Effective September 1, 2022, Michigan Rules of Professional Conduct 1.19 clarifies the requirements to include an arbitration clause in an attorney-client agreement. The order may be found here.
April 8, 1996
A lawyer may enter into an agreement with a client that disputes arising out of the representation, including disputes regarding fees, possession of files and malpractice, will be resolved in a named alternate dispute resolution program, provided the client obtains independent counsel concerning the advisability of entering into the agreement.
A lawyer may not enter into an agreement with a client that disputes arising out of the representation pertaining to the lawyer's ethical conduct will be resolved in a named alternate dispute resolution program.
References: MRPC 1.0, 1.8(h), RI-2, RI-88.
A lawyer inquires as to the ethical appropriateness of entering into an agreement with a client, which provides that disputes over fees, possession of file, malpractice and unethical conduct would be referred to an alternate dispute resolution program.
Entering into such an agreement for ADR of fee disputes has been generally permitted in Michigan under RI-2. 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. In resolving this conflict, the Committee has strictly applied MRPC 1.8(h), which provides:
"(h) 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."
A lawyer may include ADR provision for fee disputes within the fee agreement, provided that the client obtains independent counsel concerning the advisability of entering into such agreement.
Issues over client file usually arise in the context of a lawyer's withholding release of the file pending payment of fees for services. Hence, it is appropriate that disputes over fees and retention of client files would be resolved as part of the ADR process. Further, merely 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 are nor the 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).
Contractual ADR on the issues of a lawyer's breach of ethical rules is not as easily resolved. There are ethics opinions which suggest that inclusion of an all inclusive ADR clause with a disclaimer reserving ultimate disposition of ethical issues for the respective state bar organizations is permissible. See North Carolina Op 107 (1/17/91).
RI-88 prohibits a lawyer from entering into an agreement restricting a party or counsel from bringing information concerning a lawyer's ethical misconduct to the attention of the Attorney Grievance Commission. This prohibition recognizes the exclusive and ultimate authority of the Attorney Grievance Commission and the Attorney Discipline Board over the disposition of ethical issues and that such authority shall not be abridged by agreement with another party or counsel or used as a tool of settlement.
A logical extension of RI-88 would prohibit a lawyer from entering into any agreement with a client directing such disputes be settled in ADR, thereby restricting the client's ability to report the lawyer's misconduct to appropriate authorities. Michigan's ethics rules recognize that a lawyer is more than just the client's representative, but is also an officer of the legal system and a public citizen having special responsibility for the quality of justice. MRPC 1.0. Without disregarding the substantial impact on a client from a lawyer's breach of ethics, enforceability of ethics rules has a greater purpose than rectifying just the injustice done to a single client. Hence, ethical disputes cannot be resolved by agreement between the lawyer and client alone, and this prohibition cannot be cured by having the client obtain independent counsel concerning the advisability of entering into such agreement.