Federal Appeals Court Tackles Competing Arbitration Provisions

In Johnson v. Drake, a divided Sixth Circuit upheld an attorney’s arbitration award against a former client arising out of representation in hip implant products liability litigation. The parties’ engagement letter provided for arbitration of fee disputes, and, following the client’s replacement of the attorney with other counsel, the attorney successfully pursued arbitration to recover his fee from proceeds recovered under a master settlement agreement.

The point of contention was the existence of a separate arbitration provision in the master settlement agreement, which the client contended trumped the engagement letter’s arbitration agreement. Thus, the issue was not one of whether the dispute should be arbitrated, but under what agreement.

The court’s majority determined that the engagement letter provision controlled, since, by the time the settlement was reached, the original attorney was not involved, and thus he had not agreed to the subsequent arbitration provision. The competing view was that, since the damages recovery that formed the basis of the attorney’s claim to a contingency came by virtue of the master settlement agreement, the attorney should be subject to the arbitration protocols embodied in the settlement.

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