ARBITRATION CLAUSES IN ATTORNEY-CLIENT AGREEMENTS: SOME PRACTICAL ADVICE By Aric J. Garza
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t is general knowledge in the legal community that a wide variety of consumer and commercial contracts include alternative dispute resolution (ADR) clauses. Most contain a non-binding mediation provision. Many attorney-client agreements do so as well. In many commercial and consumer transactions, arbitration— the process whereby parties contractually agree to a binding, non-appealable, private adjudication of their disputes using a mutually selected arbitrator—is the default form of ADR if mediation fails to produce a resolution. But arbitration is perceived by many to be an expensive, unfair, and generally inefficient means of adjudicating disputes. It is easy to see why: litigation-type discovery can be limited, arbitrator decisions are binding, and appeals are not permitted.1 Further, the process of vacating an arbitrator’s award (called “vacatur”) is extremely difficult and quite rare.2 Attorneys seem especially reluctant to execute attorney-client agreements that contain arbitration clauses. Many take comfort in the knowledge that, if negotiation and/or mediation fails to yield a settlement agreement, they know the “lay of the land” when it comes to maneuvering courtrooms, judges, motions, hearings, and the like. But COVID-19 and its
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resulting effects on a variety of non-emergency civil cases—including delayed settings, impact on strategies relating to motion practice, longer wait periods for jury trial settings— have forced attorneys to rethink the means of final adjudication of all types of disputes. Thus, many lawyers tasked with drafting commercial and consumer contracts in general are rethinking dispute resolution clauses with more consideration to quicker, cost-effective ways of adjudicating disputes if mediation fails. It may be time for attorneys to reconsider arbitration clauses in their own agreements with clients for the same reasons. Attorneys have long used ADR clauses in their client engagement agreements to resolve potential attorney-client disputes, most of which arise out of the performance, interpretation, and/or enforcement of the agreement and include malpractice claims and fee disputes.3 The typical ADR provision requires the attorney/law firm and client to engage in informal dispute resolution followed by mandatory, non-binding mediation. Many attorneys, though, do not choose binding arbitration as the final means of adjudicating their disputes. Most of the reasons cited—nonfamiliarity with the process, lack of knowledge about the arbitrator, the inability to appeal the decision (award), and the very limited
bases upon which to vacate an award—make adjudication by arbitration a not-so-palatable clause to include in a client agreement. When drafting engagement agreements, many dispute resolution clauses end with mediation and implicitly provide for final adjudication through litigation by judge or jury. However, litigation involving one’s client is an unsavory option, especially because the privilege protecting attorneyclient communications can be waived in the process.4 Thus, many lawyers are justifiably wary of litigation. Typically, many consumer and commercial agreements do not contain thoroughly drafted arbitration clauses. In many instances, attorneys merely insert a reference to arbitration as the means of adjudicating the dispute should informal negotiation and/or mediation fail. Otherwise well-crafted, thorough agreements fail to provide for the rules to be used, include cost-shifting provisions, make venue explicit, address arbitrability, and so on. An attorney who decides to use an arbitration clause in his or her engagement agreements should not make this mistake. A well-crafted and thoroughly detailed provision can address many of the issues attorneys have with arbitration as the means of adjudicating their disputes. With an ADR clause that
