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Lawyers, clients and arbitration clauses: some considerations

Have you perhaps signed an arbitration agreement that sets forth a written understanding you have with your attorney regarding any future conflict that might arise regarding his or her legal representation or, alternatively, concerning any jointly engaged-in business relationship?

If so, did your attorney draft that provision?

And, if so, did he or she make reasoned efforts to ensure that you fully understood the dimensions and all relevant implications of that provision?

Here’s what happened recently in a California case posing the question whether a legal malpractice claim against an attorney for improper billing could be filed as a lawsuit or, rather, was required to be arbitrated pursuant to an arbitration clause. That clause was executed in a business agreement inked between the plaintiff and the attorney, with the plaintiff’s grievance relating to the lawyer’s performance under that contract.

A California court of first instance tossed out the plaintiff/client’s complaint, citing the arbitration clause in a relevant operating agreement. The court held that the clause mandated recourse to arbitration to settle any dispute between the parties.

A California appellate court overturned that ruling last month, stating that a legal action grounded in a malpractice claim could proceed as a lawsuit, notwithstanding the existence of an arbitration clause. The court found that it was not sufficiently clear whether the parties intended for all claims, including a malpractice complaint, to be subject to arbitration. Owing to that lack of clarity, the justices ruled that a plaintiff could not be compelled to arbitrate but, rather, could file a malpractice tort lawsuit.

One case commentator says that the court’s ruling stresses a lawyer’s duty to carefully draft an arbitration clause, underscoring that the attorney has a duty to ensure that a client fully comprehends what an arbitration agreement is and that a client sufficiently grasps what he or she “is giving up by agreeing to arbitrate.”

If such is not the case, the court ruling shows, an attorney can become a named defendant in a legal malpractice lawsuit, regardless of the existence of an executed arbitration pact.