Attorney-Client Arbitration: A Search for Appropriate Guidelines for Pre-Dispute Agreements

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I. Introduction

Pre-dispute arbitration agreements between attorneys and clients have been the target of recent criticism.' This criticism has centered on the apparent violations of the attorneys' fiduciary duty to their clients and on practical concerns about the negotiating process. There is at least an appearance that when attorneys propose such agreements it is because they, not the clients, stand to benefit. This situation looks even worse when the client is "unsophisticated." Such a client has little understanding of the legal implications of arbitration agreements and is not in a position to bargain equally with an attorney. It thus appears that the lawyer is determining the terms of the agreement and possibly putting his or her own interests before those of the client. "Sophisticated" clients generally are more experienced with the law, have access to independent counsel, and may have more bargaining power as potential repeat or long-term clients. Therefore, agreements between attorneys and sophisticated clients are more likely to represent the actual negotiated intention of the parties.

The courts and the American Bar Association (ABA), however, have been less skeptical of attorney-client agreements to arbitrate. Since the passage of the Federal Arbitration Act (FAA),3 courts have been inclined to recognize the validity of arbitration agreements.4 The ABA has decided to encourage alternative dispute resolution (ADR) for attorney-client fee disputes5 and not to espouse ethical rules that would protect clients from arbitration agreements that limit their rights. In the absence of such guidelines from the ABA, the courts have followed the ABA's pro-- arbitration policy and have generally enforced attorney-client arbitration agreements. Some change in the way arbitration clauses are approached is needed to ensure that attorneys live up to their duties as fiduciaries. An effective change should not just address the client's vulnerabilities or the attorney's obligations, but should also take into account the arbitration process and the growing practice of Mandatory Fee Arbitration (MFA).

Part II of this Note discusses current pro-arbitration policy and examines some practical concerns of arbitration that call this policy into question. The ABA-through the Model Rules of Professional Conduct-- and the courts have adopted a pro-arbitration policy that extends to arbitrating disputes between attorneys and clients. However, the ethical, strategic, and legal ramifications of agreements to arbitrate are not all positive. Part III analyzes the doctrines-such as violation of fiduciary duty and general contract principles-through which clients may attempt to escape from arbitration clauses, and concludes that such methods provide little protection to clients. Part IV evaluates proposed disciplinary rules and other approaches that some states and bar associations have adopted. This Note concludes that the lack of uniformity in rules governing arbitration agreements and the differences in state and local programs make a single national solution impractical. Some form of regulation to guide attorneys and protect clients is desirable, but it must work in conjunction with existing local programs.

II. Advantages and Concerns of Arbitration

A. Pro-Arbitration Policy of the Courts and the ABA

Disputes between attorneys and clients, especially over fees, are common.7 Arbitration is an increasingly standard means of lessening the load on both the judicial system and the legal profession's disciplinary machinery.8 This trend, when coupled with the judiciary's favorable treatment of arbitration, has led to the acceptance of arbitration clauses in the attorney-client context.

The FAA and later statutes have reversed the traditional judicial hostility towards arbitration? More recently, court decisions, "relying heavily on the rhetoric of voluntary agreement, but undoubtedly inspired by an interest in reducing heavy judicial caseloads" have apparently assured arbitration "a privileged position in American law. …