Testifying before a congressional committee considering the Arbitration Fairness Act of 2007, Paul Bland spoke for many attorneys when he explained the problems created by mandatory arbitration clauses that seemingly come with everything from phone service to a new car.
The agreements, which prevent consumers from filing lawsuits in the event of a dispute, strip constitutional rights from consumers and often without them even knowing what has happened, said Bland, staff attorney for the public interest law firm Public Justice.
Class action attorneys are forced to overcome such clauses in order to file suits on behalf of large numbers of consumers. Many argue in favor of the Arbitration Fairness Act, which would make such clauses unenforceable.
But now it appears that some class action attorneys may be employing the same kinds of mandatory arbitration agreements with their clients that they argue against on behalf of their clients.
According to published reports, the O'Quinn Law Firm of Houston, one of the nation's most-aggressive firms representing class action plaintiffs, had required clients in a successful 1999 breast implant class action to agree to mandatory arbitration. When the former clients disputed the firm's fees, they took their complaints to an arbitration panel.
The panel recently ordered the firm to pay $35.7 million to former clients, saying the firm improperly included such costs as professional association dues, flowers, fundraising, other lawyer fees, and overhead.
The firm did not return calls for comment on its use of the arbitration clauses.
St. Louis area law firms that have represented plaintiffs in class actions also did not return calls to determine whether they use the clauses or would find the use of such clauses by attorneys legitimate.
Peter Joy, a law professor at Washington University in St. Louis, said Bar committees nationally have found arbitration a useful tool in settling fee disputes. The pivotal point is whether clients have a realistic option not to use the arbitration procedures if they decide to proceed with their case.
"Attorneys can't require (clients) to accept arbitration as a condition of the fee agreement," Joy said. "There are a lot of states where the ethics committee would frown on that."
"The big issue on any arbitration clause comes down to the underlying fairness of the arbitration process and whether the client must take it or leave it," he said.
There are settings in which mandatory arbitration clauses are appropriate, said Public Justice's Bland. In cases where two parties are essentially equals, such as large companies and unions, arbitration may be an effective and efficient solution, he said.
Although Bar committees in several states have considered the ethical questions surrounding mandatory arbitration clauses, the clauses are not considered unethical, Bland said.
"It would be hard to represent a client and get them off the hook for a mandatory arbitration clause based on an ethics rule," he said.
Bar committees generally found that such clauses did not present an ethical question as long as clients had a reasonable alternative, he said.
Bland and others representing attorney organizations said they don't know how prevalent such agreements are between attorneys and class members. Most believe the practice is not common today but would be troubling if it were to become standard practice for attorneys.
"I haven't heard of it much," Bland said. "It certainly seems to be to be very contradictory with the views that consumer lawyers have been expressing.
"If the purpose of it is to protect the lawyer from the clients, then that is very, very, very troubling to me. If the purpose is to set you some kind of system where there is going to be a fair arbitrator making the decision, it might well be a good choice."
Bland was harshly critical of the clauses during his congressional testimony. The clauses, he said, are "cast in a dense and cryptic legalese incomprehensible to lay persons (and even many lawyers), set forth in minuscule print often on the back side of a document and buried in the center of a mailing that contained a variety of other pieces, most of which were solicitations and advertisements unlikely to be read by most recipients."
The clauses are most subject to challenge when they are contracts of adhesion, essentially presented to clients or customers as a take-it-or-leave-it proposition in such contracts as credit card agreements. Attorneys have successfully used that characteristic to overturn clauses and allow class action cases.
Other attorney groups said they also believe the clauses are not commonly used by attorneys, but they are concerned the practice may become more popular.
Spokesman Larry Akey of the Institute for Legal Reform in Washington, D.C., said the Texas case has led his organization to begin investigating lawyers' use of mandatory arbitration clauses.