The Houston (14th) Court of Appeals recently held that a fee agreement that included a mandatory arbitration agreement does not violate public policy. In this case, the attorney had included an arbitration clause requiring arbitration in Harris County under the Federal Arbitration Act (FAA)according to American Arbitration Association rules. When the client brought suit against the attorneys for malpractice, the attorneys moved to compel arbtiration under the fee agreement. The client made four arguments in response. The court first rejected the argument that the Texas Arbitration Act (TAA) should apply, instead of the FAA, because the agreement specified the FAA. The court also held in dicta that even if the TAA did apply, the arbitration clause was not invalid because the client’s malpractice claim was not a personal injury claim. Further, the court rejected the argument that the clause was unconscionable based on the special relationship between attorney and client and opined that the matter was best left to the legislature. In doing so, the court dismissed an opinion by the Texas Ethics Commission on the subject as "advisory." Finally the court rejected the argument that including the clause in the fee agreement violated Disciplinary Rule 1.08(g) by "limiting the lawyer’s liability to a client for malpractice." The court stated that "an agreement to arbitrate does not, in fact, limit a party’s liability; it merely denominates a procedure for determing that liability." Accordingly, the court granted the writ of mandamus directing the trial court to grant the motion to compel arbitration. The court’s opinion in In re Pham can be found here.
In dissent, Justice Seymore would have affirmed the trial court because the client was unaware of the clause and her counsel failed to fully explain it. The dissent would hold attorneys to a higher standard by requring counsel to fully explain the consequences of agreeing to arbitration or "offer the prospective client the opportunity to seek advice from another source before signing" the agreement. The dissent can be found here.