Editor's Note:
State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
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Ethical considerations involved in malpractice arbitration agreements between lawyers and clients.
A lawyer may not ethically condition his employment by a client upon the client's agreeing to arbitrate claims of malpractice against the attorney, except under circumstances where the client is fully advised as to the possible consequences of such an agreement.
Rule 6-102 of the Rules of Professional Conduct of the State Bar.
Evidence Code section 951.
Is it ethical for a lawyer to condition his employment upon the potential client's agreeing to the arbitration of any future malpractice claims by the client against the lawyer? We conclude that it is unethical for a lawyer to impose such a condition unless he is satisfied that the client is fully advised as to the possible consequences of the arbitration agreement.
Unquestionably, arbitration agreements are in the public interest. They can lead to the prompt, efficient resolution of disputes and the conservation of limited judicial resources. But it does not follow from this that an arbitration agreement between a lawyer and his client is necessarily or inevitably in the best interests of the client. A lawyer may be motivated by selfish interests in seeking an arbitration agreement. For instance, the lawyer may desire an arbitration agreement by reason of his concern about the possibility of a large jury verdict against him. (See rule 6-102, Rules Prof. Conduct.)
Accordingly, the negotiation of an arbitration agreement involves a potential conflict of interest between the lawyer and the client. Of course, it can be argued that the conflict of interest rules come into play only after the lawyer-client relationship is established by the employment agreement providing for arbitration. But we regard this as too restrictive a view of the extraordinary ethical obligations of a lawyer. Canon 9 of the American Bar Association Code of Professional Conduct dictates that a lawyer should avoid even the appearance of professional impropriety. Moreover, section 951 of the California Evidence Code defines "client" for purposes of describing the lawyer-client privilege as "a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in a professional capacity."
On the other hand, there is nothing inherently improper about an arbitration agreement between a lawyer and client which extends to malpractice claims. A lawyer may properly enter into such an agreement if the client is fully advised of the possible consequences of that agreement. However, because of the potential conflict of interests and appearance of impropriety, a client should be advised that he may seek separate and independent counsel as to the possible consequences of such an agreement.
Absent giving the client an opportunity to consult with such independent counsel and giving the client full explanation of the possible consequences of arbitration, a lawyer should not condition his employment upon the client's entering into an arbitration agreement. Moreover, the lawyer should not request that the client enter into such an agreement unless the lawyer proposes to give the client such an opportunity and explanation. The public interest considerations favoring arbitration can be furthered by the lawyer's offering to arbitrate after the claim for malpractice has been made, at a time when the possible consequences of the arbitration decision may be clearer to the client.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
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