Should law firms be required to meet heightened standards before they are able to contract with clients to arbitrate malpractice lawsuits? If so, how high should these standards be?

When lawyers and their clients (or clients and their lawyers, if you prefer) use ADR, we typically applaud them for choosing a process that is generally faster, cheaper and more satisfying than can be found in the crowded judicial system. But when lawyers stipulate to arbitration in their engagement letters with their clients, we’ve heard some judges believe that duties of candor and loyalty may be implicated unless proper disclosures are made.

In 2012, the Louisiana Supreme Court decided the case of Hodges v. Reasonover. In that case, an unhappy client sued his lawyers for malpractice only to have the lawyers move to dismiss the litigation under a clause in the engagement letter that read, “Any dispute, disagreement or controversy of any kind concerning this agreement, the services provided hereunder, or any other dispute of any nature or kind that may arise among us, shall be submitted to arbitration, in New Orleans, Louisiana.” The client objected under a Louisiana Rule of Professional Conduct which read, “A lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement.” The trial court found that the client had not been independently represented and denied the motion to dismiss.

On appeal, the Louisiana Court noted a generally favorable attitude toward arbitration, but it put contracts between lawyers and clients on a different level than most contracts because of the fiduciary nature of the relationship. The Court said, “After our careful study, we hold there is no per se rule against arbitration clauses in attorney-client retainer agreements, provided the clause is fair and reasonable to the client. However, the attorneys’ fiduciary obligation to the client encompasses ethical duties of loyalty and candor, which in turn require attorneys to fully disclose the scope and the terms of the arbitration clause.”

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