In a decision that broadly approves of arbitration, a U.S. court of appeals held that an unsophisticated plaintiff must arbitrate claims against the law firm that had represented her. In Plummer v. McSweeney, the U.S. Court of Appeals for the Eighth Circuit reversed a lower court’s decision that had held the arbitration provision in a retainer agreement was unconscionable and, therefore, not enforceable. ABA Section of Litigation leaders caution that lawyers seeking to use such provisions must ensure fulsome disclosure with their clients.
Solicitation of Case Leads to Lawsuit
In the fall of 2014, Jerri Plummer, an Arkansas resident, received an unexpected call from a woman claiming that Plummer had been implanted with defective surgical mesh and could die if she did not have it removed. The caller connected her with a law firm that would help her obtain compensation for the surgery and related expenses. The surgery was not successful. Plummer ultimately sued numerous defendants in the legal and medical fields for fraud, fiduciary duty, malpractice, and related actions in the U.S. District Court for the Eastern District of Arkansas. One of the law firms that she sued moved to compel arbitration based on a provision in the retainer agreement requiring all disputes between the law firm and the plaintiff to be submitted to binding arbitration in Washington, D.C.
The district court declined to enforce the arbitration provision, finding that the plaintiff, who had minimal income, could not afford the costs of travel or of arbitration. It noted that the law firm had “instill[ed] fear of death” in the plaintiff—who had a tenth grade education and did not know what arbitration was—and then solicited her to undergo a surgical procedure in another state and represent her in a lawsuit against the mesh manufacturer. Ultimately, the district court held that the arbitration provision was unconscionable under Washington, D.C., law.
Ethics Rules No Bar to Mandatory Arbitration
The law firm appealed to the Eighth Circuit Court of Appeals. On appeal, the firm offered to pay the plaintiff’s share of the arbitration costs. The plaintiff argued that the arbitration provision was unconscionable when it was executed and that the firm’s offer on appeal to pay the plaintiff’s arbitration expenses did not cure this unconscionability. She also argued that the agreement was unconscionable because the law firm violated D.C. Rule of Professional Conduct 1.4(b), which obligates attorneys to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”
The court of appeals assumed that a violation of Rule 1.4(b) would invalidate the arbitration provision. But it reasoned that there had been no such violation because the retainer agreement had apprised the plaintiff of the consequences of the arbitration provision. Accordingly, the court of appeals reversed, noting that the retainer agreement informed the plaintiff that she had the right to negotiate the terms of the agreement and consult with an attorney of her choosing, and it did so in stylized bold letters. It also observed that the retainer agreement was only six pages long, and was in “easy to read format.” Finally, the court held that the firm cured any unconscionability resulting from the plaintiff’s inability to afford arbitration by agreeing to pay those costs. It therefore reversed and granted the motion to compel arbitration to be paid at the firm’s expense.
Practical Lessons for Litigators
Section of Litigation leaders observe that Rule 1.4(b) does not provide much guidance for attorneys seeking to adequately “explain” an arbitration provision. “I would think that the D.C. bar would require more than putting the document in front of somebody,” suggests John M. Barkett, Miami, FL, cochair of the Section’s Ethics & Professionalism Committee. “I don’t know that that’s explaining the matter. The word ‘explain’ seems to suggest that there is a discourse,” he continues.
But while Barkett suggests that a live discussion may be the best practice, the appellate court focused only on the four corners of the agreement. It noted that the contract conspicuously explained that arbitration would be the plaintiff’s only recourse in the event of a dispute, that she was waiving her right to a jury trial, and that she was waiving her right to a judicial appeal.
Still, Barkett cautions against letting a retainer agreement speak for itself, particularly when engaging a lay client like the plaintiff. “With folks that don’t know any better, the very folks you’re most worried about, they’re just going to sign whatever you put in front of them,” he cautions.
Whether discussing the effects of an arbitration agreement face-to-face or putting them in the agreement itself, Section leaders remind practitioners to ensure they are conveying the information necessary for the client to make an intelligent decision. “The general principle is that the client needs to give informed consent to the arbitration agreement,” advises Mitchell L. Marinello, Chicago, IL, cochair of the Section’s Alternative Dispute Resolution Committee. Attorneys using arbitration provisions in retainer agreements “should disclose that arbitration is a private dispute resolution process paid for by the parties that substitutes for trial by a judge or jury, may entail more limited discovery than is available in court proceedings, and has very limited rights of appeal,” Marinello advises.
Katherine M. Devanney is a contributing editor for Litigation News.
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- ABA Formal Ethics Opinion 02-425: A Retainer Agreement Requires the Arbitration of Fee. Disputes and Malpractice Claims (2002).
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