Can a D.C. lawyer put a mandatory arbitration clause in a fee agreement, and does the lawyer have to send the client to independent counsel first?

Plain-English summary

Opinion 376 (published January 2019) updates the District's treatment of mandatory arbitration clauses in lawyer-client fee agreements, including clauses that cover legal-malpractice claims. The Committee revisits its older Opinions 211 (1990) and 218 (1991), which had treated such clauses as atypical and, relying on Rule 1.8(a), required that the client actually be counseled by independent counsel before agreeing. The opinion concludes those requirements no longer hold.

The change is driven by the 2007 amendments to Rule 1.8's comments. Comment [1] now states that Rule 1.8(a) does not apply to "ordinary fee arrangements," which are governed by Rule 1.5, and gives a non-ordinary example (a lawyer taking an interest in a client's business as payment). Comment [13] states that Rule 1.8(g) does not prohibit a lawyer from agreeing to arbitrate legal-malpractice claims, as long as the agreement is valid and enforceable and the client is "fully informed of the scope and effect of the agreement." The Committee reasons that because arbitration has become common (no longer "atypical") and a fee-arbitration clause gives the lawyer no special advantage over the client of the kind Rule 1.8(a) guards against, such clauses are ordinary fee arrangements outside Rule 1.8(a).

On what "fully informed" requires, the opinion draws on the Rule 1.0(e) definition of informed consent: the lawyer must communicate adequate information about the material risks and reasonably available alternatives. To convey the "scope and effect" of an arbitration clause, the opinion concludes the lawyer should discuss at least the differences between litigation and arbitration in fees, available discovery, the right to a jury, and the right to an appeal, with the depth of the discussion depending on the client's sophistication. The opinion expressly states that Opinions 211 and 218 are superseded by Comments [1] and [13] and this opinion.

In practice

Under the D.C. rules as they stood at the time of the opinion, a lawyer may include a mandatory arbitration provision in a fee agreement, including one reaching malpractice claims, and the opinion concludes the lawyer need not provide a reasonable opportunity to consult independent counsel or obtain written informed consent under Rule 1.8(a), because such a clause is an ordinary fee arrangement governed by Rule 1.5. The opinion concludes the lawyer must still ensure the client is fully informed of the clause's scope and effect.

To meet that "fully informed" standard, the opinion concludes the lawyer should explain at least how arbitration differs from court litigation in fees, discovery, the right to a jury, and the right to appeal, calibrated to the client's sophistication, drawing on the Rule 1.0(e) informed-consent standard. The opinion supersedes the prior, stricter Opinions 211 and 218. Because the opinion predates later rule developments, verify the current D.C. rules and comments before relying on specific requirements.

Common questions

Q: Can a D.C. lawyer require arbitration of fee disputes or malpractice claims in the retainer?

A: The opinion concludes yes. A mandatory arbitration clause in a fee agreement is an ordinary fee arrangement, and Comment [13] to Rule 1.8 confirms that agreeing to arbitrate malpractice claims is permissible if the client is fully informed of the scope and effect.

Q: Does the client have to consult independent counsel before agreeing?

A: No. The opinion concludes that because the clause is an ordinary fee arrangement outside Rule 1.8(a), the lawyer need not give the client a reasonable opportunity to consult independent counsel or obtain written informed consent; the stricter rule of Opinions 211 and 218 no longer applies.

Q: What does "fully informed" require the lawyer to explain?

A: The opinion concludes the lawyer should discuss at least the differences between arbitration and court litigation in the fees incurred, available discovery, the right to a jury, and the right to an appeal, with the depth depending on the client's level of sophistication.

Q: Are the old D.C. opinions on this still good law?

A: No. The opinion states that Opinions 211 and 218 are superseded by the 2007 amendments to Comments [1] and [13] of Rule 1.8 and by this opinion.

Background and rules framework

The opinion interprets D.C. Rule 1.8(a) (business transactions with clients) and Rule 1.8(g) together with Comments [1] and [13] (added in 2007), Rule 1.5 (fees, which governs ordinary fee arrangements), Rule 1.4 (communication), and the Rule 1.0(e) definition of informed consent. It situates the analysis against D.C. Opinion 300 (stock as fees, which does fall under Rule 1.8(a)) and ABA Formal Opinion 425 (2002).

Citations and references

Rules of Professional Conduct:

• D.C. RPC 1.8(a), (g) and Comments [1], [13] / Model Rule 1.8 (business transactions; arbitration of malpractice)
• D.C. RPC 1.5 / Model Rule 1.5 (fees; governs ordinary fee arrangements)
• D.C. RPC 1.4 / Model Rule 1.4 (communication)
• D.C. RPC 1.0(e) / Model Rule 1.0 (definition of informed consent)

Other opinions cited:

• ABA Formal Op. 425 (2002): arbitration of fee disputes and malpractice claims in retainer agreements
• D.C. Bar Legal Ethics Op. 300 (2000): acceptance of an ownership interest in lieu of fees (Rule 1.8(a) applies)
• D.C. Bar Legal Ethics Ops. 211 and 218 (superseded by this opinion)

See also

• ABA Formal Op. 02-425: Arbitration in Retainer Agreements
• Maine Ethics Op. 170: Arbitrating Future Malpractice Claims
• DC Ethics Op. 389: Flat Fees, Subscription Fees, and Disbarment

Source

• Landing page: https://www.dcbar.org/for-lawyers/legal-ethics/ethics-opinions-210-present/ethics-opinion-376