Opinion ID: 62956
Heading Depth: 2
Heading Rank: 1

Heading: Is the forum-selection clause enforceable?

Text: Two different reasons have been offered to rebut the presumption that the forum-selection clause here is enforceable  that it was the result of overreaching and that it is against Louisiana public policy. We address each in turn. The district court invalidated the forum-selection clause because it determined that it was the result of overreaching. The court reasoned that the agreement at issue consummated a business transaction between the parties and therefore, Belcher  as an attorney  had a professional obligation to advise the Ginters that they should seek independent counsel. Because Belcher did not do that, the district court held that the forum-selection clause was the result of overreaching. To support its conclusion, the district court relied on Louisiana State Bar Association v. Bosworth, where the Louisiana Supreme Court upheld the suspension of an attorney who had entered into a loan agreement with a current client without advising the client to seek independent counsel. [7] According to the court, [w]hen a lawyer enters into a business transaction with his client where they have differing interests and when the client expects the lawyer to exercise his professional judgment in that transaction for the protection of the client, the lawyer should at least advise the client to seek outside counsel. [8] But the agreement at issue in this case is not a separate business transaction between an attorney and client requiring application of the business-transaction rules; instead, all parties agree that it is merely an agreement consummating the attorney-client relationship. [9] The Ginters had no reason to believe that Belcher was using his professional judgment to zealously protect their interests in the very agreement that memorialized their relationship. They might as well argue that Belcher had to look after their interests in determining how much he should be paid. Belcher did not overreach by failing to advise the Ginters that they should seek independent legal counsel before signing the attorney-client agreement. The Ginters argue that even if the forum-selection clause was not the result of overreaching, it is unenforceable because it violates Louisiana public policy. The Ginters contend that the clause is a limitation on Belcher's malpractice liability, and Louisiana forbids its lawyers from entering into such agreements unless the client is independently represented in making the agreement. [10] Here, the Ginters were not separately represented, so if a forum-selection clause is a limitation on malpractice liability, it would be unenforceable as a violation of Louisiana public policy. We do not see this forum-selection clause as a limitation on malpractice liability. The thrust of the Ginters' argument is that a forum-selection clause limits Belcher's liability because it forces the Ginters to litigate in a forum favorable to Belcher. The clause, if enforced, would require the Ginters  out-of-state plaintiffs  to file suit in Louisiana state court against a Louisiana attorney. The Ginters contend that as out-of-state plaintiffs they would be at a disadvantage to Belcher in Louisiana state court. Indeed, the need for diversity jurisdiction rests, in part, on the recognition that a state tribunal might not be impartial between [its] own citizens and citizens of another state. [11] The potential advantage to Belcher is underscored by the fact that he is a local attorney. Thus, the Ginters argue, they are less likely to recover in state court, and Belcher's attempt to have this case litigated in state court is therefore a limitation on his malpractice liability. Louisiana law is silent on the contours of what constitutes limiting malpractice liability. Nevertheless, we have some conceptual difficulty in stretching the concept of limiting liability to cover situations where an attorney selects a forum where he or she might have some conceivable advantage. Our skepticism is supported by examining how other jurisdictions have handled a related issue: whether including mandatory-arbitration provisions (a type of forum-selection clause) in an attorney-client agreement is a form of limiting malpractice liability. While no Louisiana authority has addressed this issue, we find Maine's treatment instructive. Maine's Professional Ethics Commission, in opining that attorneys may include arbitration provisions in their fee contracts without running afoul of their obligation not to include limitations on their malpractice liability, stated the following: An agreement to limit liability is, in substance, an agreement that says that even though the lawyer errs in fulfilling certain duties to the client, the lawyer will not be liable to the extent that common and statutory law would otherwise make the lawyer liable. Perhaps if a particular forum had rules that themselves limited liability, then selection of such a forum could fairly be said to limit liability indirectly. Or if the arbitration agreement were a sham, such as an agreement to arbitrate before the lawyer's partner, then one could argue that its practical effect was to limit liability. [12] Three members of the Commission dissented, arguing that arbitration provided subtle advantages to an attorney, which potentially limit the attorney's liability for malpractice .... [13] We find the majority's reasoning persuasive and believe Louisiana courts would as well. A mandatory-arbitration clause (or any forum-selection clause) might in a particular case give the lawyer an advantage over the client. But a clause that has only the possibility of reducing by some small percent the chances of an attorney's being found liable is categorically different from a clause that truly limits liability  for example, a clause that either directly limits liability (e.g., a hold-harmless clause) or a clause that so handicaps a client in a malpractice suit as to be a practical limitation on liability (e.g., a clause requiring suit to be filed within days of the malpractice's occurring). Other jurisdictions have recognized that requiring a client to arbitrate is not per se a limitation on liability because requiring arbitration does nothing more than set the litigation arena. Connecticut, for example, has stated that an arbitration clause addresses only the forum for adjudication of a malpractice claim[] and has no limiting effect on the lawyer's liability to the client. [14] Ohio has noted that an arbitration provision does not limit malpractice liability because it shifts resolution of the legal malpractice dispute from a court of law to a different forum. [15] The New York and Oklahoma ethics commissions have come to similar conclusions, although they also sensibly require the attorney to explain to the client the numerous distinctions between arbitration and court proceedings. [16] The Ginters attempt to distinguish this authority by pointing out that arbitration is generally seen as beneficial to both sides because of its streamlined procedures. But the very fact that arbitration has such different procedures makes including an arbitration provision into an attorney-client agreement more, not less, objectionable. By agreeing to arbitration, clients are unlikely to be aware of the fact that they are waiving important rights, like the right to appeal and the right to a jury trial. Indeed, as noted above, the New York and Oklahoma ethics commissions have relied on this concern to conclude that their attorneys, before an including an arbitration clause in their fee agreements, must explain to their clients the substantial differences between arbitration and normal litigation. The differences between state and federal court, however, are not nearly as substantial. Thus, there is a much stronger case for upholding a forum-selection clause like the one at issue in this case than an arbitration clause, where the risk of an attorney's taking advantage of a client is greater. From all of this we can distill a general rule that including a forum-selection clause into an attorney-client agreement is usually not a limitation on malpractice liability. Instead, it is only a limitation when the selected forum has rules expressly limiting liability or if litigating in that forum would be so unfair as to be a practical limitation on liability. Here, there is no suggestion that litigating in Louisiana state court would result in an express limitation on liability  Louisiana substantive law will govern this dispute whether it is in federal or state court. The suggestion here is simply that Belcher would gain a subtle strategic advantage by being able to defend himself in state court. But the connection between that advantage and limiting liability is too remote to be considered a practical limitation on Belcher's liability. Perhaps if Belcher had selected a far-flung forum to discourage litigation, including the clause could be viewed as a limitation on liability. Belcher, however, has selected an entirely reasonable forum in light of the fact that the fee agreement at issue governed an adoption that would involve events that would take place mostly in Louisiana and would be governed by Louisiana law. The Ginters have not met their heavy burden to establish that the forum-selection clause here should be held unenforceable.