NJ Appeals Court refuses to enforce law firm's arbitration provision

A-1726-17T4 - BRIAN DELANEY VS. TRENT S. DICKEY, ET AL. (C-000214-17, ESSEX COUNTY AND STATEWIDE)

The Appellate Division of the Superior Court of New Jersey has reinstated a  malpractice claim and fee dispute against a leading firm.  The firm's retainer agreement adopted the rules of the private mediation service JAMS and provided for private arbitration of both fee disputes and malpractice claims against the firm.

A couple of excerpts from the unpublished decision by the three judge panel will capture the heart of the case:

For his part, plaintiff averred in a verified complaint that no one from Sills [Cummis, et al.] "went over the arbitration provision with [him]." He also averred that no one from Sills explained the nature of the costs associated with the arbitration, including that they could "easily exceed $20,000" and could be awarded against him. Nor did anyone from Sills point out that the arbitration fees and costs "greatly exceeded" filing fees for a Superior Court action, or that under the retainer agreement plaintiff could be held liable for Sills' costs and attorneys' fees, depending on how the arbitrator ruled. Plaintiff asserted that had he been "made aware of the inequities and costs associated with proceeding with arbitration, as well as the fact that he was constitutionally entitled to have a jury decide issues related to malpractice, he would have never signed the initial retainer agreement in the form presented by [Sills]," if he signed it at all.

Our holding is narrow. We do not hold that all retainer agreement clauses that mandate  arbitration of legal malpractice claims are per se invalid. Nor do we hold that the "reasonable explanation" required of an attorney by RPC 1.4(c) cannot be contained in the written retainer agreement. Rather, we hold that when an attorney incorporates by reference in a retainer agreement a document that contains material terms concerning mandatory arbitration of legal malpractice claims, does not provide the incorporated document to the client, gives the client no explanation about material terms contained in the document, and asks the client to sign the retainer agreement without reading the incorporated documents, the agreement runs afoul of the RPCs and is invalid.