Legal Malpractice

Arbitration and Legal Malpractice Litigation

By (Andrew Lavoott Bluestone)

An unrelated article in the NYLJ related a cycle in the franchising industry yesterday...from settlement by litigation, through resolution by arbitration, and then on to wide-scale mediation.  Legal malpractice may well be following the same cycle.  As the California Attorney's Fees Bl;og reports, arbitration is the thing in California. 

"First, the appellate court found the retainer agreement, while only talking about representation in the first lawsuit, had saving language to cover the second lawsuit. The fee agreement expressly stated “[a]dditional matters that we agree to undertake will be under the same terms as stated in this letter unless otherwise agreed in writing.” Unlike the trial court, the Court of Appeal found nothing ambiguous about this language, having the power to reverse because interpretation of a written arbitration agreement is a judicial function.

Next, the Second District, Division 2 turned to the unconscionability determination. It found no procedural unconscionability because the parties simply entered into a business relationship, a far cry from employment relationships that have spawned more rigid protections. (Contrasted with Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83 (2000) [certain additional “badges of fairness” for arbitration clauses required in employment situations].) The appellate court pragmatically noted there happen to be no shortage of attorneys, such that the clients could have simply gone elsewhere. It also had no sympathy for the unsophistication argument, which was based on the premise that the clients did not read the agreement—the law usually requires this diligence, the Second District wrote. The Court of Appeal also rejected the argument that there needed to be magic “read and understood” terminology, noting that the fee agreement did have “carefully look over before signing” language and a conspicuous “AGREED” signal above the signature lines of a sufficiently clear nature. "

The substantive unconscionability finding was also found unsatisfactory on appeal. Because this case involved private rights (a legal malpractice action) rather than a one involving public rights (such as an employment relationship), there is no additional requirement of guaranteeing the right to discovery in the arbitration forum.

The result: the parties were ordered to arbitrate, as the written fee agreement required them to do.

Full post as published by New York Attorney Malpractice Blog on May 23, 2008 (boomark / email).