Monthly Archives: October 2014

Arbitration Clauses in Attorney Client Fee Agreements – Are They Enforceable?

Why would an attorney include a mandatory arbitration clause in the engagement agreement with a client?  The only answer and the obvious answer is that the attorney would see arbitration of a future dispute with his or her client as a more attractive option than litigation.  In this sense, the inclusion of the language seems to be inspired solely by the best interest of the attorney – not the client.  Moreover, Model Rule 1.8 prevents attorneys from entering into agreements with clients which prospectively limit the liability of the attorney (ie. forget about including language that your liability is limited to the amount of fees paid, etc.).  Having said that, there is great debate and a split of authority over the enforceability of arbitration clauses in attorney client fee contracts.  South Carolina remains among the many States who are silent on the subject matter.  If you are considering whether to include arbitration as a standard clause in your engagement letters, the following are a couple of guideposts for reference:

  1. The ABA Says Yes – Sort of:  “It is permissible under the Model Rules to include in a retainer agreement with a client a provision that requires the binding arbitration of disputes concerning fees and malpractice claims, provided that the client has been fully apprised of the advantages and disadvantages of arbitration and has given her informed consent to the inclusion of the arbitration provision in the retainer agreement.”  ABA Formal Opinion Number 02-425, [Emphasis Added].  Please note that while the ABA gives its pseudo-blessing, the proviso is significant and the ABA offers no guidance on what constitutes information sufficient to “fully apprize” the client of the advantage and disadvantages.  More importantly, what if an important “disadvantage” is omitted – say for example, sharing the cost of a three person arbitration panel!  You can appreciate that this is more shifting sand than solid rock.
  1. The DC Bar Says No – Kind of:  In opposing opinions, the DC Bar first concluded that arbitration clauses in fee agreements are permissible (DC Opinion 190), and later reversed itself for the following reason:  “In Summary, this Committee has come to the conclusion that it is unrealistic to expect lawyers to provide enough information about arbitration to a prospective client, particularly on a first visit, so that the client can make an informed consent to a mandatory arbitration provision.  It is equally unrealistic to conclude that limited disclosure coupled with the advice to seek independent counsel will cure the problem.  Therefore, we now conclude that Opinion 190 was incorrect in supposing that adequate disclosures concerning mandatory arbitration could be made to lay clients.” DC Opinion 211.  So then, DC astutely recognized that what the ABA said was permissible in providing full disclosure was in all practicality not possible.  Nevertheless, they did toss out one additional bone for those inclined:  “We see no problem, on the other hand, with proposing mandatory arbitration where a client has actual counsel from another lawyer, who has no conflict of interest, upon whom the client can rely to assess the complexities posed by arbitration.”  In short, full disclosure = impossible; separate counsel = permissible.

Again, there is a deep split of authority on the subject matter, but here’s what our scorecard looks like:

  1. No chance :  Just putting an arbitration clause in the fee agreement without disclosure and without separate counsel (especially to an unsophisticated client) seems to have little chance at survival.
  1. Some chance:  If you are brave enough (or foolish enough), it seems permissible to allow the client to make the election between arbitration or litigation ONLY AFTER the client has been provided with full disclosure of the risks and benefits of both.  Again, making full disclosure to a lay client appears a dicey proposition at best.
  1. Gold Standard:  If the client is separately represented for purposes of reviewing the engagement letter, it would appear that including the arbitration language is rock solid.  However, it is hard to imagine this coming into play outside of the context of a significant engagement on behalf of very sophisticated and well-heeled clients.

Ronnie Richter and Eric Bland

Smart Phone – Dumb Lawyer         

Is technology a blessing or a curse to the legal profession? The obvious answer (and the consummate lawyer answer) is “yes” – it is a little of both. In the wrong hands, technology is Smart_phone_possibilitiesnothing more than an opportunity for self-inflicted wounds. Here are a few “lawyer technology” DON’TS:

  1. Don’t record Judges: Our old buddy Jan Warner (God rest his soul) thought he was doing the right thing to investigate a client’s concern about judicial misconduct by smuggling a recording device into the Judge’s chambers and recording a conversation with the court. Our Supreme Court disagreed that a “dilemma” existed by his desire to document judicial misconduct. All such complaints or concerns should be made through proper channels – not through self-help investigations (Matter of Warner,286 S.C. 459, 335 S.E.2d 90 (1985). Warner’s old-school, Austin Power’s technology pales in comparison to the phones that we routinely carry into chambers. With that said, DON’T RECORD CONFERENCES IN CHAMBERS. For the matter, DON’T RECORD OTHER MEETINGS either without express permission. Even if it is lawful under the circumstances, there is a better than average chance that it will carry the appearance of impropriety (otherwise, it wouldn’t be a secret recording).
  1. Don’t forget that the use of technology leaves a permanent trail: In Indiana, attorney Sniadecki was suspended from the practice of law and directed to inform his clients. Instead of telling ALL of his clients, Mr. Sniadecki apparently thought that he could remain involved on the down low with a few of his better cases. When a concern was later expressed that he continued to practice law actively, a subsequent investigation was launched. Sniadecki admitted that he had remained in periodic contact with his former office. However, it was hard for him to respond to the allegation that he was practicing law when he had called his office from his cell phone 675 times! Yes Mr. Sniadecki – there is a record of the calls. In re Sniadecki, 924 N.E.2d 109, (2010).
  1. Don’t answer your phone in court: True story. A Minnesota lawyer was sanctioned in part for answering his phone in court AFTER being warned by the hearing referee not to answer the phone. The lawyer’s response: the hearing was unfair and he was trying to get his witnesses to the courthouse. In re Petition for Disciplinary Action Against Winter, 770 N.W.2d 463 (Minn.,2009).
  1. Don’t take selfies: Svitlana Sangary is a lawyer in California who is currently responding to a disciplinary action for having taken selfies – sort of. Ms. Sangary posted a number of photographs of herself with the rich and famous, including photos taken with President Obama, Bill Clinton, George Clooney, Kim Kardashian and others. The problem is that none of the pictures are real. Instead, she superimposed her face on the images to create the appearance that she ran in all the right circles. If this sounds like false advertising to you, then you would agree with the California State Bar who considered the photos “false, deceptive, and intended to confuse, deceive and mislead the public.” Sangary’s lawyer, Mark Geragos (yes, the Mark Geragos) responded on her behalf “if that kind of puffery is actionable by the state bar, your are going to put the entire membership out of business.” That may fly in California (don’t it), but the well-advised attorney in South Carolina should avoid it here.
  1. Don’t friend jurors on social media:   There are too many opinions, advisories and cases to list here. The clear dividing line on this one seems to be the following: If a potential juror has made information publically available, it is acceptable to view it. However, a lawyer cannot “friend” a potential juror (or get somebody else to do it for them) for the purpose of learning information that the juror has not made publically available. The latter is tampering and it is a crime. Don’t do it.

There are many more Do’s and Don’ts to follow. Next time, I promise to accompany the blog with a photograph of me with Anthony Hopkins.

Eric Bland and Ronnie Richter