Can a lawyer put a broad arbitration clause in a retainer agreement covering any dispute with the client, including malpractice?

Plain-English summary

A law firm asked whether a broadly worded arbitration clause in its retainer agreement violated the ethics rules. The clause, at the lawyer's request, sent "any dispute or disagreement arising between client and lawyer arising under, out of, in connection with, or in relation to this agreement, or otherwise" to arbitration under the American Arbitration Association rules and the Michigan Arbitration Act.

The opinion drew on RI-2, which held that MRPC 1.8(h)(1) applies to a fee-agreement arbitration clause and that a client must be able to obtain independent counsel about whether to agree to it. Under MRPC 1.8(h)(1), a lawyer may not prospectively limit malpractice liability unless permitted by law and the client is independently represented in making the agreement, and the lawyer must explain under MRPC 1.4(b) that independent counsel is appropriate, with information reasonably necessary for an informed decision. The opinion also concluded, following RI-88 and MRPC 8.3 and 8.4(c), that the clause cannot be drafted so broadly as to bar a party from reporting a lawyer's ethical misconduct to the Attorney Grievance Commission. Under MRPC 1.8(h)(2), the clause cannot work a settlement of the lawyer's malpractice liability with an unrepresented or former client without first advising in writing that independent representation is appropriate.

The opinion concluded that because this clause was so broad, covering disputes "or otherwise" beyond fees, it could be read to impermissibly prevent the client from getting independent advice before signing, prevent reporting misconduct to the grievance commission, prospectively limit malpractice liability without independent counsel, and work a malpractice settlement with an unrepresented or former client without the required written notice.

Currency note

This opinion was issued in 1994, before later amendments to the Michigan Rules of Professional Conduct. MRPC 1.8, 8.3, and the related rules have since been amended, and subsequent rule changes or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer put an arbitration clause in a retainer agreement at all?

A: The opinion did not ban arbitration clauses outright; following RI-2, it concluded the client must be able to obtain independent counsel about whether to agree, with the lawyer explaining that under MRPC 1.4(b).

Q: Can the clause cover malpractice claims?

A: Only within limits. The opinion concluded that under MRPC 1.8(h)(1) a clause cannot prospectively limit malpractice liability unless permitted by law and the client is independently represented in making the agreement.

Q: Can the clause stop a client from filing a grievance?

A: No. Following RI-88 and MRPC 8.3 and 8.4(c), the opinion concluded the clause cannot be drafted to preclude reporting a lawyer's ethical misconduct to the Attorney Grievance Commission.

Q: Why was this particular clause problematic?

A: The opinion concluded its sweeping "or otherwise" language could be read to deny independent advice, bar grievance reporting, limit malpractice liability without independent counsel, and settle malpractice claims without the required written notice.

Background and rules framework

The opinion applied Michigan's fee, malpractice-liability, and reporting rules. MRPC 1.8(h)(1) and (2) (Model Rule 1.8) bar prospectively limiting malpractice liability without independent representation and settling such liability with an unrepresented or former client without written notice that independent representation is appropriate. MRPC 1.4(b) (Model Rule 1.4) requires explaining matters so the client can make informed decisions. MRPC 8.3(a) (Model Rule 8.3) concerns reporting misconduct, and MRPC 8.4(c) (Model Rule 8.4) addresses conduct prejudicial to the administration of justice. The opinion relied on RI-2 (fee-agreement arbitration clauses) and RI-88 (no agreements barring grievance reporting).

Citations and references

Rules of Professional Conduct:

• MR 1.4 / MRPC 1.4(b) (explaining matters)
• MR 1.8 / MRPC 1.8(h)(1), (2) (limiting and settling malpractice liability)
• MR 8.3 / MRPC 8.3(a) (reporting professional misconduct)
• MR 8.4 / MRPC 8.4(c) (conduct prejudicial to the administration of justice)

Statutes:

• MCL 600.5001 et seq. (Michigan Arbitration Act, referenced in the clause)

Other opinions cited:

• Michigan RI-2: arbitration clause for fee disputes in a retainer
• Michigan RI-88: no agreement barring reporting of misconduct

See also

• Mich Ethics Op. RI-2: arbitration clause for fee disputes in a retainer
• Mich Ethics Op. RI-88: reporting misconduct and no-grievance settlements
• ABA Formal Op. 02-425: arbitration of fee disputes and malpractice claims

Source

• Landing page: https://www.michbar.org/opinions/ethics/numbered_opinions?OpinionID=1066&Type=6

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

RI-196

March 7, 1994

SYLLABUS

A lawyer may not offer or make an arbitration clause in a retainer agreement which circumvents ethics rules by: (a) preventing a client from obtaining independent advice regarding whether to agree to an arbitration clause; (b) purporting to restrict a client from reporting to the Attorney Grievance Commission information concerning a lawyer's ethical misconduct; (c) prospectively limiting the lawyer's legal malpractice liability unless permitted by law and unless the client has the advice of independent counsel; or (d) working a settlement of the lawyer's malpractice liability with an unrepresented or former client without advising the client that independent representation is appropriate.

References: MRPC 1.4(b), 1.8 (h)(1) and (2), 8.3(a), 8.4(c); RI-2, RI-88.

TEXT

A law firm has asked whether the following arbitration clause in a retainer agreement violates the ethics codes and rules:

"At the lawyer's request, any dispute or disagreement arising between client and lawyer arising under, out of, in connection with, or in relation to this agreement, or otherwise, will be determined and settled by arbitration in Detroit, Michigan in accordance with the rules of the American Arbitration Association and notwithstanding any other provision of this paragraph or said rules, all such disputes and disagreements shall be decided pursuant to the Michigan Arbitration Act (MCLA 600.5001 et seq., as it may hereafter be amended) and a judgment of any court or competent jurisdiction may be rendered upon the decision of the arbitrator(s)."

The law firm has not posed a question about the application of a specific rule to the arbitration clause. The law firm has not posed questions about any other clauses of the retainer agreement.

A previous opinion on lawyer ethics considered a similar issue. In RI-2, a lawyer requested an opinion regarding the propriety of a fee agreement's arbitration clause (requiring arbitration, in compliance with MCL 600.5001, of any and all claims or disputes arising out of the lawyer's representation). The Committee opined that MRPC 1.8(h)(1) applied and that a client must obtain independent counsel concerning the advisability of entering into a fee agreement including an arbitration clause.

An arbitration clause contained in a fee agreement is governed, in part, by MRPC 1.8(h)(1) which states:

"A lawyer shall not:

-
"(1) make an agreement prospectively limiting the lawyers liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement; or

"(2) settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith."

A client, therefore, must be given an opportunity to obtain independent counsel as to whether to enter into a fee agreement containing an arbitration clause. The lawyer who offers a fee agreement containing an arbitration clause must explain to the client that the client independent counsel is appropriate. MRPC 1.4(b). The explanation must include information reasonably necessary to permit the client to make an informed decision.

A lawyer may not make an agreement restricting a party from reporting to the Attorney Grievance Commission information concerning a lawyer's ethical misconduct. RI-88. An arbitration clause in a fee agreement, therefore, cannot be drafted so broadly as to preclude a party from bringing to the attention of the Attorney Grievance Commission information concerning a lawyer's ethical misconduct. See MRPC 8.3, 8.4(c).

MRPC 1.8(h)(2) states:

"A lawyer shall not:

-
". . .

"(2) Settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith."

An arbitration clause, therefore, cannot work a settlement of the lawyer's malpractice liability with an unrepresented or former client without first advising such client in writing that independent representation is appropriate.

In this situation, the arbitration clause is broadly worded so that it purports to govern "any dispute or disagreement arising between client and Attorney arising under, out of, in connection with, or in relation to this agreement, or otherwise." Emphasis added. In light of its broad language as well as its reference to disputes other than those relating to fees, the arbitration clause may be interpreted to impermissibly: (a) prevent a client from obtaining independent counsel's advice as to whether the client shall enter into the fee agreement; (b) prevent the client from reporting to the Attorney Grievance Commission information concerning a lawyer's ethical misconduct; (c) prospectively limit a lawyer's legal malpractice liability unless permitted by law and unless the client has the advice of independent counsel; and (d) work a settlement of the lawyer's malpractice liability with an unrepresented or former client; before doing so such client must first be advised in writing that independent representation is appropriate.