district litigation proceeding, see 28 U.S.C. § 1407, the suit was subsequently transferred to the District of Rhode Island, where it joined more than 1,000 similar suits brought against the Rhode Island-based Kugel Mesh manufacturer. In due course, JLF hired the appellant as an employed attorney. In that capacity, the appellant worked, inter alia, on the plaintiffs' suit.

When the suit was settled in 2015, a dispute arose among the plaintiffs, the appellant, JLF, and John Deaton (the Rhode Island-based local counsel retained by JLF). Central to this dispute were representations allegedly made by the appellant concerning settlement amounts. The dispute was not resolved, and the appellant came to believe that the plaintiffs would be filing a malpractice suit against him.

In an attempt to get out in front of such a suit, the appellant — in April of 2016 — filed a civil action against JLF and Patton in a Texas state court seeking to compel arbitration based on the provisions of the ARA. Patton challenged the court's jurisdiction over his person, as did Deaton (who had been impleaded by JLF). The Texas trial court rejected these jurisdictional challenges, striking the special appearances made on behalf of both Patton and Deaton. Deaton appealed, and the Texas Court of Appeals affirmed. See Deaton v. Johnson, No. 05-16-01221-CV, 2017 WL 2991939, at *4 (Tex. App. July 14, 2017), review dismissed (Aug. 10, 2018).

While Deaton's appeal was pending, JLF initiated a Judicial Arbitration and Mediation Service (JAMS) arbitration proceeding against Patton in Fort Worth, Texas. The appellant was not named as a party to the JAMS arbitration. Patton challenged JLF's right to arbitrate, arguing that the uninitialed arbitration paragraphs in the ARA were of no effect. By decision dated November 15, 2016, the arbitrator determined that the ARA did not contain a valid and enforceable agreement to arbitrate. Accordingly, the arbitrator dismissed the JAMS proceeding.

The plaintiffs made the next move. On April 3, 2017, they sued the appellant, JLF, and JLF's principal in a Rhode Island state court, asserting claims for malpractice, other torts, and unfair trade practices (all relating to the handling and settlement of the plaintiffs' Kugel Mesh suit). The defendants removed the suit to the United States District Court for the District of Rhode Island, noting diversity of citizenship and the existence of a controversy in the requisite amount. See 28 U.S.C. §§ 1332(a), 1441. At roughly the same time, the appellant initiated a second JAMS arbitration proceeding against Patton in Texas, premised upon the arbitration provision in the appellant's 2013 employment agreement with JLF — an agreement to which the plaintiffs were not parties. By means of this proceeding, the appellant sought what amounted to a declaration that the plaintiffs were bound to arbitrate their claims against him. The appellant proceeded to file a motion to compel arbitration in the United States District Court for the Northern District of Texas.

With this foundation in place, the appellant turned his attention to the Rhode Island case, moving to stay the civil action and compel arbitration pursuant to the Federal Arbitration Act (FAA). See 9 U.S.C. §§ 3, 4. His motion sought to invoke the arbitration provisions of both his 2013 employment agreement and the ARA. While his motion was pending before the federal district court in Rhode Island, the federal district court in Texas denied the appellant's motion to compel arbitration on the ground that the 2013 employment agreement did not in any way bind Patton. Consequently, the court dismissed the Texas suit without prejudice.

Back in Rhode Island, the appellant abandoned his reliance on the 2013 employment agreement. Nevertheless, he continued to pursue his motion to compel arbitration, relying exclusively on the uninitialed arbitration paragraphs contained in the ARA. He alleged in relevant part that he was not a party to the first JAMS arbitration and, thus, was not bound by the decision of the first JAMS arbitrator (who had found the uninitialed arbitration paragraphs in the ARA impuissant as to Patton). The plaintiffs opposed this motion, arguing that the appellant was in privity with JLF and was therefore precluded from re-litigating the issue of arbitrability under principles of collateral estoppel.

The court below referred the appellant's motion to compel arbitration to a magistrate judge, who applied Rhode Island law and concluded that principles of collateral estoppel foreclosed the appellant's attempt to invoke the arbitration provision of the ARA. Accordingly, the magistrate judge recommended that the appellant's motion to compel arbitration be denied. See Patton I, 2018 WL 3655785, at *9. Represented by new counsel, the appellant served written objections to the R&R, but the district court overruled the objections, adopted the R&R, and denied the motion to compel arbitration. See id. at *1. This timely appeal followed.

II. ANALYSIS

Before beginning our analysis, we pause to smooth out a procedural wrinkle. We then proceed to the merits.

A. Judicial Review of the R&R.

"[A]s Article I judicial officers, magistrate judges ordinarily may not decide motions that are dispositive either of a case or of a claim or defense within a case." PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10, 13 (1st Cir. 2010). While a magistrate judge may decide a non-dispositive motion, see Fed R. Civ. P. 72(a), she may only make a recommended disposition of a dispositive motion, see Fed. R. Civ. P. 72(b).

This dispositive/non-dispositive dichotomy has implications for judicial review. When a magistrate judge issues a recommended decision on a dispositive motion and an objection is interposed, district court review is de novo. See id. By contrast, when a magistrate judge enters an order resolving a non-dispositive motion and a first-tier appeal is taken to the district court, review is for clear error (that is, the district court must accept the magistrate judge's findings of fact and inferences drawn therefrom unless those findings and inferences are clearly erroneous). See Fed. R. Civ. P. 72(a) ; Phinney v. Wentworth Douglas Hosp., 199 F.3d 1, 4 (1st Cir. 1999).

In this case, the magistrate judge treated the appellant's motion to compel arbitration as a dispositive motion and recommended a decision. See Patton I, 2018 WL 3655785, at *1. This was error because a motion to compel arbitration is a non-dispositive motion. See PowerShare, 597 F.3d at 14. Accordingly, an order, not a recommended decision, would have been the appropriate vehicle for the magistrate judge's findings and conclusions.

But the district court came to the rescue: it recognized this discrepancy and treated the R&R as an order. See Patton I, 2018 WL 3655785 at *1. The district court's prophylactic action cured the defect and rendered any procedural error harmless. See United States v. Weissberger, 951 F.2d 392, 398 (D.C. Cir. 1991) (holding that district court's application of proper standard of review "cured any arguable defect" in magistrate judge's order).

That the error was harmless is all the more evident because the appellant's motion to compel turned on questions of law. See, e.g., PowerShare, 597 F.3d at 14 (explaining that "interpreting a contractual term [is] a question of law for the courts"); Monarch Life Ins. Co. v. Ropes & Gray, 65 F.3d 973, 978 (1st Cir. 1995) ("The applicability vel non of preclusion principles is a question of law."). This is significant because a magistrate judge's answers to questions of law, whether rendered in connection with a dispositive motion or a non-dispositive motion, engender de novo review. See PowerShare, 597 F.3d at 15 (explaining that, for questions of law, "there is no practical difference between review under Rule 72(a)'s 'contrary to law' standard and review under Rule 72(b)'s de novo standard"). It follows that whether the magistrate judge issued an R&R or an order, the district court was obliged to apply the same...