Michigan attorneys should already know that Michigan Rule of Professional Conduct (“MRPC”) 1.8(h)(1) prohibits a lawyer from making an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement. But what, if any, effect does this rule have on an attorney’s ability to contract with his or her client to resolve future disputes through arbitration, including claims of malpractice? In the for-publication per curiam opinion in Tinsley, et al v Yatooma, et al,Docket No. 349354 (Mich. Ct. App. Aug. 13, 2020), the Michigan Court of Appeals took up this issue and left open a question of whether MRPC 1.8(h)(1) applies to arbitration agreements at all.
In Tinsley, plaintiffs retained the Yatooma defendants to prosecute a legal malpractice claim against plaintiffs’ prior attorneys. In doing so, plaintiffs entered into a retainer agreement that contained a provision for binding arbitration, which encompassed any “claim of attorney malpractice” plaintiffs may have against the Yatooma defendants. The retainer agreement also contained the following conspicuous language: “THE CLIENT UNDERSTANDS AND ACKNOWLEDGES THAT, BY AGREEING TO BINDING ARBITRATION, THE CLIENT WAIVES THE RIGHT TO SUBMIT THE DISPUTE TO A COURT FOR DETERMINATION AND ALSO WAIVES THE RIGHT TO A JURY TRIAL OR TO PROSECUTE A CLASS ACTION.”
After settling their underlying malpractice claim against their former attorneys, the plaintiffs in Tinsley claimed that they had been forced to settle for less than their claims were worth and decided to pursue yet another malpractice action against the Yatooma defendants. But rather than commencing arbitration in accordance with the retainer agreement, the plaintiffs filed suit in Wayne County Circuit Court. Defendants then moved for summary disposition under MCR 2.116(C)(7) based on the parties’ arbitration agreement. Plaintiffs responded by arguing that the arbitration provision was unenforceable because the Yatooma defendants failed to fully inform them of the consequences of the arbitration provision or advise plaintiffs in writing to consult with independent counsel concerning the provision in violation of both MRPC 1.8(h)(1) and Ethics Opinion R-23 (July 22, 2016). Oddly, plaintiffs also submitted affidavits of their independent counsel who averred that he had not discussed the arbitration provision with plaintiffs because the Yatooma defendants did not advise plaintiffs that such a discussion was warranted. The trial court agreed with the Yatooma defendants and granted their motion. It reasoned that plaintiffs had voluntarily signed the agreement with a conspicuous and enforceable arbitration provision, and that the plain language of MRPC 1.8(h)(1) and Ethics Opinion R-23 did not preclude enforcement of the arbitration provision because plaintiffs consulted with independent counsel. Plaintiffs appealed.
The Michigan Court of Appeals affirmed summary disposition pursuant to MCR 2.116(C)(7). While acknowledging the line of case law holding that contracts made in violation of the MRPC are not enforceable, the Tinsley Court reasoned that “we are not entirely convinced that MRPC 1.8(h)(1) even applies to an arbitration provision, considering that it specifically concerns an agreement prospectively limited the lawyer’s liability to a client for malpractice,” and “we question whether arbitration actually limits liability.” The Court also dispensed with plaintiffs’ arguments based on Ethics Opinion R-23, noting its prior holdings that “[e]thical opinions clearly are not binding on this Court and provide little, if any, precedential value, especially when statutory and judicial rules are completely dispositive with regard to the issues that the parties present.” (Citations omitted). Furthermore, relying on Watts v Polaczyk, 242 Mich App 600, 607 (2000), the Court also reasoned that it had previously found an arbitration provision “fully enforceable” notwithstanding “various ethics opinions that were inconsistent with the ruling and regardless of the fact” that the requirements of MRPC 1.8(h)(1) had not been complied with.
In the end, the court in Tinsley held that even if MRPC 1.8(h)(1) were to apply to an agreement to arbitrate, its requirements had been satisfied. The Court held that facts in Tinsley were more compelling than in Watts, because the natural-person plaintiff was a sophisticated businessman who had confirmed engagement of independent counsel before he signed the agreement voluntarily. Moreover, nothing in the plain language of MRPC 1.8(h)(1) suggested that the Yatooma defendants were required to specifically instruct plaintiffs to consult with independent counsel about the arbitration provision. Rather, Tinsley consulted independent counsel and nothing more was required by the terms of MRPC 1.8(h)(1). Similarly, even if Ethics Opinion R-23 were binding on the Court, it “merely requires, as one alternative, that a client consult with independent counsel before signing the fee arrangement; that is what occurred here.” Tinsley is illuminating on a few levels. It confirms that practitioners may include an arbitration provision in an engagement agreement and not violate MRPC 1.8(h)(1), provided that the client consult with independent counsel. But potentially further-reaching is the Court’s signaling that MRPC 1.8(h)(1) may not even apply to attorney-client arbitration provisions that do not limit an attorney’s liability for malpractice. It is the latter that may explain the Tinsley Court’s express suggestion for “contemplation by the State Bar of Michigan and our Supreme Court of an addition to or amendment of MRPC 1.8 to specifically address arbitration clauses in attorney-client agreements.”