Federal Court Enforces Arbitration Provision in Engagement Agreement

The federal district court in Seattle recently enforced an arbitration provision in a lawyer’s engagement agreement in Dodo International, Inc. v. Parker, No. C20-1116-JCC, 2021 WL 4060402 (W.D. Wash. Sept. 7, 2021) (unpublished). The lawyer had represented some of the plaintiffs in a series of business transactions that the court described as “ill-fated.” Litigation followed against both the lawyer and the counterparties.

The lawyer sought to enforce an arbitration provision in his engagement agreement against the plaintiffs he had represented. The court agreed. In doing so, the court looked to both contract law and RPC 1.5(a)(9), which requires “reasonable and fair disclosure” of the material terms of a fee agreement. The court rejected the former clients’ arguments that the arbitration provision was either procedurally or substantively unconscionable under contract law because the provision was plainly disclosed in the engagement agreement and the bargaining power over the fee agreement was not completely one-sided. With RPC 1.5(a)(9), the court noted:

The arbitration clause appears under the bold heading “Arbitration.” … It discusses the process of selecting and paying an arbitrator, necessarily (if not explicitly) indicating that disputes will not be resolved in court. … The engagement letter is only three pages long, with the clause at the end of page two, right above where … [the client] … signed. 2021 WL 4060402 at *6 [emphasis in original].

The arbitration provision involved was not limited to fee disputes, but, rather, encompassed “‘any disputes … between us as to … any matter relating to our representation of you.’” Id. at *7. The court, therefore, directed arbitration of all of the former clients’ claims against the lawyer.

Although not breaking new legal ground, Dodo is a useful reminder that for an arbitration provision in a law firm engagement agreement to be enforced, it needs to meet both the contractual and regulatory standards of adequate disclosure. Comment 14 to RPC 1.8 reinforces this point as it relates to malpractice claims in particular, noting that RPC 1.8(h) (which governs resolution of malpractice claims) “does not … prohibit a lawyer from entering into an agreement with the client to arbitrate legal malpractice claims, provided such agreements are enforceable and the client is fully informed of the scope and effect of the agreement.”