The Virtues And Vices Of Arbitrating Legal Malpractice Cases

California courts recognize that arbitration is a favored method of resolving disputes. (Lawrence v. Walzer & Gabrielson (1989) 207 Cal.App.3d 1501, 1505 (Lawrence).) Arbitration can be fast, private, and provide a more sophisticated trier of fact. As such, lawyers frequently draft retainer agreements that require their clients to arbitrate legal malpractice claims. Courts uphold these provisions when they are clear, explicit, and entered voluntarily. (Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler & Mitchell, LLP (2013) 219 Cal.App.4th 1299, 1309 (Mt. Holyoke Homes, L.P); Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102 (Powers).) Sometimes, however, attorneys are better served litigating a client's legal malpractice claim in a court of law, with its formality, wide-ranging discovery, and rights of appeal. Where arbitration is appropriate, attorneys must be careful to avoid waiver, by waiting too long after being sued to seek enforcement of an arbitration provision.

1. Arbitration Clauses are Enforceable in Legal Malpractice Cases

   California Code of Civil Procedure section 1281.4 provides that a written arbitration agreement is enforceable. Section 1281.2 provides, in pertinent part: "On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists . . . ."

   Section 1281.2 applies in legal malpractice cases. (Powers, supra, 54 Cal.App.4th at p. 1106-1107.) In Powers, an attorney included a mandatory arbitration provision in his initial and subsequent retainer agreements with a client. The attorney was sued for malpractice and petitioned the Trial Court to compel arbitration. The Trial Court denied the attorney's petition. The Court of Appeal reversed. It found that the arbitration provision in the initial retainer agreement did not attempt to limit the attorney's liability for legal malpractice, was not ethically improper and violated no conflict of interest rules. The arbitration provision in the later amendment merely confirmed the existing arbitration agreement. (Id. at pp. 1114-1115.) Subsequently, in Mt. Holyoke Homes, L.P., supra, 219 Cal.App.4th at p. 1310, the court held that an attorney owes no duty to point out to his or her clients a clear and conspicuous provision compelling arbitration.

2. Should Attorneys Seek to Compel Arbitration of Legal Malpractice Disputes?

   Attorneys may seek to compel arbitration for several reasons. An attorney may be concerned that a jury will sympathize with a likeable, injured plaintiff. An attorney may face certain liability and seek arbitration to try to contain damages, or to shield himself from embarrassment or from future claims from similarly situated potential plaintiffs, who may learn about an adverse judgment. Additionally, attorneys may select arbitration to ensure that a trained finder of fact will decide technical and complex legal and factual issues. Alternatively, an attorney, who is confident of his or her blamelessness, and who feels that extensive discovery is unnecessary, may compel arbitration in order to obtain a speedy resolution of the dispute. This may be easier said than done.

   Although arbitration can be speedy, private, and informal, compelling arbitration is not without its downsides. Pleadings are less formal, and discovery may be limited. Thus, attorneys and their insurance carriers may be unable to properly analyze the full scope of liability or damages early in an arbitration proceeding. Demurrers...