Unconscionable Lawyers

• Publication year: 2010

Unconscionable Lawyers

Paul D. Carrington

Introduction

Lawyers writing standard form contracts for clients to use in recording transactions with parties not represented by counsel have a professional duty to restrain their zeal. It is my impression that many lawyers are unaware of such a duty. As a consequence, many cause injustice and expose themselves and their firms not only to such appropriate moral sanctions as the contempt of fellow citizens and other lawyers, but also to some risks of tort liability and professional discipline.

Some contract provisions now in fashion disgrace our profession. They are designed to strip inadvertent, improvident, and impotent citizens of procedural rights they need to enforce the substantive rights that may become important to them. Such provisions divest not only those rights set forth in the standard form contract, of which the dispute resolution clause is a part, but also substantive rights created by state and federal laws enacted to protect consumers, employees, investors, and small business from diverse predatory business practices—laws that commission individual citizens as private attorneys general to discourage as well as compensate for such predation. Many of our state and federal laws regulating business practices are enacted to be enforced by private citizens who serve others by pursuing their own claims. What some lawyers seek to do for their clients is to secure the private repeal of those laws or, failing that, to cause individuals to believe that they have been repealed.

Among the procedural rights that some lawyers seek to deny to parties with whom their business clients deal are the rights to (1) a convenient forum, (2) trial by jury, (3) a public hearing, (4) an impartial judge, (5) one who is accountable to a higher court for his or her adherence to the governing law, (6) exemplary or treble damages if provided by controlling law, (7) provisional remedies such as preliminary injunctions or attachments, (8) the traditional American rule with respect to the taxation of attorneys' fees, (9) the right to conduct a private investigation of possible wrongdoing and gain access to the information of an adversary through the use of modern discovery rules, and (10) the right to participate in a class action. It is of course in the interest of any litigant to control the resolution of all these features of conventional American civil procedure. It may be especially advantageous to gain such control if the client hiring the lawyer to write the contract is engaged in sharp business practices and thus expects to be an "habitual defendant" in civil actions.

To be sure, all the procedural rights enumerated may be waived by parties engaged in the resolution of an existing dispute. But it does not follow that they may be waived by parties before they are engaged in a dispute when they cannot reasonably be expected to contemplate future disagreement, when they are not advised by counsel, or when they have little or no bargaining power with the firm that is imposing its business form on them as a record of an unnegotiated transaction. Under traditional common-law principles, predispute waivers are revocable.^[1]

There is, however, at present a raging epidemic of provisions in standard form contracts purporting to strip the party on whom they are imposed of needed procedural rights. Some of these provisions have the apparent effect of making the purported contract illusory to a consumer or worker contemplating their application to a present controversy with the party providing the printed form. Many also have the apparent effect of making it difficult or impossible for the individual on whom the form is imposed to enforce non-waivable substantive rights or to perform the public role of private attorney general. Every reader of this article has recently been given a standard form to record a business transaction where that form contains provisions imposing disadvantages on him or her that would be significant only if he or she should later fall into a dispute with the firm for whom the form was written.

It seems unlikely that business clients, on their own and out of the blue, generate the idea of imposing such terms on the inadvertent, improvident, or impotent persons with whom they deal. Imposing such terms must often be suggested by counsel who draft the standard form contracts. They know that some persons with whom their clients will consummate the contracts will find that the procedural rights purportedly abrogated by the form are needed to pursue claims against the business that imposed an unjust provision on them.

Part I of this article introduces the form contract and contracts of adhesion. Part II examines the ethical problems associated with these types of contracts. I describe a personal experience to illustrate the common pitfalls when attorneys draft such contracts. Part III examines the unconscionability of arbitration clauses using specific examples of recent court decisions. Part IV reviews the possibility of professional disciplinary action against lawyers who draft unconscionable contracts. Part V explores possible malpractice liability when attorneys draft deceptive or illusory contracts. Part VI illustrates the difference between a lawyer's simply giving advice and consummating the deception by actually drafting the contract.

I. The Law of Adhesion Contracts

Printed form contracts were not in general use until the latter half of the Nineteenth Century. They are, of course, necessary in the modern world to structure and record a vast array of commercial relationships.^[2] Businessmen making deals are rightly accountable for the terms in forms they sign, whether they read them or not. But even businessmen may not be held to terms that conflict with the printed forms they offer to those with whom they make contracts.^[3] Consumers, employees, and franchisees do not generally provide forms to record their transactions with the businesses with which they deal. Perhaps they should consider doing so,^[4] for if they did, and there were thus "battles of forms," many of the dispute resolution clauses contained in many forms would be set aside on account of the obvious lack of mutual assent.

Whatever may be the case for businessmen engaged in important exchanges, the reality is that most of the "contracts" that most of us make as consumers are never read for the good reason that they are not really contracts in the moral and classical legal sense of that term.^[5] Frequently, as is often the case with insurance policies, the purchaser may not even have an opportunity to read or sign the written instrument because it is delivered after the transaction has been performed.^[6] Even if such documents are "in hand" earlier, life is much too short for consumers of goods and services to read with care printed passenger tickets, bills of lading, warehouse receipts, insurance policies, hospital admission forms, apartment leases, warranties on consumer goods, package inserts, service contracts, terms flashed on a computer screen as part of an order form,^[7] envelope inserts that come from banks or credit card companies, or brokerage agreements. Such instruments are virtually unreadable by most persons to whom they are presented, even those who are well-educated and wearing their prescription glasses. Never mind those millions who are illiterate, uneducated, disabled, or to whom English is a foreign language, none of whom can possibly be said to have assented to any terms disadvantageous to themselves.

Moreover, insofar as such forms deal with future disputes, a customer often perceives the matters they address to be so remote and unlikely that their terms are of no immediate interest to a reasonable consumer. As Melvin Eisenberg put it, given the risk preferences of all but the most suspicious persons, it is not worthwhile to investigate the possibility of an adverse dispute resolution clause in a printed form contract.^[8] No "single shot player," not even a Samuel Williston fascinated with contract terms,^[9] can be reasonably expected to take the time to pursue the meaning and significance of the terms of such form contracts because he, unlike the party imposing its terms on him, would not enter the transaction at all if his mind were on the calamities that are the subject of the unread terms. In contrast, it pays the "repeat player" to be attentive and hire a draftsman of forms to assure himself of every available advantage when the inevitable disputes arise. Lawyers who write standard form contracts know these things full well.

These are the reasons that consumers of goods and services have no practical choice but to rely on the integrity of the businesses that print the forms to record their transactions and on the professional responsibility of the lawyers who write them to assure that the terms set forth in the forms do not impair their substantive rights. This reliance would exist even if the onerous provisions were written in large type and came with a full explanation including a glossary of terms.^[10] Thus, the Uniform Commercial Code invalidates unconscionable terms no matter how large the print in which such terms are written.^[11] Similarly, insurance contracts are closely regulated in every state.

The problem of standard form contracts is somewhat different for the job applicant or the person seeking a franchise for his or her local neighborhood business. With regard to such parties to contracts, the issue is simply one of bargaining power. As the Supreme Court of California has recently emphasized,^[12] Williston himself, if he wanted routine employment, would not feel free to try to negotiate with a prospective employer over a dispute resolution clause. Even if it was in the back of his mind, he could not say to a prospective employer, "Now let's talk about my right to sue you if I am mistreated or fired." Unless he was an extraordinary talent in great...