Consider Mandatory Arbitration to Resolve Fee Disputes
It is well-recognized that often, when an attorney sues a client for unpaid fees, the client will bring a counterclaim for legal malpractice. Some sources indicate that the likelihood of receiving such a counterclaim could be as high as 40 percent; others place it even higher.
May 21, 2018 at 01:51 PM
6 minute read
Although many state bars recognize that attorney-client disputes may be resolved through arbitration, the use of mandatory arbitration clauses in engagement letters may be subject to federal law. The FAA (Federal Arbitration Act) governs requests for arbitration and, on its face, is supreme to state law on the issue.
Recently, the U.S. Court of Appeals for the Third Circuit reviewed the application of the FAA to a mandatory arbitration clause in an attorney engagement letter. Smith v. Lindemann, No. 16-3357 (3d Cir. 2017). In a nonprecedential opinion, the court concluded that, although a mandatory arbitration clause could be set aside on the basis of fraud, duress or unconscionability (which analysis may be governed by state law), federal law generally governs the application of such a provision. Indeed, the U.S. Supreme Court has indicated that state law may not prohibit the arbitration of any specific type of claim. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341 (2011).
Though the FAA may govern an arbitration clause absent any restriction by the parties, the state-level rules of professional conduct may still have some impact. Indeed, those rules bearing on a client's right to be informed about the scope of the representation and the potential waiver of rights may impact whether an arbitration provision violates public policy.
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