By Joel Bander
You go to see an attorney because you have a problem. You want the attorney to solve the problem, and the only real contract term you care about is ‘how much is it going to cost me?’ However, just like any agreement a party has to consider ‘what happens if something goes wrong?’ With an attorney that usually means legal malpractice, but could also just mean a dispute about fees.
Many attorney retainer agreements now unfortunately have ‘arbitration’ clauses which can greatly affect the client’s ability to get a fair hearing if ‘something goes wrong.’ Many times when consulting a client on a legal malpractice case I am asked ‘what does arbitration mean?’ Arbitration is an agreed upon legal process that a single person decides all issues, as judge and jury, usually with streamlined evidentiary procedures. Essentially, the parties go into a conference room and prove their case to a retired judge or experienced lawyer and it is all over in a few hours or days. While that is advertised as being cost efficient and quicker, substantively it favors the attorney because in arbitration you have less ability to obtain information through discovery (written questions, asking for documents, taking depositions) then in court. Most importantly, the client waives their right to a trial by a jury of their peers, a panel of common citizens, and instead must have a single person hear the case.
Consider your common agreements with credit card companies, financial institutions, auto dealers, cell phone and internet providers. These large institutions always have ongoing claims, and hence the same arbitrators keep seeing the same defendants, but never the same plaintiff. How many times is the common consumer bringing an arbitration claim?
So there is an ongoing relationship between defendants and arbitrators. And who pays the arbitrators? Well the parties do, meaning credit card/sell phone/auto dealer keeps paying the arbitrators again and again, but the consumer does it once. If you were an arbitrator, are you going to keep ruling against the company that keeps coming back with more business?
Additionally, lawyers representing claimants generally would prefer to have the cases heard before common folk jurors than experienced arbitrators commonly considered as ‘jaded’ because they have heard so many cases that little impresses them anymore. However, a juror does not hear about disputes and misdeeds all the time, and is more apt to be compassionate to an injured victim. And the reality is that lawyers are not particularly well liked when they have screwed up someone’s case.
Unfortunately, clients often sign these agreements quickly because they are more focused on the ‘problem’ and how much will it cost. But then you ask, well how often is my lawyer having to pay for an arbitrator? Answer, hopefully not very often, but their defense counsel will be retained by an insurance company that will keep large dossiers on arbitrators, obviously rewards those ruling favorable for them with more business. And they are constantly hiring arbitrators.
So now you have read this far along and are now thinking ‘but I have already signed the contract.’
Unlike your cell phone or auto dealership agreement nothing prevents any client from going back to the attorney and saying ‘I did not know what that arbitration clause meant. Now I know and I want to strike it out.’ Of course, the attorney can refuse, but the client, at that point, can take their case file and go to an attorney willing to have a dispute on an equal playing field, the courts, instead of with an arbitrator.
However, the concept of arbitration is not always bad in all circumstances when dealing with your lawyer. For a legal malpractice case with larger damages most individuals should seek to avoid arbitration. However, when legal fees are in dispute the fairly universal method for resolution is arbitration because the only issue is the amount of and necessity of services performed, and the reasonableness of the fees. Local bar associations have streamlined procedures with attorneys selected from a random panel. The issues are usually more mundane, and evidence usually just involves the parties.
So what do you do now? If you are going to hire an attorney, READ the agreement and tell them you do not want the arbitration clause. (Doctors will usually not treat you if you try the same thing in their offices, as their malpractice premiums are tied to these provisions. However, attorney malpractice coverage usually does not require arbitration agreements.) If you have a pending case, take a look at the agreement. If your attorney wishes to deny your right to trial by jury and send you to an arbitrator, consider getting a writing that removes that arbitration provision so you can be on a fair ground if an unfortunate problem does arise.
Posted by PWD
on October 9, 2012. Filed under Joel Bander,OPINION.
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