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Litigation: Resolving fee disputes before things get ugly

Taking advantage of ADR mechanisms to avoid litigation with clients

On November 6, 1906, attorney Albert Sillers was busy working in his office in Washington, D.C. Shortly after noon that day, iron worker and former police officer Thomas Reidy quietly entered Sillers’ office, rawhide horsewhip in hand, and began lashing the lawyer, administering what a newspaper account of the incident described as “terrible punishment.” A dozen or more people witnessed the assault, which left Sillers with a gash on his chin that stretched nearly from ear to ear.

Reidy was angered by Sillers’ refusal to return a disputed $50 legal fee to his wife, Mrs. Reidy. Mrs. Reidy had retained Sillers two months earlier to bring a suit in equity to partition property left to Mrs. Reidy and her brother by their mother. The Reidys believed that another lawyer had done the actual work and wanted Sillers to return the money, which he refused to do. Sillers’ understated reaction to the assault was, “I see no reason for Mr. Reidy’s actions in this matter.”

Fortunately, today we have better ways to resolve fee disputes with clients.

On June 20, 2012, the American Bar Association’s Standing Committee on Client Protection published a chart that lists the 12 jurisdictions that have mandatory fee arbitration. Those jurisdictions are: Alaska, California, the District of Columbia, Georgia, Maine, Montana, New Jersey, New York, North Carolina, Ohio, South Carolina and Wyoming. A review of three of these programs is useful.

According to a podcast on the California Bar’s mandatory fee arbitration program website , the program resolves approximately 2,000 fee disputes per year. Most fee dispute arbitrations are conducted through the local bar associations. Both the attorney and the client have the right to file for arbitration, and the attorney must participate if the client requests it. The arbitration covers issues pertaining to unpaid fees or whether an attorney must refund the client for fees that have already been paid. A client may proceed pro se at the arbitration or may hire an attorney. The average hearing is 3-4 hours, and the arbitrator will issue an award within 30 days. The loser does not pay the winner’s legal fees incurred in the arbitration.

In the District of Columbia, the Attorney/Client Arbitration Board (ACAB) of the D.C. Bar resolves fee disputes between bar members and their clients. As with California, the attorney must participate in the arbitration if the client requests it. The fee arbitration may resolve the dispute within 120 days of the ACAB’s receipt of agreements to arbitrate that are signed by both parties. The parties receive the rules of procedure that will govern the arbitration, and those rules are consistent with D.C. law concerning arbitrations. The ACAB’s award is binding on the parties. While there is no appeal process within the ACAB, the aggrieved party has a limited right of appeal to the Superior Court of the District of Columbia. However, it is difficult to get that court to vacate or modify an award. Additional information on D.C.’s program can be found at the D.C. Bar’s website.

The North Carolina State Bar’s Fee Dispute Resolution Program is available to attorneys and clients who disagree on a fee issue. As with other jurisdictions, the disputes include both unpaid fees and fees the client believes should be refunded. An attorney must notify the client of the fee dispute resolution program at least 30 days prior to filing a suit for the unpaid fees. An unpaid fee is assumed to be disputed unless the client affirms its existence orally or in writing, or if the client pays the fee by a check that is subsequently returned for insufficient funds. Information about the Fee Dispute Resolution Program can be found at the North Carolina State Bar’s website.

Many other states have voluntary programs to resolve fee disputes. Depending on the jurisdiction, attorneys may include mandatory arbitration clauses in retainer agreements. Check with your local bar for the options in your jurisdiction. I am sure that attorneys and clients alike would rather resolve fee disputes as quickly as possible without the headaches of litigation.

Contributing Author

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Jim Steele

Jim Steele is a member at Carr Maloney. He counsels insurers on complex coverage matters and litigates insurance coverage disputes. He also defends clients in...

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