American Bar Assn. gives arbitration green light.

• Author: Pribek, Jane

Byline: Jane Pribek

The American Bar Association Standing Committee on Ethics and Professional Responsibility recently issued a formal opinion concluding that the ABA's Model Rules permit a lawyer to write binding arbitration clauses into a retainer agreement, as long as a client is fully apprised of the advantages and disadvantages and gives his informed consent.

Formal Opinion 02-425, which stems from a committee decision made on Feb. 20 and released on April 11, observes in its "overview" that there has been a significant increase in the use of binding arbitration provisions in retainers in recent years. The overview additionally provides that arbitration clauses have been more willingly accepted in fee disputes than in malpractice claims.

The principal ethical issue with binding arbitration clauses is that ABA Model Rule 1.8(h) and Wisconsin Supreme Court Rule 20:1.8(h) prohibit a lawyer from prospectively limiting his liability for malpractice, unless the client has independent legal counsel and the limit is permitted by law. But binding arbitration over fees does not limit liability, the opinion reasons. Rather, it merely establishes a procedure for addressing claims.

The explanation must provide sufficient information to permit the client to make an informed decision about whether to agree to the arbitration clause, the opinion continues. That means talking to the client about what he's waiving, such as a jury trial, discovery and the right to appeal. It additionally means he might be paying the fees for an arbitrator or panel of arbitrators.

Impact On Wisconsin Practitioners

Kris Wenzel is the State Bar of Wisconsin staff liaison to the association's Committee on Resolution of Fee Disputes. She reports that the program doesn't keep track of whether the participants are there due to an arbitration clause, or simply because the parties agreed to the process once their dispute arose. Anecdotally, however, she can say that there have been a few cases - the vast minority - where an arbitration clause was used.

Another bar staffer, attorney Keith Kaap of the ethics hotline, notes that no one has phoned to ask if they can use arbitration clauses in their retainers, nor has anyone inquired specifically about the ABA's ethics opinion on the matter.

Likewise, Milwaukee lawyer Nathaniel Cade Jr., a member of the State Bar of Wisconsin's Professional Ethics Committee, says he's not sure if the ABA's ethics opinion is entirely correct about the...