Monday, May 21, 2007

Mediation or Arbitration of Attorney-Client Fee Disputes

Fee disputes between attorneys and their clients can arise when 1) there is no retainer agreement detailing the agreement for services, or 2) the retainer agreement is not clear and results in misunderstandings or 3) there is a disagreement over the services that were or were not performed by the attorney.

The State Bar and local Bar Associations have Mandatory Fee Arbitration Programs under which attorneys and clients have their fee dispute arbitrated by one or a panel of three arbitrators. There is a small administrative fee to the client and attorney for this service, but the arbitrators provide their time pro bono as a much-needed service to the legal and non-legal community.

The downside of Mandatory Fee Arbitration is the same as the downside of any arbitration. The client and attorney are not there to communicate with each other, work out a win-win solution or to figure out what can be done to satisfy everyone's needs. Instead, the client and attorney spend much time preparing evidence and witnesses for arbitration, they spend the better part of a day at the arbitration hearing and then they receive a decision by a neutral arbitrator or panel deciding the result of the parties' dispute.

While many disputants feel they have had "their day in court" by going through the Mandatory Fee Arbitration process regardless of the outcome, I am always left feeling that we could have spent time in mediation exploring options and interests and creating unique results which would allow both the client and the attorney to walk away with what they need - whether that is additional legal services, money repaid or reimbursed or other arrangements that everyone can feel good about.

Some clients and attorneys who are aware that these disputes can be mediated, will do so knowing they still have the option of arbitration if the matter is not resolved in mediation first. Some attorneys include provisions for mediation then arbitration of any fee disputes to alert clients to this option. I think this is such a good idea that it's included in my own attorney-client retainer agreements.


Marvin Schuldiner said...

I am a mediator as well as an arbitrator in NY's attorney-client fee dispute program. In one arbitration, it became very clear to me that the client wasn't disputing the services that the attorney provided, but was looking for some type of payment plan. That would have been a good case for mediation. However, once the hearing starts, I cannot change roles. Hopefully, more states will adopt mediation processes as a part of resolving these cases.

Paula M. Lawhon said...

Thank you for your comment. I agree with you and have had that happen myself. I plan to speak with our program coordinators to see if we can include some type of screening to see if the dispute might be better suited for mediation instead of arbitration. Thanks! Paula