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Commonwealth of Massachusetts


April 2005

WHY NOT ARBITRATE FEE DISPUTES?

by
Kenneth Luke and Alison Mills Cloutier

As happens about 600 times a year, a consumer recently contacted the Attorney and Consumer Assistance Program (“ACAP”) at the Office of the Bar Counsel with a fee-related complaint about her lawyer. She had fired her first divorce lawyer because she felt he had not adequately communicated with her and she was disappointed with the temporary orders that she felt that he had pressured her to accept. Successor counsel suggested that she not pay the first lawyer’s bill because the second lawyer believed that the first lawyer had not done that much work on the case. Several months later, the first lawyer sued the client for legal fees in the district court. The client, now infuriated, called bar counsel.

Where litigation is pending, bar counsel might defer to the court to adjudicate the case and suggest that the client contact us again if the court finds that the lawyer made misrepresentations on the bill or charged a clearly excessive fee. If there are other allegations of misconduct, however, bar counsel might investigate and prosecute any disciplinary violations, and discipline might result. See e.g., Matter of Getch, 15 Mass. Att’y Disc. R. 214, 216 (1999)(disbarment for overcharging a trust and for other misconduct); Matter of Aronson, 14 Mass. Att’y Disc. R. 12, 41 (1998)(4-year suspension for making false or misleading representations in itemized bill and for other misconduct); Matter of Lawton, 15 Mass. Att’y Disc. R. 348, 349 (1999)(public reprimand because billing statements were inflated and clearly excessive and for other misconduct).

Clients who contact bar counsel with fee issues are advised that fee disputes generally are not within our jurisdiction. They are given suggestions as to how they might resolve the dispute directly with the lawyer, and they are given contact information for fee arbitration services. They are usually very pleased to learn of this option until they discover that the lawyer’s participation is voluntary. Their frustration then returns and they often demand to exercise their right under S.J.C. Rule 4:01, §7 to pursue a disciplinary complaint for claims of inadequate communication, lack of zealous representation or incompetence.

In these instances, the time and resources of both the lawyer and the Office of Bar Counsel are spent on a dispute that should have been resolved outside of the disciplinary system. Even when the complaint is closed, the lawyer has had to respond to the charges, the existence of which may have to be reported to a malpractice carrier. From the client’s perspective, the belief that the profession is corrupt and greedy and that the Office of the Bar Counsel is the fox guarding the chicken coop has been confirmed.

When a lawyer sues a former client for legal fees, the perception of the legal profession is harmed. Clients correctly believe that the playing field is not even unless they are represented by a lawyer, and they feel burned having to pay additional fees to another lawyer to defend a suit brought by someone who was supposed to be a loyal ally. They also believe that judges will not be sympathetic because judges, after all, used to be lawyers.

Lawyers, on the other hand, risk the filing not only of a disciplinary complaint when suing a client for fees, but also of a counterclaim for malpractice with a potential for a judgment on the counterclaim that is more than the fee sought. See, for example, Fishman v. Brooks, 396 Mass. 643 (1986), where a lawsuit brought by the attorney for additional fees in a personal injury case resulted instead in a large judgment on a counterclaim for malpractice.

To address this systemic problem and aid in improving the image of the bar, the American Bar Association House of Delegates in February 1995 adopted the ABA Model Rules for Fee Arbitration. These rules provide that either prior to or simultaneous with commencing a civil suit for fees, the lawyer must notify the client by certified mail of the client’s right to choose arbitration as an alternative to litigation. The client then has 30 days to exercise the option. If the client does so, the arbitration decision is binding unless either party appeals within 30 days. If the client declines to arbitrate, the lawyer may proceed with litigation. The rules and accompanying comments can be viewed at http://www.abanet.org/cpr/clientpro/fee.html. We believe that instituting a program providing for fee arbitration at the option of the client would greatly benefit the public and the bar in Massachusetts.

Currently, several jurisdictions require the arbitration of disputes over legal fees; among them are Alaska, California, the District of Columbia, North Carolina, South Carolina and Wyoming, as well as our sister states in the Northeast: Maine, New York and New Jersey. Fee arbitration at the option of the client has had a long and successful history in those states: it was implemented in New Jersey in 1978 (see N.J.Ct.R. 1:20A-1), in Maine in 1979 (see Me. Bar Rule 9), and in New York in 1999 (see N.Y.Comp. Codes R. & Regs. Tit 22 §. 137). New Jersey offers the closest comparison to Massachusetts. New Jersey currently has approximately 57,000 active lawyers, and Massachusetts has more than 48,000 active lawyers. The lawyers in both states serve a similar mix of commercial and individual clients in urban, suburban, and rural communities.

According to New Jersey’s most recent annual report, its fee arbitration program (which operates independently of its discipline system) receives about 1200 requests a year. Of the cases filed in 2003, 65% were arbitrated and another 25% were settled by the parties prior to hearing. Approximately 70% of the cases filed were resolved in less than 180 days. For a complete description of New Jersey’s fee arbitration program, see its 2003 State of Attorney Discipline System Report, http://www.judiciary.state.nj.us/oae/annual_report03.pdf.

The Massachusetts Bar Association’s Fee Arbitration Board has been successfully arbitrating a wide variety of fee disputes since 1974, both between lawyers and clients and between lawyers. That program functions much like the New Jersey system, with a sliding scale of filing fees based on the amount of the dispute, and with matters heard either by a single arbitrator or by a panel of two lawyers and a lay arbitrator, again depending on the amount at issue. The decision is final and binding, with a limited right of appeal to the court under MGL c. 251.

The Boston Bar Association and several county bar associations also offer fee arbitration services. If demand is high, additional programs could be created using the framework set forth in the Uniform Rules on Dispute Resolution, adopted by the Massachusetts Supreme Judicial Court in 1998. Existing and new programs could then be standardized to ensure uniformity in fee arbitration proceedings.

Apart from the worthy goal of maintaining harmonious attorney/client relationships, there are practical reasons why fee arbitration can be beneficial to the bar. In addition to preventing fee disputes from escalating into expensive and lengthy court cases or disciplinary complaints, fee arbitration prevents public disclosure of client confidences by the lawyer and the airing of the client’s grievances about the lawyer in open court. Jurors hearing such details may feel little sympathy for the lawyer who sues his client for fees. Arbitration also is quicker than litigation through the court system.

Instituting fee arbitration at the option of the client might also prevent disputes from developing by encouraging better lawyer/client communications about fees from the outset of the representation. Lawyers might be more careful to provide clearly itemized bills on a regular basis, so that any dispute can be quickly addressed and rectified. Fewer clients might contact the Office of Bar Counsel, and those who do can be redirected to a legitimate and appropriate forum for resolution of the fee dispute.

Arbitration has proven its efficacy in increasingly large and complex disputes, including the allocation of fees among plaintiffs’ counsel in the settlement of national tobacco litigation and the compensation awarded to victims of 9/11. Law firms often arbitrate disputes with departing partners. It is time to allow the average client the same benefits. Providing for the option of fee arbitration as a precondition to suit would benefit lawyers and clients. Perpetuation of a system that forces clients to sue or defend fee disputes in court undermines the image of our profession. The voluntary adoption by the bar of a structure where arbitration is attempted prior to suit would go a long way to improving not only individual attorney/client relations but the image of lawyers and the legal system in general. Why not give it a try?



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