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Category: Fee Dispute

Lead Counsel Defends $800M Fee Request in Roundup MDL

February 19, 2021

A recent Law.com story by Amanda Bronstad, “Lead Counsel in Roundup MDL Defend $800M Fee Request,” reports that lawyers defending as much as $800 million in proposed common benefit fees from settlements with Monsanto insisted that the law firms objecting to their request had painted “an incomplete and inaccurate picture” of the Roundup litigation.  More than a dozen law firms had objected to the fee request, with one of them calling the request a “money grab” by lead counsel in the multidistrict litigation.  In a response, lead counsel insisted that the award was justified.

They said Bayer, which owns Monsanto, would not have entered into settlements last year but for their work, which included obtaining three Roundup verdicts.  “The pleadings and affidavits submitted by the objectors present an incomplete and inaccurate picture of the Roundup litigation,” they wrote.  “The simple fact remains that all Roundup attorneys and plaintiffs have benefitted from MDL leadership’s efforts—irrespective of whether or where their cases are filed or unfiled and whether their individually retained attorneys have cases pending in the MDL, have formally availed themselves of MDL work product, or have entered into a formal participation agreement.”  Lead counsel are Robin Greenwald, of Weitz & Luxenberg in New York; Michael Miller, of The Miller Firm in Orange, Virginia; and Aimee Wagstaff, of Andrus Wagstaff in Lakewood, Colorado.

Bayer announced in June that it planned to settle about 125,000 Roundup claims for an estimated $10.9 billion, which included a class action settlement that lawyers later withdrew.  The settlements were not part of a global agreement, however.  Lawyers, including lead counsel, conducted their own negotiations, which have been confidential, and many cases remain unsettled.

In a Jan. 11 motion, lead counsel sought an 8.25% assessment on Roundup settlements to pay for fees and expenses spent on the “common benefit” of all lawyers.  U.S. District Judge Vince Chhabria of the Northern District of California, overseeing the Roundup multidistrict litigation, filed a Jan. 26 order asking lawyers to address four questions about the holdback request, including whether it is even necessary and, if so, how much, and whether it should be lower than the proposed 8% in fees and 0.25% in expenses.  He also asked whether he could issue a holdback “without understanding how much of a premium co-lead counsel has already received on their settlements compared to the typical settlement.”

Several firms criticized the request, particularly on top of an estimated $2 billion in attorney fees they claimed that lead counsel made from contingency fee contracts associated with their own cases, which settled last year for greater amounts than Monsanto is now offering.

In their response, lead counsel noted that the proposed holdback includes an assessment on their own cases, and would compensate about 20 firms not in leadership.  They also said that the assessment pertained only to about 400 law firms that had done one of the following: had at least one case pending in the multidistrict litigation, signed a participation agreement, used “work product” in the multidistrict litigation, or sought help from Kenneth Feinberg, the special master, in settlement negotiations.

“The circumstances of this litigation warrant an expansion of the current scope of the holdback to encompass the entire universe of settlements, because all Roundup plaintiffs have undoubtedly benefited from the efforts and expenditures of common benefit attorneys,” they wrote.  “Indeed, the extensive work that this court has conducted in issuing opinions and managing the litigation have had a direct effect on each and every Roundup case or claim, irrespective of whether or where an attorney might have filed his or her cases.”  Many of the objecting firms had insisted they did not use discovery in the multidistrict litigation and that lead counsel purposely kept the experts to themselves.  Lead counsel countered that they had made work product available on a firm website and provided a “trial package” and experts.

Addressing the objections of specific firms, lead counsel said that Beasley Allen had a pending case in federal court that is part of the trial pool and had coordinated with Weitz & Luxenberg, one of the lead counsel firms, to obtain experts in its state court cases.  Beasley Allen also had asked for an 8% holdback in the multidistrict litigation against Johnson & Johnson over talcum powder, they wrote.  They also attacked the objections of The Lanier Law Firm as “untrue and baffling” given that the firm reached out to lead counsel to retain their experts for upcoming Roundup trials in Missouri state courts.  The Lanier Law Firm also had sought a 10% holdback in multidistrict litigation over DePuy Orthopaedics’ Pinnacle hip implants.

In an email, W. Mark Lanier called the comparison “apples and oranges,” given the amount of work done in the hip implant cases, and disputed claims that he used experts from the multidistrict litigation.  “I find the pleading and allegations a bit baffling as well,” he wrote. “I personally had been told most every expert was being pulled by MDL leadership, and non-MDL cases would have to find their own experts.”  Chhabria has scheduled a March 3 hearing on the fee dispute.

Apple Challenges $87M Fee Request in iPhone Settlement

February 18, 2021

A recent Law 360 story by Dorothy Atkins, “Apple, Ky. AG Rip Class Attys’ $87M Fee Bid in IPhone Deal,” reports that Apple and the Kentucky attorney general joined objectors in urging a California federal judge to reject class counsel's $87.7 million fee bid for cutting a $310 million deal resolving claims over slowed iPhones, slamming it for being millions above the benchmark and padded by unsupported rates.  During a three-hour hearing, Christopher Chorba of Gibson Dunn & Crutcher LLP, counsel for Apple, argued that awarding the fee request would set a "very bad precedent" because class counsel overlitigated the case and shouldn't be awarded for its conduct.

He also said it would result in a net reduction of between $19 and $20 for class members who would otherwise receive more than $100 per claim.  Chorba also argued that class counsel failed to go through the factors warranting its large fee request and that its lodestar calculation is unsupported by the billing submissions.  "We're not saying they shouldn't get any fees," Chorba said.  "The fees are just so outside the norm and so in excess of what would be appropriate."

If approved, the settlement would resolve dozens of consumer protection lawsuits that were filed in 2018 after Apple admitted to issuing software updates that slowed certain iPhones.  The suits allege that Apple designed its software updates to slow down some phone models, nudging consumers to buy newer iPhones.

In May, Apple reached a deal to settle the case for $500 million but objected to the plaintiffs' request for $87 million in attorney fees, asking the court to cut it down by at least $7 million.  Since the settlement was announced, dozens of people have objected, arguing that it doesn't do enough for class members and doles out too much to class attorneys.  In December, the federal government also made clear in a filing that it does not object to the proposed settlement itself but views the fee request as over the top.

During a hearing on the deal's final approval, class counsel Mark Molumphy of Cotchett Pitre & McCarthy LLP argued that the fee award is warranted because the case was exceptional and the risks were great, particularly since the plaintiffs' firms were working on a contingency basis.  He also noted that it's the "first and largest" settlement of the Computer Fraud and Abuse Act claims at issue and that class counsel secured significant recovery that's nearly half of the potential $1 billion damages at issue.

Molumphy argued that a 28% fee award is supported by a lodestar cross-check for the three years of litigation, which included "World War III" discovery, 18 motions, including a motion to dismiss, and what he called Apple's unreasonable litigation demands.  "Frankly there was no roadmap.  There's not a case in which there was a government investigation or plea.  We were the leaders in this case," he said.  "We created a roadmap for others, including government investigation that followed us."

But Apple, the state of Kentucky and multiple class members objected to the size of the fee award and how class counsel proposed to calculate it.  Four attorneys representing objecting class members argued that the 3.5% claims rate was "puny" and the fee request should not be based on the initial $500 million deal because Apple is only paying $310 million due to the low claims rate.

The objectors also argued that a fee recovery of between 10% and 18% is more in line with case precedent, and they slammed class counsel for not submitting detailed billing.  They said the information class counsel provided appears to inflate the hourly rate of staff attorneys to $350 per hour when those attorneys likely received less than $50 per hour for their work and that it appeared to include work by dozens of attorneys who weren't authorized to bill for their time.

John Pentz, counsel for two objectors, pointed out that the alleged billing padding caused U.S. District Judge Lucy Koh to "hit the roof" when she presided over Anthem's $115 million data breach deal, and noted that of the eight contract attorneys billed by Kaplan Fox & Kilsheimer LLP only one is listed on the firm's website.  He also said class counsel didn't explain why those who first filed lawsuits in state court were entitled to a cut of the fees.

Another attorney, Robert William Clore of Bandas Law Firm PC, argued on behalf of objector Alexis West that based on class counsel's own information, the aggregate potential damages at issue were over $4 billion, not $1 billion, and the $310 million represents only 5% of the potential $4 billion damages.

Philip R. Heleringer of the Office of the Kentucky Attorney General echoed other objectors' comments and emphasized that the court has a fiduciary duty to step in for absent class members in situations in which there is a "tension" between class counsel and class members.  Heleringer pointed out that in In re. Yahoo litigation, a court rejected a fee request that had a $10 million discrepancy between the lodestar and fee request, but class counsel's fee request in this case is five times larger than the lodestar.

Heleringer also argued that the settlement does not guarantee class members will receive $310 million.  He said the court should use base lodestar without a multiplier.  He added that there are no rare or exceptional circumstances here and that it's not enough that class counsel is going up against a well-heeled, well-resourced opponent to warrant a multiplier or that it's fighting on a contingent basis, particularly since 81 firms initially filed lawsuits over it.

PA Enviro Board Can Weigh ‘Bad Faith’ in Awarding Attorney Fees

February 17, 2021

A recent Law 360 story by Matthew Santoni, “Pa. Enviro Board Can Weight ‘Bad Faith’ in Awarding Attorney Fees,” reports that the administrative board that hears appeals of decisions by Pennsylvania's Department of Environmental Protection was justified in denying attorney fees to environmental groups that reached a settlement with Sunoco over its Mariner East 2 pipeline, since the board found neither side acted in "bad faith," a state appellate court ruled.

A majority of the Commonwealth Court ruled the state's Environmental Hearing Board could deny a petition for fees from the Clean Air Council, The Delaware Riverkeeper Network and Mountain Watershed Association Inc. based on the so-called bad faith standard, since neither the environmental groups nor Sunoco had acted in bad faith through the groups' appeal of the DEP granting permits for the pipeline, which resulted in a settlement between the groups and the state.

The environmental groups had argued that the board should have applied the looser "catalyst test," which would have only required them to show that their appeal was the motivating factor behind some benefit conferred by the other side in order to trigger fee-shifting provisions in the state's Clean Streams Law and have Sunoco pay their nearly $230,000 legal bill.

"Contrary to objectors' assertions, the catalyst test is not the sole and exclusive standard that EHB may employ in disposing of a request for costs and fees against a permittee under ... the Clean Streams Law.  Indeed, we have specifically recognized that EHB's 'broad discretion includes the authority to adopt standards by which it will evaluate applications for costs and fees,'" wrote Judge Michael H. Wojcik for the majority.  "It was entirely within EHB's discretion, and eminently appropriate, to apply the instant bad faith standard in deciding whether or not to impose costs and fees upon a private party permittee."  The court ruled that the EHB had wide discretion when weighing whether and how to award fees, and in a separate decision it upheld another EHB ruling that had cut the fees awarded to a family that challenged the DEP permits for another part of the pipeline crossing their land.

The environmental groups had challenged 20 permits the DEP had granted Sunoco for construction of a pipeline linking gas wells in Western Pennsylvania to a refinery in the east. The matter wound its way through various proceedings before the EHB until the challengers reached a deal with the DEP in which it would establish a "stakeholder group" on pipeline construction and would put more of its permitting documents online in exchange for the groups dropping their challenge.  The DEP also agreed to pay $27,500 of the challengers' legal fees.

But the challengers then asked the EHB to make Sunoco pay additional legal bills related to their appeal, and Sunoco filed its own petition to make the environmental groups pay nearly $300,000 toward what it had spent defending the permits.  The EHB was split, with the majority saying it could apply the bad-faith standard and find that neither side had "engaged in dilatory, obdurate, vexatious, or bad faith conduct in the course of prosecuting or defending" the appeals.  The minority had agreed that neither side was entitled to fees, but said the bad-faith test was not necessary and the board had broad discretion to award fees as it saw fit.

The environmental groups and the DEP both appealed, though the Commonwealth Court found the DEP lacked standing and granted Sunoco's bid to quash that side of the appeal because the state agency hadn't formally intervened in the fee debate and would not have been affected by the EHB ruling against the private parties.

President Judge P. Kevin Brobson wrote a concurring opinion, joined by Judge Renée Cohn Jubelirer, expressing concerns that the EHB's discretion might be so broad that the particular section of the Clean Streams Law might run afoul of the state constitution's requirement that the law contain standards to "guide and restrain" the administrative board's decision-making.  But because that issue wasn't brought up on appeal, and the EHB had denied either side any fees, this wasn't the case to address that with, Judge Brobson wrote.  In this case, there was no reason Sunoco should have been required to pay, he said.

"There is absolutely no basis in the record upon which the EHB could have exercised its discretion below in such a way as to compel Sunoco to pay objectors' legal fees," he wrote. "Sunoco was not a party to the settlement agreement between objectors and DEP that essentially ended objectors' appeals.  Moreover, Sunoco gave up nothing in the settlement or otherwise.  Sunoco kept its permits, unaltered, as if objectors had not even filed their appeals with the EHB."

A dissenting opinion from Judge Ellen Ceisler said the courts shouldn't apply a tougher standard to permit holders when the DEP itself could have been made to pay fees under the catalyst test.  "It does not therefore seem reasonable that, in theory, the DEP could be saddled with fees and costs in response to inadvertent mistakes or good faith, negotiated compromises or settlements, while a permittee could get off scot-free under similar circumstances unless it has conducted itself in a dilatory, obdurate, or vexatious way," she wrote.

The court then applied its ruling to a separate appeal by the DEP of another EHB order, which said the state had to pay about $13,000 of a family's requested $266,000 in fees from the DEP and Sunoco.  Huntingdon County landowners Stephen and Ellen Gerhart had convinced the EHB in 2019 that the DEP had misclassified a wetland on their property and that Sunoco had to do more work to restore it after completing the pipeline's construction.  But the EHB held Sunoco to the bad-faith standard and the DEP to the catalyst test in parceling out who was responsible for the reduced fee award.

Following the same logic as its ruling in the Clean Air Council case, the court affirmed that the EHB had the discretion to apply both standards in awarding fees.  "We agree that the statute and the case law grant broad discretion to the EHB in setting the standard and applying it," said Robert Fox of Manko Gold Katcher & Fox LLP, representing Sunoco in both cases.  An attorney for the environmental groups said they were weighing the decision and their options.

The attorney for the Gerharts said he thought the court correctly balanced the different standards for fee-shifting against the state and against private actors, but noted that in cases like his where the DEP and Sunoco essentially worked together to defend the permits, the state would have to be mindful of whether it would need to build a record to establish that the permit-holder was acting in bad faith.

Litigation Funder Seeks Share of Attorney Fees

February 16, 2021

A recent Law 360 story by Carolina Bolado, “Litigation Funder Wants Cut of $350M Shire Deal,” reports that law firm lender Counsel Financial Services asked a Florida federal judge for permission to intervene in a dispute over divvying up attorney fees from a $350 million whistleblower settlement with biotech company Shire, alleging the law firm Barry A. Cohen PA should be forced to direct any fees it receives to pay back a $43.8 million line of credit.

Counsel Financial says it loaned money to the Cohen firm in February 2009 in exchange for a secured interest in the firm's assets, which includes legal fee proceeds.  In January 2019, the company obtained a $43,778,684 judgment against the Cohen firm, which previously represented whistleblower Brian Vinca in his suit against Shire.

"Counsel Financial thus has an interest in the legal fees that will be awarded to [the Cohen firm] in this action," the company said in the motion.  "Consequently, Counsel Financial seeks to intervene to ensure that its interest in the legal fees obtained by [the Cohen firm] in connection with this matter are rightfully directed by this Court to Counsel Financial directly from the court registry."

The motion is the latest development in a fight over fees from the $350 million settlement, which was announced in August 2016 and resolved claims stemming from Shire's sales and marketing practices around Dermagraft, a skin substitute the company picked up when it acquired Advanced BioHealing Inc. — now known as Shire Regenerative Medicine Inc. — as part of a $750 million deal in 2011.  Vinca and co-plaintiff Jennifer Sweeney filed the first of the six False Claims Act suits against Shire that led to the settlement.

Kevin J. Darken, who represents Vinca's former counsel, says Vinca's current attorneys, Noel McDonell of Macfarlane Ferguson & McMullen and Bryen Hill of Mahany Law, have tried to cut him and the Cohen firm out of a fee award.  Darken has asked the court to disqualify McDonell and Hill for allegedly using stolen confidential emails to challenge the charging lien filed by Darken, Cohen and Saady & Saxe PA for a cut of the attorney fees.

McDonell and Hill have accused Darken and Kevin M. Cohen, the representative for Barry Cohen's estate, of conspiring to a fee-splitting scheme of the proceeds.  Vinca, who fired his attorneys in March 2018, is suing Darken, the Cohen firm and Saady & Saxe for malpractice, claiming they cost him the full whistleblower's cut of the Shire settlement.  Vinca claims his former counsel's failures forced him to share the whistleblower award of the Shire settlement with the five other relators who filed FCA suits after he did.

Generally, the first whistleblower to file gets about 20% of the government's recovery, and any subsequent whistleblowers do not receive a cut. But in this case, U.S. District Judge James Moody Jr. decided to divvy up the proceeds, in part because of deficiencies in the initial eight-page complaint from Vinca and Sweeney, according to McDonell.  Vinca and Sweeney shared more than $50 million from the settlement, while the other whistleblowers shared approximately $30 million.

The six whistleblower lawsuits that led to the settlement all alleged misconduct by Shire from 2007 through the beginning of 2014, including that it paid illegal kickbacks to get health care providers to use or overuse Dermagraft, marketed Dermagraft for uses not approved by the U.S. Food and Drug Administration, inflated the price of the drug and spurred the coding of Dermagraft-related reimbursement claims for payouts higher than what was appropriate.

McDonell told Law360 that Counsel Financial's claim has no bearing on this lawsuit because Vinca was not a party to the financing contract between Counsel Financial and the Cohen firm.  "As Magistrate Judge Porcelli noted in June of 2019, the matter at issue is the merits of a charging lien filed against relator Brian Vinca by former counsel, and to what extent compensation is appropriate," McDonell said.  "Accordingly, on behalf of Brian Vinca, we are confident that CFS has, as Judge Porcelli so aptly put it, 'no dog in this fight.'"

NJ Case Has Lessons on Arbitration Clauses in Attorney Retainers

February 14, 2021

A recent Law 360 article by Hilary Gerzhoy, Deepika Ravi, and Amy Richardson, “NJ Case Has Lessons On Arbitration Clauses in Atty Retainers”, reports on arbitration clauses in attorney retainers in New Jersey.  This article was posted with permission.  The article reads:

On Dec. 21, 2020, the New Jersey Supreme Court issued Delaney v. Dickey, an opinion that severely limits the enforceability of arbitration provisions in law firm retainer agreements.  The court held that an arbitration provision in a retainer agreement is only enforceable if an attorney provides "an explanation of the advantages or disadvantages of arbitration" to a client before the client signs the retainer agreement.

The decision, which applies prospectively, tracks and builds on other jurisdictions' limitations on the enforceability of arbitration provisions in retainer agreements.  Attorneys wishing to resolve client disputes via arbitration should take close note of these heightened disclosure obligations.

Delaney v. Dickey

Delaney v. Dickey addressed whether an arbitration provision contained within Sills Cummis & Gross PC's four-page retainer agreement was enforceable.  A Sills attorney provided the retainer agreement to client Brian Delaney during an in-person meeting.  The retainer agreement contained a provision stating that any disputes about the law firm's fees or legal services would be resolved by arbitration.

The arbitration provision stated that the result of any arbitration would not be subject to appeal, and that Delaney's agreement to arbitration waived his right to a trial by jury:

The decision of the Arbitrator will be final and binding and neither the Firm nor you will have the right to appeal such decision, whether in a court or in another arbitration proceeding.  You understand that, by agreeing to arbitrate disputes as provided in this retainer letter, you are waiving any and all statutory and other rights that you may have to a trial by jury in connection with any such dispute, claim, or controversy.

The retainer agreement included a one-page attachment that contained a hyperlink to the JAMS rules.  However, the Sills attorney did not provide Delaney with a hard copy of the JAMS rules at the meeting.  The attachment also stated that the arbitration would be conducted by one impartial arbitrator; that the parties waived any claim for punitive damages; that the arbitration would be binding, nonappealable and confidential; and that the parties would share the arbitrator's fees and expenses, except that the arbitrator could award costs, expenses, and reasonable attorney fees and expert witness costs.

The New Jersey Supreme Court held that the arbitration provision was unenforceable "[b]ecause Delaney was not given an explanation of the advantages or disadvantages of arbitration."

The court recognized that the Sills attorney had disclosed, in the retainer agreement and attachment, several of the differences between an arbitral and judicial forum — but it found that disclosure insufficient.  Instead, the court required that the attorney provide an "explanation" of these differences — but it did not provide clear guidance on what is required for a sufficient explanation.  Importantly, the court held that an attorney must explain the differences between an arbitral and judicial forum, even when the client is "a sophisticated businessman."

The mere recitation of these differences in the retainer agreement, and the Sills attorney's "[offer] to answer any questions" Delaney had about the retainer agreement was insufficient to meet the attorney's fiduciary obligations.  Instead, the court imposed an obligation to explain the advantages and disadvantages of an arbitration provision either orally or in writing.

Although the court did not explicitly so state, its opinion suggests that an attorney cannot merely list the differences between an arbitral and judicial forum, but rather must explain how those differences might affect the client's interests in the event of a future dispute.

What Happens Outside of New Jersey?

The New Jersey Supreme Court pointed to a string of ethics opinions and case law from other states that support heightened disclosure obligations on an attorney where an arbitration provision is included in a retainer agreement.  The court also pointed to jurisdictions that require a lawyer to go even further and advise a client to seek independent counsel before agreeing to arbitrate future disputes.  Delaney closely tracks the American Bar Association's Formal Opinion 02-425, Retainer Agreement Requiring the Arbitration of Fee Disputes and Malpractice Claims, issued in 2002.

The opinion concluded that a binding arbitration provision requiring all "disputes concerning fees and malpractice claims" to be resolved via arbitration does not violate ABA Model Rule of Professional Conduct 1.4(b), "provided that the client has been fully apprised of the advantages and disadvantages of arbitration and has given her informed consent to the inclusion of the arbitration provision in the retainer agreement" and the arbitration provision does not "insulate ... or limit the liability to which she would otherwise be exposed under common and/or statutory law."

Because a lawyer has a fiduciary "duty to explain matters to a client," she must "advise clients of the possible adverse consequences as well as the benefits that may arise from the execution of an agreement" that includes an arbitration provision.  Accordingly, compliance with Rule 1.4(b) requires that the lawyer "'explain' the implications of the proposed binding arbitration provision 'to the extent reasonably necessary to permit the client to make [an] informed decision' about whether to agree to the [provision's] inclusion" in the retainer agreement.

Unlike the New Jersey opinion, the ABA concluded that just how extensie that disclosure must be will depend on "the sophistication of the client."  However, consistent with Delaney, the lawyer "should make clear that arbitration typically results in the client's waiver of significant rights, such as the waiver of the right to a jury trial, the possible waiver of broad discovery, and the loss of the right to appeal."

For these reasons, the Sills attorney's failure to explain these differences to Delaney would similarly fail under the ABA standard.  While ABA opinions are persuasive, not binding, authority on the states, they are an important road map for attorneys seeking to understand their ethical and practical obligations.

The District of Columbia takes a similar approach.  D.C. Ethics Opinion 376, published in November 2018, concludes that an agreement to arbitrate fee disputes and legal malpractice claims is otherwise permitted by the rules, provided that the lawyer has adequately informed the client about "material risks of and reasonably available alternatives to" the proposed arbitration clause such that the client is "fully informed."

That requires, at minimum, that the attorney inform the client about differences between a judicial and arbitral forum as to (1) the fees to be charged; (2) the scope of discovery; (3) a right to a jury; and (4) a right to an appeal.  Like ABA Formal Opinion 02-425, the D.C. opinion also advises that the scope of the discussion depends on the level of sophistication of the client.

What Should an Attorney Explain to a Client, and How?

While the Delaney case is only controlling in New Jersey, it provides useful guidance for attorneys hoping to create binding arbitration provisions in retainer agreements.  As the Delaney court noted, the differences between resolving an attorney-client dispute in arbitration or before a judicial forum can be communicated orally, in writing, or both.

The New Jersey Superior Court's Appellate Division stated in Delaney that it did not hold that the "reasonable explanation" required of an attorney cannot be contained in the written retainer agreement.  However, the New Jersey Supreme Court's opinion did not directly address that question, suggesting that an attorney can sufficiently explain the advantages and disadvantages of the arbitral forum within the retainer agreement.

Rather, the court held that the disclosure in the case before it — which merely recited several of the differences between a judicial and arbitral forum, with no additional explanation provided orally or in writing about these or other differences — was insufficient.  Recognizing that not all arbitration provisions are alike, the court enumerated several differences between an arbitral and judicial forum about which a client might need to be advised including the following:

1.  An arbitration resolves a dispute before a single arbitrator and not a jury of one's peers.

2.  The arbitrator's decision is final and binding with no right of appeal.

3.  Unlike court proceedings, arbitration proceedings are conducted privately and the outcome will remain confidential.

4.  Unlike court proceedings, the arbitration process offers a more limited right to discovery.

5.  The client may be responsible, in part, for the costs of the arbitration proceedings, including payments to the arbitrator.

6.  A plaintiff prevailing in a judicial forum may be entitled to punitive damages, but that right may be waived in an arbitral forum.

7.  A judicial forum generally does not permit reasonable attorney fees to be imposed against a nonprevailing client in a nonfrivolous malpractice action, whereas an arbitral forum may permit an award that imposes costs, expenses and reasonable attorney fees against the nonprevailing party.

However, the court was silent as to how an attorney is to translate that list into a compliant explanation to a client.  Practically then, attorneys should, at a minimum, explain — not merely recite — these differences to a client prior to the client agreeing to a mandatory arbitration provision.

The attorney's explanation should include, for example, that applicable arbitration procedures offer limited discovery — for instance, the JAMS procedures "limit each party to 'one deposition of an opposing [p]arty or of one individual under the control of the opposing [p]arty'" whereas judicial rules do not have a set limitation on the number of depositions available.

The attorney should also explain that, unlike a court proceeding where neither party pays for a judge's time, parties in arbitration often split the cost of the arbitrator's hourly rate, which can be costly.  And, at least in New Jersey, an attorney must provide a hard copy of the rules governing the arbitration — but note that neither D.C. Ethics Opinion 376 nor ABA Formal Opinion 02-425 imposes that requirement.  And, perhaps most importantly, an attorney must understand the relative benefits and disadvantages of arbitration so as to answer any client questions.

Conclusion

While agreements to arbitrate attorney-client disputes are routinely permitted, attorneys' ability to enforce such agreements will turn on the client's ultimate understanding of the implications of agreeing to arbitration.  Attorneys should, as always, consult the ABA Model Rules of Professional Conduct and related guidance in their jurisdiction — and when in doubt, should err on the side of explaining, both orally and in writing, the benefits and disadvantages of an arbitral forum.

Hilary Gerzhoy is an associate, and Deepika Ravi and Amy Richardson are partners, at Harris Wiltshire & Grannis LLP.