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A federal court in Arizona ruled that a broadly worded arbitration agreement in a legal representation letter applied to all malpractice claims brought by the client against its counsel.
In MCA Financial Group, LTD v. Gardere Wynne Sewell, L.L.P., No. 05-2562-PHX-MHM, 2007 WL 951959 (D. Ariz. Mar. 27, 2007), MCA acted as trustee for debtor Fourthstage Technologies (Fourthstage) in a bankruptcy proceeding. Fourthstage accused its legal counsel, Gardere Wynne Sewell (Gardere), of various forms of malpractice.
Gardere asked the Court to compel arbitration of these claims, based upon a broadly worded arbitration agreement in a representation letter signed by the parties. However, Fourthstage argued that legal malpractice claims were not arbitrable, and that the arbitration agreement did not apply to alleged malpractice that occurred prior to the signing of the agreement.
The Court rejected both arguments and compelled arbitration of the malpractice claims. First, the Court noted that as long as there was no limit to overall liability, Arizona law allows attorneys and fully informed clients to enter into agreements to arbitrate malpractice disputes.
Second, because there was no explicit language limiting the scope of the agreement only to issues of representation arising after signing, the Court ruled that all issues arising out of Gardere's representation were subject to arbitration, regardless of when they occurred.
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