September 22, 2000

9:00 a.m.




No. 212953

Wayne Circuit Court

LC No. 97-728578-NM



Before: O'Connell, P.J., and Kelly and Whitbeck, JJ.


Plaintiff appeals as of right the trial court's order granting defendants' motion for summary disposition in this legal malpractice action. We affirm.

On September 9, 1993, plaintiff lost his left leg as a result of a work-related accident. Four days later, while in the hospital recovering, defendants presented him with a four-page, single-spaced contingent fee compensation agreement for representation in pursuing any claims arising out of the accident. The retainer agreement contained an agreement to arbitrate any disputes arising out of the performance of the retainer or the representation.

On December 28, 1995, plaintiff signed a letter of agreement acknowledging that the Supreme Court had granted leave to appeal in several cases involving the intentional tort exception to the exclusive remedy provision of the Worker's Disability Compensation Act, MCL 418.131(1); MSA 17.237(131)(1). Plaintiff agreed to await the outcome of those appeals before deciding whether to file a complaint against his employer. He acknowledged that the statute of limitations would run on September 9, 1996, and that he was free to retain other counsel rather than wait.

The Supreme Court decided the cases on July 31, 1996. Travis v Dreis & Krump Manufacturing Co, 453 Mich 149; 551 NW2d 132 (1996). Plaintiff was thereafter notified by letter dated August 8, 1996, that defendant law firm would no longer be able to pursue his case. He was again notified that failure to file a lawsuit by September 9, 1996, would forever bar his claim, and he was advised to immediately obtain a second opinion. Plaintiff signed an acknowledgment that he had received the letter and his file. Plaintiff was unable to find counsel


willing to take his case with such little time remaining, and the statute of limitations ran before he filed a complaint.

On September 9, 1997, plaintiff filed this action seeking damages for alleged legal malpractice. Defendants answered the complaint and asserted several affirmative defenses, none of which raised the arbitration agreement as a bar to this litigation. Defendants then sought leave to amend their affirmative defenses, claiming that the existence of the agreement to arbitrate was not discovered until the file was reviewed. Plaintiff opposed the amendment, arguing that amendment would be futile because the arbitration clause was invalid. The court held that such an argument went to the enforceability of the clause, not to whether amendment should be allowed, and granted the motion.

Defendants then sought and were granted summary disposition under MCR 2.116(C)(7), asserting that the action was barred by the arbitration agreement. The motion was granted, plaintiff's complaint was dismissed, and the matter was ordered to arbitration.

We review a trial court's grant or denial of a motion for summary disposition pursuant to MCR 2.116(C)(7) de novo to determine whether the moving party was entitled to judgment as a matter of law. DeCaminada v Coopers & Lybrand, LLP, 232 Mich App 492, 496; 591 NW2d 364 (1998). In reviewing a motion under MCR 2.116(C)(7), this Court accepts as true the plaintiff's well-pleaded allegations and construes them in the plaintiff's favor. Abbott v John E Green Co, 233 Mich App 194, 198; 592 NW2d 96 (1998). We must consider the pleadings, affidavits, depositions, admissions and documentary evidence filed or submitted by the parties to determine whether a genuine issue of material fact exists. MCR 2.116(G)(5); Employers Mutual Casualty Co v Petroleum Equipment, Inc, 190 Mich App 57, 62; 475 NW2d 418 (1991).

The existence of an arbitration agreement and the enforceability of its terms are judicial questions for the court rather than for the arbitrators. City of Huntington Woods v Ajax Paving Industries, Inc (After Remand), 196 Mich App 71, 74; 492 NW2d 463 (1992). Presumably, judicial questions, like questions of law, are reviewed de novo. See Cardinal Mooney High School v Michigan High School Athletic Ass'n, 437 Mich 75, 80; 467 NW2d 21 (1991).

We must decide whether the arbitration agreement contained in defendants' retainer agreement was valid. The clause stated as follows:

Any controversy, dispute, or question arising out of, in connection with, or in relation to this Agreement or its interpretation, performance or nonperformance, or any breach thereof, shall be determined by arbitration conducted in accordance with the then-existing rules of the American Arbitration Association or the Federal Mediation and Conciliation Service and any decision rendered by the Arbitrator shall be final and binding upon the parties; and Judgment upon any arbitration award, including an award of damages, may be entered in any court having jurisdiction thereof. The Arbitrator may not amend, modify, or substitute any of the terms or conditions of this Agreement and his jurisdiction is thereby limited.

Plaintiff argues that the arbitration agreement should either be stricken or be limited to disputes over attorney fees. He asserts that, because defendants failed to advise him that the fee


agreement contained an arbitration clause, it is invalid. We reject this argument. Michigan law presumes that one who signs a written agreement knows the nature of the instrument so executed and understands its contents. McKinstry v Valley Obstetrics-Gynecology Clinic, PC, 428 Mich 167, 184; 405 NW2d 88 (1987). Moreover, mere failure to read an agreement is not a defense in an action to enforce the terms of a written agreement. DeValerio v Vic Tanny Int'l, 140 Mich App 176, 179-180; 363 NW2d 447 (1984).

Next, plaintiff argues that the agreement is not valid because he was not provided with an opportunity to obtain the advice of independent counsel concerning the advisability of entering into the arbitration agreement. In support of this argument, plaintiff relies on two informal ethics opinions addressing arbitration clauses in retainer agreements. In the first opinion cited by plaintiff, it was decided that there is no ethical prohibition against an attorney including a provision calling for the arbitration of fee disputes in a fee agreement, provided that the client obtains independent counsel concerning the advisability of entering into such an agreement. State Bar of Michigan Ethics Opinion RI-2 (January 28, 1989).

The second opinion cited by plaintiff noted that an arbitration clause contained in a fee agreement is governed by MRPC 1.8(h), which conditions agreements prospectively limiting the lawyer's liability to a client for malpractice. State Bar of Michigan Ethics Opinion RI-196 (March 7, 1994). MRPC 1.8(h) states as follows:

A lawyer shall not:

(1) make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement; or

(2) settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith.

Accordingly, it was deemed a violation of the ethics codes and rules to offer or make an arbitration clause in a retainer agreement that (1) prevents a client from obtaining independent counsel's advice as to whether the client should enter into the fee agreement, (2) prevents the client from reporting to the Attorney Grievance Commission information concerning a lawyer's ethical misconduct, (3) prospectively limits a lawyer's legal malpractice liability unless permitted by law and unless the client has the advice of independent counsel, and (4) works a settlement of the lawyer's malpractice liability with an unrepresented or former client. RI-196, supra. Before offering or making an arbitration clause in a retainer agreement, the lawyer must advise the client in writing that independent representation is appropriate. Id.

Subsequent to the issuance of the two informal opinions cited by plaintiff, the ethics committee again addressed the question of the propriety of a lawyer entering into an agreement with a client calling for the arbitration of disputes arising out of representation. State Bar of Michigan Ethics Opinion RI-257 (April 8, 1996). In its opinion, the committee noted, "Entering into such an agreement for [Alternative Dispute Resolution] has generally been permitted in Michigan under RI-2." Id. The committee further observed, "RI-2 balances the public policy


preference for settlement via arbitration with the concern that an unfettered arbitration clause would permit a lawyer to impliedly limit the liability for malpractice with little opportunity for appellate review." Id.

Quoting MRPC 1.8(h), the committee reiterated that the inclusion of an arbitration clause in a fee agreement is dependent upon the client being given the opportunity to obtain independent counsel concerning the advisability of entering into such an agreement. Id.

[M]erely contracting for ADR on issues of professional malpractice does not violate MRPC 1.8(h). As other ethics opinions have noted, when used appropriately such provisions in fee agreements only address the forum in which liability will be determined, not the duty of the lawyer to exercise reasonable care nor liability for breach of that duty. California State Bar Op 1989-116. However, applying MRPC 1.8(h) to protect against potential abuse of an overreaching lawyer, inclusion of such an ADR clause over file disputes and malpractice claims should be conditioned, again, on the client being given the opportunity to obtain independent counsel concerning the advisability of entering into such agreement. See District of Columbia Op 211 (5/15/90).

Plaintiff argues that defendants' failure to provide him with the opportunity to obtain independent counsel as required by these ethics opinions rendered the arbitration agreement invalid. We disagree. Attorneys have an obligation to follow the rules of professional conduct which generally operate on ethical principles. MRPC 1.0(b). Attorneys are well-advised to be aware of the State Bar's ethics opinions in order to avoid breaching the rules of professional conduct and being forced to submit to a disciplinary proceeding. Id. However, "[a]n informal ethics opinion is prepared and issued by a subcommittee after it has been circulated to subcommittee members and the Chairperson has resolved any conflicting views. Informal ethics opinions generally deal with situations of limited and individual interest or application." State Bar of Michigan Ethics Opinion J-6 (September 20, 1996). These opinions, though instructive, are not binding on this Court. Barkley v City of Detroit, 204 Mich App 202, 203; 514 NW2d 242 (1994).1

On the other hand, public policy pronouncements of the Michigan Legislature, enacted as statutes, are binding on this Court. Rembert v Ryan's Family Steak Houses, Inc, 235 Mich App 118, 131; 596 NW2d 208 (1999). "The Michigan arbitration act ("MAA"), MCL 600.5001 et seq.; MSA 27A.5001 et seq., evidences Michigan's strong public policy favoring arbitration." Grazia v Sanchez, 199 Mich App 582, 584; 502 NW2d 751 (1993). The MAA "is a strong and unequivocal endorsement of binding arbitration agreements." Rembert, supra. The act provides that "[a]ll persons, except infants and persons of unsound mind, may, by an instrument in writing, submit to the decision of 1 or more arbitrators, any controversy existing between them, which might be the subject of a civil action . . . and may, in such submission, agree that a judgment of


1 Moreover, though failure to comply with the requirements of MRPC 1.8(h) may provide a basis for invoking the disciplinary process, such failure does not give rise to a cause of action for enforcement of the rule or for damages caused by failure to comply with the rule. MRPC 1.0(b).


any circuit court shall be rendered upon the award made pursuant to such submission." MCL 600.5001(1); MSA 27A.5001(1).

The MAA further provides as follows:

A provision in a written contract to settle by arbitration under this chapter, a controversy thereafter arising between the parties to the contract, with relation thereto, and in which it is agreed that a judgment of any circuit court may be rendered upon the award made pursuant to such agreement, shall be valid, enforceable and irrevocable save upon such grounds as exist at law or in equity for the rescission or revocation of any contract. Such an agreement shall stand as a submission to arbitration of any controversy arising under said contract not expressly exempt from arbitration by the terms of the contract. Any arbitration had in pursuance of such agreement shall proceed and the award reached thereby shall be enforced under this chapter. [MCL 600.5001(2); MSA 27A.5001(2).]

To ascertain the arbitrability of an issue, a court must consider whether there is an arbitration provision in the parties' contract, whether the disputed issue is arguably within the arbitration clause, and whether the dispute is expressly exempt from arbitration by the terms of the contract. DeCaminada, supra at 496, citing Burns v 0lde Discount Corp, 212 Mich App 576, 580; 538 NW2d 686 (1995). Any doubts about the arbitrability of an issue should be resolved in favor of arbitration. Id.

It is undisputed that plaintiff voluntarily signed the fee agreement in which he promised to submit all disputes arising out of the agreement or the legal representation to arbitration. The clause covered "any controversy, dispute, or question arising out of the agreement or the representation. Plaintiffs legal malpractice claim is arguably covered by this language.

Plaintiff does not allege fraud or deception in the procuring of the agreement. Christy v Kelly, 198 Mich App 215, 217; 497 NW2d 194 (1992). As noted, plaintiff's failure to read or understand the agreement is no defense. Id. at 216-217. He has not provided this Court with any grounds for refusing to enforce the valid arbitration agreement. Resolving any doubts in favor of arbitration, the trial court's order granting defendants' motion for summary disposition and compelling arbitration was proper.


/s/ Peter D. O'Connell

/s/ Michael J. Kelly

/s/ William C. Whitbeck