In your letter of January 27, 1988, you have asked for an opinion from the Professional Guidance Committee as to the appropriateness of having an arbitration agreement with each of your clients. As set forth in your letter - "the agreement would be very broad, will provide that in the event of any dispute or controversy between the client and [your]self over fees, alleged negligence or any other matter, the dispute will be settled by arbitration in accordance with the then existing rules of the American Arbitration Association."
As you know, effective April 1, 1988, a new set of ethical guides will be implemented in Pennsylvania, known as the Rules of Professional Conduct. As your proposed conduct will undoubtedly take place after April 1, 1988, we have limited our opinion to an analysis of these new rules rather than the existing Code of Professional Responsibility which will no longer be effective after April 1, 1988.
Our reading of your proposed arbitration agreement would make the arbitration procedure compulsory and unappealable as of right. The client, therefore, would be waiving his/her right to a jury trial.
Rule 1.5 addresses the considerations between a lawyer and client as it relates to fees. It does not address the broad range of issues covered by your proposed arbitration agreement. However, as to the arbitration of fee disputes, the Comment to Rule 1.5 encourages arbitration or mediation of such disputes. Nevertheless, the Comment does not seem to address the compulsory (final) nature of the arbitration procedure you propose.
A lawyer, of course, has a fiduciary obligation to those who seek his/her advice. Fundamental to that advice is the notion that the lawyer will render independent judgment without any personal conflicting interests. Rule l.8(a) sets forth certain guidelines when there is, or may be, a conflict of interest between an attorney and his/her client. That section is applicable here because of the potentially conflicting interests which you and your clients might have as to a dispute over the nature of services which are rendered.
The importance of the right to a jury trial in our system of justice, was a reason for the Committee's view that when a lawyer is contractually requiring his/her client to waive the right to a jury trial, the lawyer is effectively "enter[ing] into a business transaction with the client. Thus, Rule 1.8(a) would control.
In view of the foregoing, it is the opinion of the Committee that your proposed arbitration arrangement is ethically permitted as long as the following conditions are met:
1. The client is advised in writing, in simple direct language, that by agreeing to arbitration the client is waiving the right to trial by jury;
2. The client is advised to seek the advice of independent counsel with regard to the waiver of a jury trial, and is given a reasonable opportunity to seek such advice; and,
3. The client consents in writing.
We hope that the foregoing will be of use to you in formulating your documentation with your clients.