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Arbitration Clauses – The Future of Lawyer-Client Dispute Resolution

Recently, the undersigned encountered an arbitration clause drafted by a successful Chicago law firm.

I will quote the relevant language in full and then discuss what the language means for a client.  I am not in any way criticizing the clause or the lawyers who drafted it.

“This Agreement shall be construed under the laws of the State of Illinois and any disputes concerning the Agreement, our fees that relate in any way to our representation, including any claims relating to our billings for breach of fiduciary duty, professional negligence or malpractice or other disputes over our representation, shall be resolved under Illinois law in Chicago, Illinois through a summary procedure involving limited discovery in which we will jointly appoint a qualified arbitrator who specializes in such matters to promptly resolve any disputes through arbitration, whose decision shall be final and binding upon the parties.  These limitations shall be imposed on any arbitration: (i) five (5) depositions, thirty (30) interrogatories, forty (40) document requests and fifty (50) requests for admissions per side; (ii) pre-hearing briefs totaling fifteen (15) pages per side; (iii) post-hearing briefs totaling twenty-five (25) pages per side; (iv) no more than three (3) days for hearing testimony and argument. Because this procedure for dispute resolution involves a waiver of [Client’s] rights and ours, we jointly acknowledge that this alternative procedure for dispute resolution waives our respective rights to seek relief through litigation or to have a trial by jury or to conduct full discovery or to appeal or to otherwise exercise rights available in litigation, rather than through arbitration. It is therefore, important that this matter be carefully discussed with independent counsel and only after that review has been completed can we jointly agree to this alternative dispute-resolution procedure. In the event agreement cannot be reached on a suitable arbitrator, we shall jointly seek the assistance of the American Bar Association for the selection of a suitable person. (Emphasis supplied).

We specifically require that [Client 1] and [Client 2] have this entire Agreement read and evaluated by independent counsel of their choice and understand that this has been done and that the signatures below acknowledge that this has been done.”

So what does this mean? The client is giving up (a) the right to a jury trial; (b) the right to an arbitration before the American Arbitration Association or other such regulated forum; and (c) is agreeing to arbitration before a private arbitrator in Chicago, Illinois, who will be governed by Illinois law.

The clause requires the client to obtain his own lawyer to study the agreement and advise him whether or not he should sign it.

Clients who sign such agreements need to understand that in arbitration it will be much tougher to prove legal malpractice and much tougher to obtain damages for legal malpractice.  One advantage to both parties is that the private arbitration will not be open to the public and the public will not learn any details of the client’s business or the lawyer’s approach. Arbitration agreements are increasingly being used in lawyer-client disputes and this clause is one worth pondering.

Edward X. Clinton, Jr.