NJ Supreme Court validates use of mandatory arbitration clauses in retainer agreements

The New Jersey Supreme Court in Delaney v. Sills has validated the use of retainer agreements that provide that all disputes between attorney and client shall be subject to arbitration. On the other hand, the court emphasizes that the fiduciary nature of the attorney-client tie requires candid explanation to the client of the advantages and disadvantages of the arbitral forum.

In my opinion, mandatory arbitration agreements are inherently bad for consumers and lawyers should not be allowed to impose them on their clients.  I am glad that the court says lawyers have an obligation to explain the pros and cons of arbitration, but what good does that do when prospective clients are all but forced to accept it if they want the lawyer of their choice?  

The court summarized its decision as follows:

For an arbitration provision in a retainer agreement to be enforceable, an attorney must generally explain to a client the benefits and disadvantages of arbitrating a prospective dispute between the attorney and client. Such an explanation is necessary because, to make an informed decision, the client must have a basic understanding of the fundamental differences between an arbitral forum and a judicial forum in resolving a future fee dispute or malpractice action. . . . That information can be conveyed in an oral dialogue or in writing, or by both, depending on how the attorney chooses best to communicate it. The Court refers the issues raised in this opinion to the Advisory Committee on Professional Ethics (ACPE), which may propose further guidance on the scope of an attorney’s disclosure requirements. The new mandate will apply prospectively, except as to Delaney, who must be allowed to proceed with his malpractice action . . .. 

George Conk (a member of the ACPE) has a detailed comment on the decision here.  The Louisiana Legal Ethics Blog has a comment comparing the decision with the current state of the law in Louisiana.