Legal Malpractice Law Review : Professional Responsibility Case Summaries & Commentary : Bennett J. Wasserman : LegalMalpractice.com : Lawyer Malpractice & Legal Ethics

Alford v. Bryant, 137 S.W.3d 916 (Tex. App. 2004)

TX: Underlying  mediation

Student Contributor: Megan Diodato

Facts:  The client hired attorney to represent her in litigation against a contractor. The suit settled at mediation where the parties entered into a settlement agreement. All claims between client and the contractor were settled with the exception of attorney’s fees and costs in the underlying litigation. Attorney’s fees and costs were left to the trial court to determine. The client sued attorney for malpractice after the court ruled that the parties would be responsible for its own costs and attorney’s fees. The client alleges malpractice for the failure to disclose the risks and benefits of settlement, including that the trial court could deny attorney’s fees. The attorney claims that the client was fully disclosed the risks and benefits of settlement, including the risk that the court could deny attorney’s fees. The attorney claims that the only people privy to the discussion and disclosure were attorney, client and the mediator. The court did not allow the mediator to testify on the basis of the confidentiality provisions contained in the statute governing mediations.

Issue: Whether the mediator should have been allowed to testify to the substance of the disclosure made during mediation between attorney and client?

Ruling:  The policy of this state is to encourage peaceful resolution of disputes through mediation and confidentiality is critical to the success of the mediation process. One cannot search relief in court on the basis of privilege and deny a party the benefit of evidence that would materially weaken or defeat claims against her. Before a party may be found to have waived an asserted privilege the court must determine that: the party asserting privilege is seeking relief from the court, the privileged information sought is all likely outcome determinative of the suit, and disclosure of the confidential information is the only means by which the aggrieved party may obtain evidence. The client sought relief in the form of a money judgment from the attorney. The mediator’s testimony in this case would be crucial in establishing the advice rendered, or not rendered, by attorney to client. Finally, due to the fact that only those three were present, the mediator’s testimony is the only means attorney can obtain and present unbiased and critical information to the court. It is only fair to require the client either to abandon her claim of confidentiality or abandon her claim of legal malpractice.

Lesson: The confidentiality privilege in mediation may be waived where the testimony is outcome determinative and the only means opposing party may obtain evidence. 

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Wallenstein v. Cohen, 45 A.D.3d 674, 845 N.Y.S.2d 428 (App. Div. 2007)

NY Underlying  Fee Arbitration

Student Contributor: Maninder (Meena) Saini

Facts: Defendant-attorneys represented the plaintiff-client in a matrimonial action that resulted in a judgement for divorce pursuant to a stipulation of settlement. The plaintiff then complained to the grievance committee that the defendants over-charged her for their services and did not protect her interests. The case was transferred to Fee Arbitration. During the arbitration, it was found that defendants were entitled to the fees, which they sought. Two years later, the plaintiff commenced an action, alleging that defendants charged excessive fees and committed legal malpractice in representing plaintiff.

Issue: Can plaintiff re-litigate the issue of excessive attorney’s fees that was formerly resolved in arbitration?

Ruling: The Appellate Division held in this case that the action was barred by fee arbitration award and by collateral estoppel because all of the allegations in the complaint were “reasonably and plainly comprehended to be within the scope of the dispute submitted to arbitration.”

[T]he determination fixing the value of the defendants' services necessarily determined that there was no malpractice.

Lesson: If the excessive fee allegation in the complaint was resolved by previous arbitration, the fee awarded to the attorney during arbitration may ultimately conclude that there is no malpractice. This is a fact sensitive ruling.  The  jurisdiction of the Fee Arbitration Committees in New Jersey, however, does not extend to deciding issues of legal malpractice, even if they are raised in the fee arbitration proceeding. 

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Kamaratos v. Palias, 360 N.J. Super. 76 (App. Div. 2003)

Student Contributor:  Melissa Goldberg

NJ Underlying Commercial Action

Facts: The Plaintiff was a minority shareholder in a corporation and retained Defendant attorney to represent its interests in  a dispute with the majority shareholder. The retainer agreement included an arbitration provision whereby  Plaintiff agreed that any dispute regarding fees would be resolved by binding arbitration between the parties in accordance with the New Jersey Uniform Arbitration Act. As litigation continued, Plaintiff challenged bills submitted by the attorney. Defendant filed an attorney’s lien to recover the unpaid legal fees. Plaintiff filed for fee arbitration  provided by NJ Court Rule 1:20A, but the fee arbitration committee declined  to hear it given the amount in controversy (usually more than $100,000.)  Plaintiff then argued that the retainer clause mandating arbitration of a fee dispute was against public policy and unenforceable.

Issue: Is a mandatory arbitration clause for fee disputes in a retainer agreement  enforceable?

Ruling: Yes. The attorney-client relationship does not inherently mandate a blanket preclusion of the arbitration of fee disputes. However, in the instant case, the arbitration clause was not binding on the Plaintiff, since the court did not believe that the retainer agreements clearly articulated the consequences of an agreement to arbitrate a dispute over legal fees.

Lesson:  In making a decision concerning the enforceability of arbitration clauses in retainer agreements, courts will consider:

•  the circumstances in which the agreement was made;
• the parties’ past practices and agreements
• the extent to which the parties actually negotiated the agreement; and 
• the client's level of sophistication or experience in retaining and compensating lawyers.

In addition, the prospective effect of an agreement to arbitrate must be clear to the client before it will be held to be binding upon him, e.g.,

• no right to a jury trial,
• no right to appeal,
• the binding nature of the arbitration award.

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