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Keywords

contractlawsuitbreach of contractarbitrationattorneyliabilityfiduciarymalpracticelegal malpracticearbitration clause
contractlawsuitbreach of contractarbitrationattorneyliabilityfiduciarymalpracticelegal malpracticearbitration clause

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Hodges v. Reasonover, 103 So.3d 1069, 2012-0043 (La. 7/2/12)

Facts

Jacqueline Hodges, the CEO of Med-Data Management, retained attorney Kirk Reasonover to sue MedAssets, Inc. for breach of contract after a failed asset sale. The retainer agreement included a binding arbitration clause, which the Hodges later contested after their claims against MedAssets were dismissed. They filed a legal malpractice suit against Reasonover, who argued that the arbitration clause should preclude the lawsuit. The District Court denied this, citing the lack of independent representation when the agreement was made.

Jacqueline Hodges, the CEO of Med-Data Management, retained attorney Kirk Reasonover to sue MedAssets, Inc. for breach of contract after a failed asset sale. The retainer agreement included a binding arbitration clause, which the Hodges later contested after their claims against MedAssets were dismissed. They filed a legal malpractice suit against Reasonover, who argued that the arbitration clause should preclude the lawsuit. The District Court denied this, citing the lack of independent representation when the agreement was made.

Issue

Whether the binding arbitration clause in the attorney-client retainer agreement is enforceable given the circumstances of the case, particularly regarding the adequacy of disclosures made by the attorney.

Whether the binding arbitration clause in the attorney-client retainer agreement is enforceable given the circumstances of the case, particularly regarding the adequacy of disclosures made by the attorney.

Rule

A binding arbitration clause between an attorney and client does not violate the Rules of Professional Conduct if it does not limit the attorney's substantive liability, provides for a neutral decision maker, and is otherwise fair and reasonable to the client.

A binding arbitration clause between an attorney and client does not violate the Rules of Professional Conduct if it does not limit the attorney's substantive liability, provides for a neutral decision maker, and is otherwise fair and reasonable to the client.

Analysis

The court analyzed the arbitration clause in light of the attorney's fiduciary duties, which require full disclosure of the implications of such clauses. It found that the attorney failed to adequately inform the clients about the scope of the arbitration clause and the rights they would waive by agreeing to it. This lack of disclosure rendered the arbitration clause unenforceable, despite the general favorability of arbitration under Louisiana law.

The court analyzed the arbitration clause in light of the attorney's fiduciary duties, which require full disclosure of the implications of such clauses. It found that the attorney failed to adequately inform the clients about the scope of the arbitration clause and the rights they would waive by agreeing to it. This lack of disclosure rendered the arbitration clause unenforceable, despite the general favorability of arbitration under Louisiana law.

Conclusion

The Supreme Court affirmed the lower court's ruling, holding that the arbitration clause was unenforceable due to the attorney's failure to provide necessary disclosures to the clients.

The Supreme Court affirmed the lower court's ruling, holding that the arbitration clause was unenforceable due to the attorney's failure to provide necessary disclosures to the clients.

Who won?

The Hodges prevailed in the case because the court found that the arbitration clause was unenforceable due to inadequate disclosures by the attorney.

The Hodges prevailed in the case because the court found that the arbitration clause was unenforceable due to inadequate disclosures by the attorney.

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