State Bar of Wisconsin

The Case for Voluntary Fee Arbitration

by Donald Victor Kozlovsky

The State Bar of Wisconsin has operated a "voluntary" fee arbitration program since 1981 as a service to the public and lawyers of Wisconsin. The program, developed as an alternative to litigation for resolving fee disputes, is an informal and economical way to resolve such disputes and has been well-received by those who have participated therein. The touchstone of the program is that is has been voluntary.

The petition filed by Gerald C. Sternberg with the Wisconsin Supreme Court seeks to make fee arbitration mandatory on Wisconsin lawyers, i.e., (i) a lawyer would be compelled to arbitrate a fee dispute if an arbitration request was submitted by the client and (ii) a lawyer could not litigate a fee dispute unless the client refused to consent to arbitrate the dispute after being notified of the opportunity to arbitrate.

I submit that the interests of clients and lawyers would be best served if the fee arbitration program remains voluntary for the following reasons:

1. Mandatory fee arbitration will serve to deprive lawyers of a cherished right available to all other citizens-the right to resort to the courts for the resolution of disputes. We enter upon a very slippery slope in requesting that the Wisconsin Supreme Court order that a class of citizens, namely lawyers, may not, as a matter of right, use the courts as a first resort in resolving fee disputes. The move to deprive lawyers of this right, it seems to me, is rooted in the very fear echoed by Justice Stevens in his dissent in Bush v. Gore (No. 00-949), to wit: "an unstated lack of confidence in the impartiality and capacity of the state judges." Judges called upon to adjudicate fee disputes give such matters their full, fair, and impartial attention-no differently than they do with regard to the many other disputes they are called upon to resolve on a daily basis. Making fee arbitration mandatory for lawyers is but the first step in having other licensing authorities impose similar restrictions on medical professionals, dentists, accountants, architects, etc. Before one knows it, the courts will be off limits in terms of resolving professional fee disputes. But why just fee disputes? Why not any disputes regarding the services provided?

2. The program as presently operated benefits from and, I believe, is successful due, in large part, to its voluntary nature. The persons who serve as arbitrators, both lawyers and laypersons, volunteer their services to the program with the knowledge that they afford the parties who willingly appear before them an efficient means of resolving fee disputes. The process succeeds because the participants want to be there and have voluntarily consented to having their dispute resolved in such fashion. Mandating participation by lawyers will likely serve to spawn resentment on the part of lawyers, thus making the process more stressful and tedious and, as a result, less efficient. Many who now serve as volunteer arbitrators may well be reluctant to continue to so serve if the nature of the program changes from voluntary to mandatory.

3. A criticism of the present program is that it permits "advisory opinions" which discourage clients because such opinions, being merely advisory, are of no legal effect and are not admissible in subsequent court proceedings. The Committee on Resolution of Fee Disputes, which oversees the fee arbitration program, is considering the elimination of advisory opinions. This will remove the objection that clients are permitted to participate in a process with no likelihood of securing a meaningful resolution. As such, the concern that fee arbitration can be "a waste of time" for clients under such circumstances will be eliminated.

4. Apart from the disparate treatment inherent in permitting a client to commence fee litigation, but precluding a lawyer from doing so without first serving the requisite notice of the opportunity to arbitrate upon the client, various equitable considerations come into play when fee arbitration becomes mandatory. How will a rule mandating fee arbitration be equitably enforced with regard to those providers of legal services employed in, e.g., an accounting firm, when the bill generated comes from the accounting firm, but clearly has a legal component? The proposed ABA Model Rules for Fee Arbitration except disputes where the fees in question have been determined by court order. Is it fair to allow some lawyers to have their fees judicially approved, and thus insulated from challenge via mandatory fee arbitration, but to deny other lawyers, at least initially, the same right simply because of a difference in the nature of the legal services rendered and to compel such lawyers to arbitrate their entitlement to their fees?

5. The "Diversion to alternatives to discipline program" which now forms a part of the lawyer discipline system in Wisconsin (SCR 22.10) is expected to utilize the services of the State Bar's fee arbitration program. Diversion to fee arbitration, however, remains voluntary on the part of the lawyer to whom the opportunity to participate is offered by the Director of the Office of Lawyer Regulation. The alternatives to discipline program only becomes operative if an eligible lawyer "agrees" to diversion. SCR 22.10(4). While it may be debated whether or not it is advisable for such a lawyer to accept diversion, the critical factor is that it remains an eligible lawyer's option. No such lawyer may be required to participate in the diversions program. As such, grievances over fee disputes should not likely be filed solely as a means of mandating lawyer participation in the fee arbitration. Moreover, grievances which on their face appear to have been filed by a client possessed of such an ulterior motivation should cause the preliminary review committee to pause before determining whether cause to proceed exists. It is a misconception to infer that fee disputes necessarily entail misconduct.

6. As set forth in the Survey of Fee Arbitration Programs conducted by the American Bar Association (1999) and included as an appendix to Attorney Sternberg's petition, it is believed that only 11 or 12 jurisdictions operate mandatory programs. Survey, p. 3. The clear message is that mandating participation is not the preferred way of addressing the issue of how best to resolve fee disputes. The goal of increasing public confidence in the profession is a laudable one. That goal is best achieved by encouraging lawyers to propose fee arbitration to their clients as a means of resolving fee disputes-but a means, nonetheless, that either lawyer or client may freely reject.

7. The argument is made that the courts, as a forum for the resolution of fee disputes, are a hostile forum to a client lacking legal training. That, however, need not be the case. Small claim disputes are resolved informally without strict application of the rules of evidence. See § 911.01(4)(d), Stats. Judges typically are fairly accommodating to the needs of pro se litigants. Moreover, nothing precludes a judge from referring fee dispute litigants to alternate dispute resolution. See § 802.12, Stats.

8. The argument that the current voluntary program is "underutilized" is disingenuous. One cannot simply cite the number of fee arbitrations handled by the State Bar program and conclude that mandating fee arbitration would increase its use. Setting aside the fact the Milwaukee Bar Association operates its own voluntary fee arbitration program and that there are other arbitration services (e.g., American Arbitration Association and private arbitrators), there is no indication that fee disputes constitute a significant portion of lawsuits being filed in the courts. It appears reasonable from discussions with colleagues to conclude that resorting to fee dispute litigation is a rare occurrence indeed. Such would lead one to conclude that lawyers are doing a good job of resolving fees disputes on their own, without resorting either to the current voluntary program or to the courts.

Conclusion

It is conceded that the lawyer regulatory system has no jurisdiction to mandate a client's participation in fee arbitration. The client remains free to resort to the courts as the forum for resolution should the client so desire. It is offensive to many for a lawyer to seek to contravene this freedom by mandating arbitration as a means of resolving fee disputes in the retainer agreement. If such a provision is voluntarily agreed to by a client, so be it. In such a case, however, the client willingly consents to arbitration as a means of fee dispute resolution. Just as it is offensive to many to bind a client to mandatory fee arbitration via a retainer agreement provision, so too is it offensive to many to so bind a lawyer via a mandate from the Wisconsin Supreme Court. The fact that the Court has this power or that mandatory fee arbitration has been held to be constitutional in Maine and New Jersey does not mean that it ought to be imposed.

The State Bar should encourage lawyers to participate in a program which resolves fee disputes in a manner that is sensitive to a client's lack of legal expertise and in a forum that is informal and unthreatening. The "voluntary" fee arbitration program is such a program. Mandating an attorney to participate in arbitration, however, sends the unstated message to the public that lawyers cannot be trusted to be fair when it comes to collecting their fees and, as Justice Stevens observed, bespeaks a lack of confidence in the impartiality and ability of judges in adjudicating fee disputes. Mandating fee arbitration encourages a lack of public confidence in the legal profession-an end wholly at odds with the professed aim of increasing the public's respect for and esteem of the legal profession.

The current voluntary program, by all accounts, has operated in a commendable fashion. Those who serve on the Committee for Resolution of Fees Disputes are dedicated to ensuring that the program remains sensitive to the needs of both clients and lawyers. Those who have utilized the program speak well of it and find it preferable in many ways to litigating in court over fees. Its strength, however, stems from its voluntary nature and because it does not impose on lawyers that which is not imposed on clients. Voluntary resolution has served us well over the years and improvements to the current program now under consideration (e.g., proposed elimination of advisory opinions, greater participation of laypersons as arbitrators) bode well for its future. Mandating arbitration would have adverse consequences and would undermine, rather than promote, public confidence in the fee dispute resolution system. "Seizing the Future" need not entail undoing the past.