Court Approves Arbitration Provision in Retainer Agreement

• Author: Katherine M. Devanney
• Pages: 7-7

U.S. cour t of appeals held

that an unsophisticated

plainti must arbitrate

claims agains t the law

f‌irm that had repre sent-

ed her. In Plummer v. McSwe eney,

the U.S. Co urt of Appeals for the

Eighth Circuit reverse d a lower

court’s dec ision that had hel d the

arbitration provisio n in a retainer

agreement was unconscionable and,

therefore, not enforceable. ABA

Section of Litigati on leaders cau-

tion that lawyers se eking to use such

provisions must e nsure fulsome d is-

closure with their cli ents.

Jerri Plumme r, an Arkansas res-

ident, received a n unexpected call

claiming that Plu mmer had been im-

planted with defec tive surgical mesh

and could die if sh e did not have it

removed. The caller connected her

with a law f‌irm that would he lp her

obtain compen sation for the surgery

and related expen ses. The surgery

was not successful. Plummer ultimate-

ly sued numero us defendants in the

legal and med ical f‌ields for fraud,

breach of f‌iducia ry duty, malprac-

tice, and related ac tions in the U.S.

District Cour t for the Eastern District

of Arkansas. O ne of the law f‌irms that

she sued moved to comp el arbitration

based on a provision i n the retainer

agreement req uiring all disputes be-

tween the law f‌irm an d the plainti to

be submitted to bin ding arbitration in

Washington, D.C.

The district cou rt declined to en-

force the arbitratio n provision, f‌ind-

ing that the plainti , who had minimal

income, could n ot aord the costs

of travel or of arbitration . It noted

that the law f‌irm had “ instill[ed] fear

of death” in the plai nti—who had a

tenth grade educ ation and did not

know what arbitratio n was—and then

solicited her to und ergo a surgical

procedure in ano ther state and rep-

resent her in a lawsui t against the

mesh manufa cturer. Ultimately, the

Court Approves Arbitration Provision

in Retainer Agreement

district cour t held that the arbitration

provision was unconscionable under

Washington, D.C ., law.

The Eighth Circuit Co urt of

Appeals assu med that a violation of

D.C. Rule of Professional Conduct

1.4(b), which oblig ates attorneys to

“explain a matter to the ex tent rea-

sonably neces sary to permit the cli-

ent to make informed d ecisions re-

garding the repre sentation,” would

invalidate the arbitr ation provision.

But it reasoned t hat there had been

no such violation b ecause the retain-

er agreement h ad apprised the plain-

ti of the consequ ences of the arbi-

tration provision. Ac cordingly, the

court of appea ls reversed, noting

that the retainer agreement informed

the plainti that sh e had the right

to negotiate the terms of th e agree-

ment and consul t with an attorney of

her choosing , and it did so in stylized

bold letters . It also observed that

the retainer agreement was only six

pages long and w as in “easy to read

format.” Finally, the co urt held that

the f‌irm cured any un conscionabili-

ty resulting from th e plainti’s inabili-

ty to aord arbitrati on by agreeing to

pay those co sts.

Section of Litigati on leaders ob-

serve that Rule 1 .4(b) does not pro-

vide much guidance for attorneys

seeking to adeq uately “explain” an

arbitration provisio n. “I would think

that the D.C. bar wo uld require more

than putting the d ocument in front

of somebody,” sugge sts John M.

Barkett, Miam i, FL, cochair of the

Section’s Ethics & P rofessionalism

Committee. “ I don’t know that that’s

explaining the ma tter. The word ‘ex-

plain’ seems to su ggest that there is a

discourse,” he continues.

But while Barket t suggests that a

live discussion may be t he best prac-

tice, the appell ate court focused only

on the four corne rs of the agree-

ment. It noted tha t the contract con-

spicuously explained that arbitration

By Katherine M. Devan ney, Litigation News Contributing Editor

would be the plainti ’s only recourse

in the event of a dispute, th at she was

waiving her right to a ju ry trial, and

that she was waiving h er right to a ju-

dicial appeal.

Still, Barkett c autions against let-

ting a retainer agreement speak

for itself, parti cularly when engag-

ing a lay client like the pl ainti.

“With folks who d on’t know any bet-

ter, the very folks you’re mo st wor-

ried about, th ey’re just going to si gn

whatever you put in front of th em,”

he cautions.

Whether discus sing the eects of

an arbitration ag reement face-to-face

or putting them i n the agreement it-

self, Section le aders remind practi-

tioners to ensure th ey are conveying

the information n ecessary for the cli-

ent to make an intellige nt decision.

“The gener al principle is that the cli-

ent needs to give info rmed consent

to the arbitration agr eement,” advis-

es Mitchell L. M arinello, Chicago, IL,

cochair of the Sec tion’s Alternative

Dispute Resoluti on Committee.

Attorneys using arb itration provisions

in retainer agreements “should dis-

close that arbitrati on is a private dis-

pute resolution pro cess paid for by

the parties tha t substitutes for trial by

a judge or jury, may ent ail more limit-

ed discovery than i s available in court

proceedings , and has very limited

rights of appea l,” Marinello advises.

RESOURCE

ABA Formal Eth ics Op. 02-425: A

Retainer Agre ement Requires the

Arbitration of Fe e Disputes and

Malpracti ce Claims (2002).

AMERICA N BAR ASSOCIATION WINTER 202 1 • VOL. 46 NO. 2 | 7

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