Arbitration Clause Must Be Explained

The New Mexico Court of Appeals has held that a broad arbitration agreement drafted by an attorney and signed by the client is enforceable if there is informed consent.

In 2006 Plaintiff Ray Castillo signed a document with a provision requiring him to arbitrate “any dispute” arising between him and his attorneys, who are now defendants in this case. The present lawsuit—alleging legal malpractice and related  claims—can only proceed to a jury trial if, as a matter of contract, the arbitration clause does not apply, or if it is otherwise unenforceable.

An arbitration clause in a fee agreement between attorney and client implicates  unique legal and ethical concerns that are presently being debated, with other jurisdictions taking varied approaches to enforceability..For the reasons discussed in this Opinion, we hold that the  plain text of this unusually broad arbitration provision reasonably applies to Plaintiff’s malpractice claim, but that it is unenforceable if it was signed without  Plaintiff’s informed consent. We reverse the district court’s decision compelling arbitration and remand for proceedings to determine the circumstances surrounding negotiation of the fee agreement.

The court on remand must determine whether the law firm explained the implications of the arbitration clause

If Defendants did not inform Plaintiff that the agreement constituted a waiver of important rights, including  the right to a jury trial, potentially the right to broad discovery, and the right to an appeal on the merits, then Defendants’motion to compel arbitration should be denied.

(Mike Frisch)