It is essential for attorneys to understand the interplay between risk mitigation/resolution strategies and the rules of professional conduct. After all, when addressing a risk, attorneys must be careful not to run afoul of ethical considerations. In this day and age, it is not uncommon for parties in a variety of contexts to manage risk by inserting alternative dispute resolution clauses into service contracts. Likewise, the manner in which disputes between a lawyer and the client will be resolved can be addressed at the outset of the engagement. However, some states—including Ohio—specifically limit an attorney’s ability to include arbitration clauses in engagement contracts.
Under Ohio Prof. Cond. Rule 1.8(h)(1), a lawyer shall not:
make an agreement prospectively limiting the lawyer’s liability to a client for malpractice or requiring arbitration of a claim against the lawyer unless the client is independently represented in making the agreement.
Despite “permitting” attorney-client arbitration clauses (and thus surviving public policy challenges or preemption arguments based on the Federal Arbitration Act, 9 U.S.C. § 1, et seq.), this rule places a huge practical impediment on the effective use of such clauses in the attorney-client context. (Interestingly, however, the Ohio Bar does permit local bar associations, called “certified grievance committees,” to establish alternative dispute resolution programs—including arbitration panels—for disciplinary complaints and, more commonly, fee disputes. Typically, under these arrangements, a client is not required to arbitrate, but an attorney must do so if the client elects this option.)
Prof. Cond. Rule 1.8(h)(1) specifically mandates that a client be independently represented before entering into an arbitration agreement. Naturally, except for the most sophisticated clients, an independent attorney will not be retained to consult on, or negotiate, the terms of a retention agreement. As a result, Ohio courts have consistently struck arbitration provisions in engagement agreements for lack of independent counsel. See, e.g., Helbling v. Lloyd Ward, P.C., 2014-Ohio-1513, ¶¶ 8-10 (8th Dist.); Guay v. Lloyd Ward, P.C., 2014-Ohio-190 (5th Dist.); Thornton v. Haggins, 2003-Ohio-7078 (8th Dist.).
The Ohio Bar has even gone as far as indicating that a lawyer acts against the client’s best interests when using such a clause because the client is not in a position to decide for or against arbitration until the particular dispute arises. See S.Ct. Ohio Board of Comm'r on Grievances and Discipline Op. No. 96-9 (Dec. 6, 1996). In light of this distaste for attorney arbitration provisions, Ohio attorneys should recognize that not only will an arbitration provision be struck where it is not approved by a client’s independent counsel, the act of including an arbitration provision in an engagement agreement may technically violate Prof. Cond. Rule 1.8(h)(1), giving rise to a host of unsavory headaches and consequences of a bar grievance.
Despite the policies and preferences in favor of arbitration, attorneys must thoroughly understand the ethical implications of using arbitration clauses in engagement agreements. In Ohio, it is most prudent to avoid using an arbitration provision except in unusual circumstances, and only after requiring a client to verify in writing that they have, in fact, received independent counsel before agreeing to the arbitration clause.