Canadian Lawyer InHouse

31 CANADIANLAWYERMAG.COM/INHOUSE MARCH 2016 L a w D e p a r t m e n t M a n a g e m e n t just a one-way clause — it's unilateral; all it allows the parties to do is to deal with whether or not the fees are justified, were they reasonably directly incurred, and are they fair in the circumstances," he says. "On the other hand, the client may not want to pay the fee because they believe the law firm was negligent, or worse, there may have been a fraud or misrepresentation." Pontello says that if the arbitration clause is written too narrowly, the arbitrator might say he or she does not have jurisdiction to deal with counterclaims and those claims require a separate hearing. "That kind of defeats the purpose," he says. "You're paying for two dispute pro - ceedings and they're related. The arbitrator may lack proper context to make a decision. If the arbitrator decides not to deal with the negligence claim, then the negligence claim needs to be dealt with in the court and the judge may not be able to hear evidence with regards to whether the fee was written down and so on," he continues. "If I were a client, I'd ensure that the ar - bitration clause allows the arbitration of all disputes arising from the representation and it might even say, 'Without limitation, rea- sonableness of fees, negligence, gross negli- gence, fraud, mis- representation, etc." LITTLE APPETITE IN CANADA Despite acknowledging the efficien- cies and cost-saving benefits of arbitration, several Canadian in-house counsel say they've so far seen little need for including such a clause. After flipping through one of her retainer agreements, Tesla points out a part where it says the parties are to resolve all disputes at Ontario courts. "There's no mention of an ar - bitration clause," she says, adding that, at the end of the day, being transparent and clear upfront is the basis for a good relationship. "If you have a good relationship, any inconsistencies, questions, or sur - prises get resolved rather quickly. So we never felt the need for a for- mal arbitration clause," she adds. Still, Tesla says she sees value in adding arbitration clause retainer agreements for confidentiality as well as efficiency and cost. "It might be a much more efficient pro - cess if it were to come to that," she says. "It's something we may want to consider going forward." Pontello says that although in-house counsel know the advantage of putting ar - bitration clauses in agreements, they're just not emboldened enough to do it. "I think what's behind it is that we're a very traditional practice and we have difficulty letting go of the tried and true, and if we try a different route, we run a risk, an unknown risk we can't quantify because we don't have enough experience with it," he says. Pontello goes on to say that arbitration clauses are not included in retainers for the same reason lawyers are reluctant to offer alternative fee structures. "My evidence for that is that lawyers and clients will sit down either in the beginning of their engagement when they first decide that they're going to work together or at some point, maybe even midstream, they might say rather than just doing an hourly billing, as we've always done, why don't we try a fixed fee or premium-based billing, or let's do it based on a success fee, or what- have-you," he adds. "But at the end of the day, the parties usually just end up saying, 'OK, well let's just talk about it next year.'" The same is true when it comes to arbitra - tion, Pontello says. "We consider them, but often they're just removed because we just say, 'Well, let's just leave it to the courts.'" But that's not why Mary Martin, executive vice president and general counsel at Metro - linx, says she's not in any hurry to push for ar- bitration clauses in her retainer agreements. "I understand the pros of arbitration gen- erally, including confidentiality, expeditious resolution, expertise of the arbitrator, poten- tial cost savings, and customized processes. These are advantages [that] always, at least potentially, exist for all dispute resolutions through arbitration," she says. "That said, I also see significant downsides to including an arbitration agreement in a legal retainer." Martin says "it is unlikely" she will be in - cluding this type of clause in legal retainer agreements. "I choose my law firms, and continue to work with such firms, based on a relationship of trust." She adds that Metrolinx has worked with its key legal service providers for some time and developed close working relationships with them. If she feels a law firm is over - charging her, she sits down with its relation- ship partner and works it out. "If we cannot resolve these issues, we both lose. The law firm will not get the benefit of our continued work on future matters. We will lose the benefit of a part - nership with a firm, which has come to un- derstand our business," Martin adds. "In other words, the interests of Metrolinx and our key firms are aligned. I believe this is more powerful than any retainer provision. I dislike the idea of introducing an element of formality into what is fundamentally a re - lationship of trust and mutuality." The same strategy "virtually always" works for Dean Scaletta, director of infor- mation and litigation at Manitoba Public Insurance legal department. Arbitration clauses aren't something he's currently con- sidering, but he could see them coming in handy when the stakes are very high. "If you're getting bills that are in the mil- lions, maybe getting an arbitration clause is probably a good thing," he says. "I can see that if you're involved in a major legal mat- ter, whether it's a litigation, a merger, or an acquisition, the last thing you want to have happening is a very public fight with your legal counsel over fees." IH If we cannot resolve these issues we both lose. The law firm will not get the benefit of our continued work on future matters. We will lose the benefit of a partnership with a firm, which has come to understand our business. MARY MARTIN, Metrolinx '' ''

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