Predispute agreements to arbitrate legal malpractice claims: skating on thin ice in Florida's ethical twilight zone?

• Author: Spector, Brian F.

We begin by stating the obvious: Arbitration is firmly rooted in our culture as a means of resolving disputes. Anyone who has recently purchased "pricey" products or services knows that predispute agreements to arbitrate are typically non-negotiable parts of everyday bargains. Notwithstanding the ubiquitous nature of arbitration clauses, or perhaps because of their widespread use, the legal enforceability of such agreements is frequently challenged by those who insist on exercising a constitutionally guaranteed right to have their day in court before a judge sworn to uphold the law or a trial by a jury of their peers. (1) More often than not, such challenges run aground because judges favor extra-judicial resolution of disputes via arbitration. (2) But attitudes change, as do notions of propriety, when the agreement to arbitrate is between lawyer and client, requiring arbitration of all potential client claims against the lawyer for breach of fiduciary duty, malpractice, or any other common law or statutory claim arising out of the engagement and the attorney-client relationship. To ask for such an agreement is considered by some as a faux pas at best, and, at worst, an act repugnant to and inconsistent with the highest principles of the profession.

In Florida, hostility to predispute agreements requiring the arbitration of legal malpractice claims has existed in high places among important people. It was evidenced most recently in the December 2003 decision of the Board of Governors of The Florida Bar to withdraw Proposed Advisory Opinion 02-9 of The Florida Bar's Professional Ethics Committee. This proposed ethics advisory opinion concluded that "an agreement for mandatory binding arbitration to resolve all disputes between an attorney and a client is ethically permissible under specific circumstances." To this day, those Florida lawyers tracking the path of Opinion 02-9 have found little, if any, intellectual satisfaction in, or practical guidance from, the reasons cited by the Board of Governors as justifying withdrawal of Opinion 02-9. Those of us who hoped for clarification of the ethical issues raised by predispute arbitration provisions have no deep-water safe harbor. We did not receive a clear pronouncement that such arbitration provisions were per se unethical, nor did we receive any guidance regarding the circumstances under which such provisions would be deemed ethically permissible. However, as explained more fully below, Opinion 02-9 lives on in the recent amendment to Rule 4-1.5(i) of the Florida Rules of Professional Conduct.

This article revisits Opinion 02-9 in light of the recent amendment, effective March 1, 2008, to Rule 4-1.5 of the Florida Rules of Professional Conduct. (3) This amendment--the addition of a new subparagraph (i)--expressly authorizes the use of predispute agreements requiring arbitration of fee disputes. (4) This article begins by discussing Opinion 02-9. It then recites the reasons underlying the Board of Governors' decision to withdraw the proposed opinion and continues by tracing the genealogy of the most recent amendment to Rule 4-1.5. The concluding section of this article identifies the Rules of Professional Conduct applicable to the issue at hand, offers a sample arbitration clause, and suggests policies and procedures for those who decide to skate on ethically thin ice and use such provisions in their standard "retainer" letters. (5)

Opinion 02-9

On April 1, 2003, formal notice was given of then Proposed Advisory Opinion 02-9. (6) The opinion was written because "[a] member of The Florida Bar [had] inquired about the ethical propriety of including a clause in a retainer letter requiring mandatory binding arbitration to resolve all disputes between the lawyer and client." The Florida Bar's Professional Ethics Committee's proposed opinion concluded that "an agreement for mandatory binding arbitration to resolve all disputes between an attorney and a client is ethically permissible under specific circumstances." The circumstances specified were:

the arbitration clause must be fair and reasonable;

the arbitration clause should not be written so broadly as to require disciplinary matters to be submitted to arbitration; the clause must be disclosed to the client, and the lawyer must disclose that the client is waiving the right to a jury trial and discuss the benefits and the detriments of arbitration:

the client must be given the opportunity to consult with another lawyer, although the client need not actually be represented by independent counsel in making the agreement; and

the client must consent in writing.

The committee emphasized that the "majority of bar ethics committees that have analyzed this issue have concluded that a lawyer's retainer agreement may include a clause for mandatory binding arbitration to resolve future fee and malpractice disputes." Using string citations and explanatory parentheticals, the majority view (7) was summarized as follows:

ABA Formal Ethics Opinion 02-425 (attorney may include provision for mandatory binding arbitration for malpractice claims in retainer agreement if attorney discloses benefits and detriments of arbitration and gives informed consent); Arizona Ethics Opinion 94-05 (attorney may agree with client to mandatory binding arbitration to resolve all disputes if the attorney follows the rule on business transactions with clients); California Formal Ethics Opinion 1989-116 (attorney and client may agree to binding mandatory arbitration for potential malpractice claims; if there is an existing attorney-client relationship, the attorney must fully disclose the terms and consequences and obtain client's knowing consent); Connecticut Informal Ethics Opinion 99-20 (attorney may include a mandatory arbitration clause in retainer agreement to resolve fee and malpractice claims, but must fully disclose to client the benefits and detriments of arbitration); New York County Ethics Opinion 723 (attorney may include clause in retainer agreement for binding arbitration to resolve malpractice and contract disputes, but only if the arbitrator can award punitive damages, the attorney fully discloses the difference between jury trial and arbitration, and the attorney gives the client the opportunity to seek separate counsel); Oklahoma Ethics Opinion 312 (attorney may include clause in retainer agreement for binding arbitration to resolve all disputes if the attorney follows the rule on business transactions with a client and with full disclosure of the differences between arbitration and jury trial to the client; the attorney need not require the client to obtain other counsel); Philadelphia Ethics Opinion 88-2 (mandatory binding arbitration clause in retainer agreement to resolve malpractice claims is permissible if the attorney complies with the rule on business transactions with clients, including full disclosure that the client is waiving the right to jury trial, the client has the opportunity to seek independent counsel, and the client consents in writing); Virginia Ethics Opinion 638 (attorney may include provision in retainer agreement for binding arbitration of malpractice claims after full disclosure of the meaning of the provision and recommending that the client seek the advice of separate counsel).

Withdrawal of Opinion 02-9

At its December 2003 meeting, The Florida Bar's Board of Governors approved a recommendation by its Review Committee on Professional Ethics that Opinion 02-9 be withdrawn. (8) The public record reveals very little concerning the basis for the Board of Governors' actions. The record reflects:

One member of the Board of Governors stated that "[t]he very idea of arbitrating malpractice is repugnant to me, and this opinion as proposed would allow that." The same member of the Board of Governors said that "a law professor testified that such a clause literally could mean if the client disagrees with the selection of an expert witness in a case, that could go to arbitration."

The [c]hair of the Board of Governors' Review Committee on Professional Ethics, in explaining the recommendation to withdraw Opinion 02-9, stated: "The thought was why create a problem if you don't have one?" (9)

The formal minutes of the Board of Governor's December 2003 meeting offer no basis, reasoned or otherwise, for withdrawing Opinion 02-9, stating as follows on the subject:

On July 2, 2002, an attorney requested a written staff opinion regarding including a clause in the inquiring attorney's fee contract requiring arbitration of disputes between the attorney and client. Staff denied an opinion on the basis of a Professional Ethics Committee policy not to review specific...