5 Tips for Fee Agreement ADR Clauses

Attorneys and law firms have been experimenting with strategies to collect unpaid client fees while limiting the risk of malpractice claims. One approach that is gaining traction involves the use of alternative dispute resolution (ADR) provisions, including mandatory arbitration clauses, in retainer agreements and engagement letters to address the status of unpaid fees.

ADR has several advantages over litigation. Most obviously, arbitration or mediation of a fee dispute is often less expensive than litigation. Additionally, arbitration and mediation proceedings are confidential and do not become matters of public record. Thus, a client’s assertion of a malpractice counterclaim in an ADR proceeding as justification for his or her failure to pay the fees at issue may stay out of the public realm. Attorneys should be aware, however, that their professional malpractice insurance will likely require them to report such a potential claim as a condition of coverage (regardless of whether it is confidential).