Sloppy Arbitration Clauses are Unenforceable

On December 30, 2021, the Louisiana First Circuit Court of Appeals refused to enforce a lawyer-client arbitration clause because the lawyer failed to explain to the client “the consequences of entering into the agreement.” See Lape v. Brown, 2021-CA-0391 (La. Ct. App. 1st Cir. Dec. 30, 2021). Said the court:

As set forth in Louisiana Rule of Professional Conduct 1.0(e), ” informed consent” is defined as consent given after an attorney ” has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” In the context of attorney- client arbitration clauses, this means the attorney has an obligation to fully explain to the client the possible consequences of entering into an arbitration clause, including the legal rights the client gives up by agreeing to binding arbitration. Without clear and explicit disclosure of the consequences of a binding arbitration clause, the client’s consent is not truly ” informed.”

Id. at 5. Because the lawyer failed to explain to the client the “consequences of entering into the agreement,” including any mention of the potentially higher upfront costs of arbitration or the exact claims covered by the arbitration clause, the court refused to enforce the arbitration clause. Id. at 10.

The Louisiana Supreme Court has given Louisiana lawyers clear guidance as to how to draft an enforceable arbitration agreement. In Hodges v. Reasonover, 103 So. 3d 1069 (La. 2012), the court noted that a lawyer-client arbitration clause “does not inherently limit or alter either party’s substantive rights; it simply provides for an alternative venue for the resolution of disputes,” and held that a “binding arbitration clause between an attorney and client does not violate Rule of Professional Conduct 1.8(h) provided the clause does not limit the attorney’s substantive liability, provides for a neutral decision maker, and is otherwise fair and reasonable to the client.” Hodges, 103 So. 3d at 1076.

However, the court set forth several terms required for the enforcement of arbitration clauses. At a minimum, an arbitration clause must inform the client:

  • That the client waives the right to a jury trial;
  • That the client waives the right to an appeal;
  • That the client waives the right to broad discovery under the Louisiana Code of Civil Procedure and/or Federal Rules of Civil Procedure;
  • That arbitration may involve substantial upfront costs compared to litigation;
  • The nature of claims covered by the arbitration clause, such as fee disputes or malpractice claims;
  • That the arbitration clause does not impinge upon the client’s right to make a disciplinary complaint to the appropriate authorities;
  • That the client has the opportunity to speak with independent counsel before signing the contract.

See id. at 1077.

To download model engagement agreements that include Louisiana-compliant arbitration clauses, click here: Model Lawyer-Client Agreements.

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