Can a lawyer put a clause in the engagement agreement requiring any future fee or malpractice dispute with the client to go to binding arbitration?

Plain-English summary

The inquiry concerned the Private Adjudication Center affiliated with Duke University School of Law and asked, across several variations, whether a lawyer could agree with a client to refer future disputes arising out of their relationship to that center for resolution under its alternative dispute resolution procedures.

The opinion concluded it would not be unethical for a lawyer to suggest such an agreement, observing that lawyers should avoid litigation to collect fees wherever possible and are encouraged to use reasonably available alternative forms of dispute resolution. It further concluded it would not be unethical to require such an agreement by including the clause in all engagement letters and employment contracts, so long as the clause did not divest the State Bar of its disciplinary authority or let the lawyer evade the consequences of unethical conduct. The opinion answered "No" to each variation the inquiry posed, finding no ethical difference whether the agreement was binding or nonbinding, binding on the lawyer but not the client, allowed nonbinding results to be used (or not) in later litigation, or allowed binding results to be pled in bar of future claims, or recited a right to independent counsel. Finally, where there was no predispute agreement, the opinion concluded that a private dispute-resolution agreement would be appropriate provided the nature of the procedures was fully disclosed to the client and the client was given full opportunity to consult independent counsel about foregoing other remedies.

Currency note

This opinion was issued in 1991, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer require clients to agree in advance to arbitrate future disputes?

A: The opinion concluded that a lawyer may include such a clause in all engagement letters, so long as it does not divest the State Bar of disciplinary authority or let the lawyer evade the consequences of unethical conduct.

Q: Does it matter whether the agreement is binding or nonbinding?

A: No. The opinion found no ethical difference among the binding, nonbinding, and one-sided variations the inquiry described.

Q: What if there is no advance agreement and a dispute has already arisen?

A: The opinion concluded that a private dispute-resolution agreement would be appropriate if the nature of the procedures is fully disclosed and the client has a full opportunity to consult independent counsel about giving up other remedies.

Background and rules framework

The opinion did not cite a numbered Rule of Professional Conduct. It framed the question in terms of professionalism and the encouragement of alternative dispute resolution, while preserving the State Bar's disciplinary authority and the client's opportunity to consult independent counsel as the limiting conditions on such agreements.

Citations and references

Rules of Professional Conduct:

• The opinion cites no numbered rule; it rests on general professionalism principles and the preservation of State Bar disciplinary authority.

See also

• NC Ethics Op. RPC 106: fee refunding
• NC Ethics Op. RPC 158: advance payment of legal fees

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-107/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Inquiry #1:

The Private Adjudication Center is an affiliate of the Duke University School of Law, Durham, North Carolina ("P-A-C"). The P-A-C has been organized for a number of years and has developed a successful program and procedures for alternative dispute resolution.

Would it be unethical for a lawyer to suggest to a client that the lawyer and client agree in their employment contract to refer any future dispute arising out of their contractual relationship to the Private Adjudication Center at the Duke Law School for binding resolution under one or more of its alternative dispute resolution procedures?

Opinion #1:

No. As a matter of professionalism, lawyers should avoid litigation to collect fees wherever possible. In that regard lawyers are encouraged to employ reasonably available alternative forms of dispute resolution.

Inquiry #2:

Would it be unethical for a lawyer to require such an agreement by including in all engagement letters and employment contracts a provision such as:

Any dispute arising under this contract for legal services will be referred to the Private Adjudication Center and the resolution of such dispute shall be binding on the parties to this agreement;

PROVIDED, that no such agreement shall be construed as designed to divest the North Carolina State Bar of its authority or responsibility for disciplinary action for breaches of professional ethics, or otherwise used by the lawyer to evade the consequences of unethical conduct.

Opinion #2:

No.

Inquiry #3(a):

Would the ethics opinion be different if the agreement were nonbinding on either party?

Opinion #3(a):

No.

Inquiry #3(b):

Would the ethics opinion be different if the agreement were binding upon the lawyer but nonbinding upon the client?

Opinion #3(b):

No.

Inquiry #3(c):

Would the ethics opinion be different if the agreement provided that the nonbinding results could be used in any future litigation to the extent permitted under rules of evidence and procedure (or could not be used in any way)?

Opinion #3(c):

No.

Inquiry #3(d):

Would the ethics opinion be different if the agreement provided that binding results could be pled in bar of any future covered claims?

Opinion #3(d):

No.

Inquiry #3(e):

Would the ethics opinion be different if the agreement contained a statement that either party has a right to the advice and use of independent counsel at any state of the negotiation of the employment contract or the resolution of any dispute arising out of such employment.

Opinion #3(e):

No.

Inquiry #4:

Are agreements for the private resolution of disputes between attorneys and clients subject to any restriction or limitation if there is no predispute agreement?

Opinion #4:

Such agreements would be appropriate assuming that the nature of the alternative dispute resolution procedures is fully disclosed to the client and the client is given full opportunity to consult independent counsel relative to the wisdom of foregoing other possible remedies in favor of alternative dispute resolution.