Motion to Compel Arbitration Denied

Bloomberg BNA reports that a Texas law firm’s retainer agreement was procedurally unconscionable because the client “was not informed of the advantages or disadvantages of arbitration” including the requirement that arbitration must be brought in Texas.

According to Bloomberg,

After seeing an Internet advertisement, Washington residents Sherrie K. Gorden and Debbie K. Miller separately enrolled in a debt settlement program administered as a joint venture by Texas attorney Lloyd Ward, his law firm and other parties (collectively, LWG). The clients signed a service contract that included a retainer agreement. The contracts stated that the agreements were governed by Texas law, and that any disputes relating to them would be resolved through binding arbitration in Texas. Those provisions were not discussed with the clients, the court said.

After failing to settle the dispute between the attorney and the client, the attorney moved to arbitrate the claim. The trial court denied the motion, ruling that the provision was unconscionable and the appellate court agreed. According to the appellate court, under Washington law, an arbitration agreement between an attorney and client is allowable only if the client has been given “sufficient information to permit her to make an informed decision about whether to agree to the inclusion of the arbitration provision in the retainer agreement.” The appellate court concluded:

“Here, no attorney or attorney’s representative discussed the arbitration provisions with Ms. Miller, or advised her of the rights at stake,” Brown said. “She was not counseled or advised regarding the consequences of relinquishing the legal protections provided by Washington law or of the protections provided by Texas law. Ms. Miller was not informed of the advantages or disadvantages of arbitration, including the requirement she must bring arbitration claims in Texas.”

 

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