Occasionally, a client or in propia persona litigant may ask other attorneys, court personnel or family law advisors for information about how to deal with a fee dispute with his or her own attorney. The purpose of this article is to provide a summary of the basics (“NITTIE-GRITTIES”) of the Mandatory Fee Arbitration Fee Arbitration Program in Sonoma County (and California) to enable everyone to correctly identify when a dispute is a proper subject for mandatory fee arbitration and refer parties or themselves to the Sonoma County Bar Association program.
What is the Mandatory Fee Arbitration Program?
The Mandatory Fee Arbitration Program (“the Program”) provides an extraordinary opportunity to have a volunteer arbitrator (or panel of arbitrators) resolve attorney fee and cost disputes between clients and attorneys through an informal, low-cost alternative to the court system. This has tremendous value to both the attorney and client. The arbitrator determines whether the fees and costs charged by the attorney are reasonable for the services provided. The Program is authorized by Business and Professions Code section 6200 et seq. Fee arbitration is voluntary for the client, unless the parties previously agreed to arbitrate their disputes with the Program. Conversely, Fee Arbitration is mandatory for the attorney if the client requests it. (See Bus. & Prof. Code §6200, subd. (c).)
How does the Program work?
Virtually all of the Sonoma County fee arbitrations are conducted through the SCBA’s State Bar approved Mandatory Fee Arbitration Program. Jurisdiction to hear these matters lies in the county where the legal services were provided, where the attorney maintains an office, or where the client lives. If our program lacks jurisdiction, or, in a rare occurrence, if either party declares that he or she cannot obtain a fair hearing at the local level, the State Bar Office of Mandatory Fee Arbitration will assume jurisdiction of the matter. Either way, the process is the same as described hereinbelow.
Are All Disputes With an Attorney Covered by the Mandatory Fee Arbitration Program?
No. Fee disputes where the fee or cost to be paid by the client has been determined pursuant to statute or court order are not covered. (See Bus. & Prof. Code §6200, subd.(b)(3).) For example, court ordered or statutorily set attorney’s fees in bankruptcy or probate cases are not covered by the Program. Nor are claims for affirmative relief against the attorney for damages or otherwise based upon alleged malpractice or professional misconduct. (See Bus. & Prof. Code §6200(b)(2).) However, evidence of professional negligence or misconduct is admissible in the fee arbitration hearing and may have an impact on the reduction of fees. (Bus. & Prof. Code §6203, subd. (a.).)
What are the Client’s Rights Before an Attorney May File a Lawsuit to Collect Unpaid Attorney’s Fees?
Attorneys are very often ignorant of the state-mandated prerequisites to collecting fees from their clients. Prior to or at the time of service of summons or claim in an action against the client, or prior to commencing a proceeding as an alternative to arbitration under the Mandatory Fee Arbitration Program (i.e., contractual arbitration), the attorney shall forward a written notice to the client of his or her right to arbitration under the Program. The Notice shall be on the State Bar-approved Notice of Client’s Right to Arbitration form and not a letter from the attorney. It must be on the State-approved form, which may be obtained on the SCBA website here or at the SCBA office. Otherwise, the notice is invalid for Fee Arbitration purposes and the time for the client’s election to avail themselves of the program is extended. The client’s failure to request fee arbitration within 30 days of his or her receipt (not service) of the Notice is deemed to be a waiver of the right to arbitration under the Program. (See Bus. & Prof. Code §6201, subd.(a)) and the attorney may then proceed to collection by filing a complaint and proceeding through the judicial process or contractual arbitration.
If the attorney has already filed a lawsuit against the client for unpaid fees, the client may elect to either respond to the lawsuit or request fee arbitration. If the client files a response to the lawsuit, after Notice of the right to arbitration is given, his or her right to arbitrate the fee dispute is deemed waived. (See Bus. & Prof. Code §6201, subd.(b).) If the client requests fee arbitration, the lawsuit is automatically stayed. (Bus. & Prof. Code §6201, subd. (c).) To alert the court, the client should file the appropriate notice of automatic stay where the lawsuit is pending using Judicial Council Form CM-180. To preserve the right to arbitrate, the client should file a request for arbitration with the SCBA promptly. If the client is unaware of the automatic stay provisions, it would be in good form for the attorney to prepare and file the Notice with the court.
What Happens Once Arbitration Is Requested?
To request arbitration, a party submits a completed arbitration request form from the SCBA fee arbitration program and pays any required filing fee. A telephone call or letter to the program requesting arbitration will not protect the right to arbitration. Most attorneys appreciate the value of the program and, as such, sometimes, in order to keep the matter out of the court system, attorneys initiate the arbitration by paying the filing fee. However, it remains the client’s right to ultimately elect Fee Arbitration unless a provision for such mandatory arbitration is included within the written fee agreement between the attorney and client.
The program will assign a sole arbitrator or a panel of three arbitrators (depending on the amount in dispute) to hear the dispute and determine whether the attorney’s fees and costs were reasonable (or unconscionable in the case of the existence of a valid, enforceable written fee agreement). If the arbitrator determines that the attorney’s fees were not reasonable (or unconscionable, as the case may be), the client may be awarded a refund of attorney’s fees or costs. Alternatively, the arbitrator may determine that no refund is owed or that the client owes fees to the attorney.
Depending on the circumstances, the arbitrator will consider a number of factors in making a decision. These may include: whether there was a valid, enforceable written fee agreement; the reasonable value of the attorney’s services; the amount of time the attorney spent on the case; and whether any misconduct or incompetency by the attorney affected the value of the services. The arbitrator will decide the matter based only upon the evidence presented at the hearing. The arbitration award will be served on the parties by the SCBA after the hearing is submitted for decision.
Is an Attorney Necessary for a Party in a Fee Arbitration?
Absolutely not. This is the simple beauty and value of the program. Because the program is intended to be a low cost alternative to the court system, parties do not need an attorney to represent them in fee arbitration. While either party may choose to hire an attorney at his or her own expense, the arbitration award cannot include the attorney’s fees incurred for the preparation for, or appearance at the arbitration hearing, regardless of any contractual provision to the contrary. Any such contractual provision is simply unenforceable by law (See Bus. & Prof. Code §6203, subd. (a).)
What if the Client Believes that the Attorney Engaged in Misconduct or Malpractice?
The Mandatory Fee Arbitration Program cannot help recover damages or offset expenses incurred by attorney malpractice or misconduct.
If the arbitrator determines that the attorney’s malpractice or professional misconduct reduced the value of the attorney’s services, the arbitrator can reduce the attorney’s fees accordingly. However, the arbitrator cannot offset the fee or order the attorney to pay for any damages the attorney’s conduct may have caused. (See Bus. & Prof. Code §6203, subd. (a).) If there are concerns about attorney malpractice, they should be discussed with an independent attorney.
In addition, a disciplinary complaint may be filed with the State Bar of California by calling the State Bar’s toll-free number: (800) 843-9053. A copy of the pamphlet “What Can I Do If I Have A Problem With My Lawyer?” is available on the State Bar website here or by calling the State Bar.
A discipline complaint and a request to arbitrate a fee dispute are separate matters. Filing a complaint may result in disciplinary action against the attorney; however, the result may or may not require the attorney to pay restitution or unearned fees to the client.
Can the Client Still Litigate a Fee Dispute In Court If He or She Is Dissatisfied with the Arbitration Award?
It depends on whether the fee arbitration proceeded as binding or non-binding. Fee arbitrations are non-binding unless the parties agree in writing to binding arbitration after the dispute arises but prior to the hearing. This usually occurs by checking the appropriate box requesting “binding arbitration” when the parties request fee arbitration. If the arbitration is binding, the award is final and neither party may request a new trial in court. A binding award can only be corrected or vacated for very limited reasons (i.e., bias, failure to allow the introduction of evidence, etc.) within a limited period of time as set forth in Code of Civil Procedure section 1285 et seq. The time period for filing a petition to correct or vacate the award is 100 days from the date of service of the award. (Code. Civ. Proc.§1288.2.)
If the award is non-binding, a party has 30 days from the date of service of the award to file an action in court requesting a trial to reject the award and to request a trial de novo (Bus. & Prof. Code §6204 (c).) If a trial is not requested within the 30 days by either party, the award automatically becomes binding, with the same effect as if the parties had agreed to binding arbitration. In small claims court, the parties may use the Judicial Council forms SC-100 and SC-101 to request a trial de novo. Form SC-101 contains useful information on this process.
How Does the Client Enforce An Arbitration Award Against the Attorney?
An arbitration award must become final before it is enforceable. Generally, that means that the 30- day time period to request trial de novo or the 100-day period to petition to vacate or correct the award must pass. Either party may then request the court to enter a judgment confirming the arbitration award. The client may then enforce the judgment against the judgment debtor (attorney). (See Code Civ. Proc.§1287.4.)
Something to consider and understand: If the arbitration award rendered is in favor of the client for a refund of attorney’s fees or costs, the client may request the State Bar for assistance in enforcing the award or judgment. (See Bus. & Prof. Code §6203, subd.(d).) The attorney’s reply may consist of a payment proposal, a claim of financial inability to pay or lack of liability. By statute, the State Bar is authorized to enforce an unpaid award by imposing administrative penalties on the attorney member. It may also seek a State Bar Court order enrolling the attorney on inactive status until the award is paid. (Ibid.)
For further information about the Sonoma County Mandatory Fee Arbitration Program, please contact the address below:
Michael J. Fish is a partner with the firm of Merrill, Arnone & Jones (MAJ Law) with locations in Santa Rosa and Novato. He is a past chair of The State Bar of California Mandatory Fee Arbitration Committee and the Marin County Bar Association Client Relations Committee and the current Chair of the SCBA Mandatory Fee Arbitration Committee.