January 28, 1989
There is no ethical prohibition preventing an attorney from including in a fee contract with a client a provision requiring arbitration of any fee dispute, provided that the client obtains independent counsel concerning the advisability of entering into such an agreement.
References: MRPC 1.8(h)(1).
A lawyer has requested an opinion regarding the propriety of including in a retainer agreement with clients a clause requiring that any and all claims or disputes arising out of the lawyer's representation of the client be submitted to arbitration. The lawyer contemplates that the arbitration agreement would comply with the statutory requirements of MSA 27A.5001 and MCL 600.5001, and that any such disputes would be submitted to the American Arbitration Association for disposition.
MRPC 1.8(h)(1) states:
"A lawyer shall not 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."
The question then becomes, is the inclusion of an arbitration clause in a fee contract with a client an attempt to limit the attorney's liability to this client? There are no opinions of either the State Bar of Michigan or the American Bar Association regarding this issue.
In theory, arbitration would not limit the liability of the attorney in any manner, but would simply provide for an alternative method of resolving the dispute. In this regard, the policy of the law clearly favors the settlement of disputes through arbitration. See e.g., Detroit v. AW Kutsche and Co, 309 Mich 700 (1944); McCandliss v. Award W. Roth, 45 Mich App 342 (1973); J.R. Snider Co. v. Soble, 57 Mich App 475 (1974); Campbell v. Community Service Insurance Co, 73 Mich App 416 (1977); DAIIE v. Curak, 81 Mich App 217 (1978); Omega Construction Co Inc v. Altman, 147 Mich App 149 (1985).
On the other hand, arbitrator's awards are generally not appealable. A client who believes that a decision of the arbitrator is erroneous is foreclosed from seeking appellate relief, which would have been available in the absence of an arbitration clause had the claim been tried in a court. Further, the agreement contemplated would be negotiated by parties having unequal bargaining power, i.e., a nonlawyer in trouble seeking services about which he may know little, and a lawyer active in the particular area of expertise.
While there is no case to be found in Michigan which prohibits an arbitration provision in a fee contract, and while it is unclear whether inclusion of an arbitration clause would be interpreted to be an attempt to limit one's liability for malpractice, this Committee feels the best course of conduct is to apply MRPC 1.8(h)(1) in this situation, provided that the client obtains independent counsel concerning the advisability of entering into a fee agreement which includes an arbitration clause.