New Mexico Court Rejects Bare Bones Arbitration Clause in Legal Fee Agreement

Castillo v. Arrieta, NM: Court of Appeals 2016 – Google Scholar:

The Court of Appeals of New Mexico has voided an arbitration clause on the ground that the client did not give his informed consent to arbitration. The clause was bare bones and stated:

“ARBITRATION CLAUSE: Should any dispute arise, Client and Attorney agree to submit their dispute to arbitration.”

The New Mexico Court found fault with this clause because it did not explain to the client that he was waiving his right to a jury trial and possibly waiving his right to broad discovery.  The court’s opinion provides in relevant part:

Plaintiff signed the fee agreement, affirming that he “read the foregoing terms and agree[d] to them without reservation.” There is no other language in the agreement that discusses the scope or meaning of the arbitration clause or provides any explanation of arbitration generally. There is no indication in the agreement that Plaintiff was waiving his right to a jury trial should he sue his attorney for malpractice. Nor is there any suggestion that Plaintiff seek advice of independent counsel before agreeing to such a waiver.
{24} Here, the text of the clause itself is no help. It declares in a single sentence only that client and attorney agree to submit “any dispute” to arbitration. We have already held that this is technically sufficient to apply to malpractice claims. However, it is not sufficient to inform the client “of the material advantages and disadvantages of the proposed course of conduct.” See id. If Plaintiff truly was never warned that he “was waiving [his] right to a trial by jury” if he sued his attorneys for malpractice, as he stated in his affidavit, then inclusion of such a broadly worded and unexplained material term was an overreach by his attorneys that will not be enforced in this Court.

The court remanded the case to determine if the lawyers sufficiently explained the arbitration clause to the client. 

For the practicing lawyer who wishes to use arbitration, this case is instructive. The case suggests that the arbitration clause needs to be more detailed and needs to explain what the client is giving up by agreeing to arbitration. Further, the clause should recommend that the client consult with another attorney before signing.

Edward X. Clinton, Jr.

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