Can a lawyer who runs a nonlaw ADR business require participants to release the arbitrators and mediators from all liability arising from the proceeding?

Plain-English summary

A lawyer proposed to establish a nonlaw business offering alternative dispute resolution services, training lawyer and nonlawyer staff as arbitrators and mediators, setting rules for the proceedings, and charging participants for costs and a daily charge for the presiding officials. The lawyer asked whether, as a condition of using the business, participants could be required to release the presiding officials and staff from all liability arising from their ADR duties.

The opinion concluded they could. It distinguished MRPC 1.8(h)(1), which bars an agreement prospectively limiting a lawyer's malpractice liability to a client absent independent representation, and the prior fee-arbitration opinions RI-2 and RI-196 and the no-grievance-restriction opinion RI-88, on two grounds. First, the proposed release concerned liability stemming from the ADR process itself, not a representation. Second, and decisively, there was no identifiable lawyer-client relationship: a neutral arbitrator or mediator, by definition, has no client with respect to the matter being arbitrated or mediated (citing RI-256). Because MRPC 1.8(h)(1) is conditioned on a lawyer-client relationship and the facts established none between the neutrals and the participants, the opinion concluded there was no ethical prohibition on requiring the liability releases as a condition of using the ADR service.

Currency note

This opinion was issued in 1996, before later amendments to the Michigan Rules of Professional Conduct. Subsequent rule amendments 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 Treat this page as historical context, not current guidance.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 operate a nonlaw ADR business?

A: Yes. The opinion concluded a lawyer may establish a nonlaw business offering ADR services, train staff as arbitrators and mediators, set rules, and charge for costs and the presiding officials.

Q: Can the business require participants to release its neutrals from liability?

A: Yes. The opinion concluded the lawyer may, as a condition of using the service, require participants to release the presiding officials and staff from all liability arising from their ADR duties.

Q: Why doesn't the malpractice-liability rule (MRPC 1.8(h)) bar the release?

A: The opinion concluded MRPC 1.8(h)(1) applies only where a lawyer-client relationship exists, and a neutral arbitrator or mediator has no client in the matter, so the rule did not apply on these facts.

Background and rules framework

The opinion interpreted MRPC 1.8(h)(1) (Model Rule 1.8), which bars an agreement prospectively limiting a lawyer's malpractice liability to a client unless permitted by law and the client is independently represented. The opinion concluded the rule turns on the existence of a lawyer-client relationship, which is a fact-dependent question, and that a neutral arbitrator or mediator has none in the matter. It relied on RI-2, RI-88, RI-196, and RI-256.

Citations and references

Rules of Professional Conduct:

• MR 1.8 / MRPC 1.8(h)(1) (no prospective limit on malpractice liability to a client absent independent representation)

Other opinions cited:

• Michigan RI-2, RI-196: fee agreements with arbitration clauses
• Michigan RI-88: no agreement restricting reports of misconduct
• Michigan RI-256: a neutral arbitrator or mediator has no client

See also

• Mich Ethics Op. RI-256: lawyer-neutral dealing with self-represented parties
• Mich Ethics Op. RI-257: ADR clauses for fee, file, malpractice, and ethics disputes
• Mich Ethics Op. RI-196: limits on an arbitration clause in a retainer agreement

Source

• Landing page: https://www.michbar.org/opinions/ethics/numbered_opinions?OpinionID=1133&Type=6

Original opinion text

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

RI-263

May 7, 1996

SYLLABUS

A lawyer may establish a nonlaw business offering alternate dispute resolution services, train lawyer and nonlawyer staff to be arbitrators and mediators in the business, establish rules governing the proceedings, and charge participants for costs and expenses incurred and for the presiding officials.

A lawyer may, as a condition of using the nonlaw business services, require participants to release the presiding officials and staff from all liability arising from the exercise of their duties.

References: MRPC 1.8(h)(1), RI-2, RI-88, RI-196, RI-256.

TEXT

A lawyer proposes to establish a nonlaw business offering alternate dispute resolution [ADR] services. The lawyer will train lawyer and nonlawyer staff to be arbitrators and mediators, will establish a set of rules governing the proceedings, and will charge the participants for costs and expenses incurred and a daily charge for the presiding officials. The lawyer asks whether, as a condition of using the nonlaw business services, the participants may be asked to release the ADR presiding officials and ADR staff from all liability arising from the exercise of their ADR duties.

MRPC 1.8(h)(1) states:

"(h) A lawyer shall not:

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

In RI-88 this Committee opined that a lawyer may not offer or make and agreement restricting a party or counsel for a party from bringing information concerning a lawyer's ethical misconduct to the attention of the Attorney Grievance Commission. In RI-2 and RI-196 this Committee rendered opinions on the propriety of fee agreements containing arbitration clauses requiring arbitration in compliance with MCL 600.5001, of any and all claims or disputes arising out of the lawyer's representation.

The instant inquiry is clearly distinguishable. First, the proposed agreement relates to the prospective limitation of liability stemming from the ADR process itself. Secondly, unlike the prior inquiries, there is no identifiable client-lawyer relationship. MRPC 1.8(h)(1) conditions agreements prospectively limiting the lawyer's liability to a client for malpractice. Whether a client-lawyer relationship exists for any specific purpose depends on the circumstances and may be a question of fact. Traditionally, the process of arbitration or mediation is presided over by neutral arbitrator(s) or mediator(s). A neutral arbitrator or mediator, by definition, has no client with respect to the matter being arbitrated or mediated. In accord RI-256. The facts, as set forth in the instant inquiry, fail to establish a client-lawyer relationship between the ADR presiding officials or staff, and any prospective participants. Consequently, there is no ethical prohibition preventing the lawyer from, as a condition of using the ADR services, asking the participants to release the ADR presiding officials and ADR staff from all liability arising from the exercise of their ADR duties.