First Circuit Enforces Arbitration Clause in Attorney Engagement Letters

In Bezio v. Draeger, No. 13-1910 (December 16, 2013), the Court of Appeals for the First Circuit affirmed a ruling by the United States District Court for the District of Maine, enforcing an arbitration clause in an attorney-client engagement letter. The former client brought malpractice and unfair practice claims, but the action was dismissed and sent to arbitration under Maine law.

The court found that (1) Maine professional responsibility law for attorneys permits arbitration of legal malpractice claims so long as there is no prospective limitation of the firm's liability; and 2) Maine law, like the Federal Arbitration Act, evidences no hostility to the use of the arbitral forum.

There were several material factors in the instant case that could limit its application to its particular facts. The client negotiated the terms of the engagement letter, for example, changing some, and then signed the letter and initialed each page, thus specifically noting his agreement to each term. This client also had specific and particular prior experience with arbitration, thus limiting the amount of explanation of the procedure that was required of the firm in reaching informed consent of the particulars of this type of dispute resolution.

But the broader significance is clear: arbitration of client disputes is permitted and indeed encouraged. If attorneys mimic the procedure followed in this particular engagement letter, by actually getting client signature on letters, there is every reason to believe their choice of arbitration for dispute resolution will be followed. Of particular note, while making sure prospective clients are informed about the process is material to the outcome, the court found no requirement that the law firm encourage the client to seek independent counsel over the meaning of the term in the agreement.

For more information on professional liability and arbitration issues, contact attorney William Saturley or a member of Preti Flaherty's Professional Liability group.