Inside Track: Ethical Dilemma: Fees in Family Law Cases: Judgment or Arbitration?:

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  • September
    16
    2020

    Ethical Dilemma: Fees in Family Law Cases: Judgment or Arbitration?

    In fees involving family law cases, a lawyer may request that the court grant a judgment for fees. How does this judgment intersect with the requirement to participate in fee arbitration on a client's request?

    Timothy J. Pierce

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    Sept. 16, 2020 – When a family law lawyer withdraws from or completes a case involving outstanding fees, that lawyer may request that the court grant a judgment for the fees. Is the lawyer then required to notify the client that they can request fee arbitration?

    Question

    I am a family law lawyer and use hourly fees, and I normally require my clients to pay an advance on those fees at the beginning of the case. I use the alternative protection for advanced fees pursuant to SCR 20:1.5(g), and place those advanced fees in my business account. I have the required language in my engagement agreements and closing letters, which requires me to participate in fee arbitration if my client timely disputes my fees and requests fee arbitration.

    Wis. Stat. section 767.264(2)(a), however, permits a lawyer in an action affecting the family, upon withdrawal, to request that the court grant a judgment for fees. I plan to file a motion to withdraw in a matter in which the client owes me outstanding fees, and I wonder about the interaction of this statute, which permits me to obtain a judgment for my fees, with the requirement that I participate in fee arbitration if timely requested by the client under SCR 20:1.5(g).

    If the court grants me permission to withdraw and grants a judgment for fees, am I then required to notify the client that they can request fee arbitration, as set forth in SCR 20:15(g), despite the judgment for fees?

    Need Ethics Advice?

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    Ethics Hotline: To informally discuss an ethics question, contact State Bar ethics counselors org tpierce wisbar Timothy Pierce or org akaiser wisbar Aviva Kaiser. They can be reached at (608) 229-2017 or (800) 254-9154, Monday through Friday, 9 a.m to 4 p.m.

    Answer

    SCR 20:1.5(g) (the “alternative protection for advanced fees”) permits a lawyer to place advanced fees, as defined by SCR 20:1.0(ag), in the lawyer’s business account, rather than in a trust account, and have access to the funds immediately.

    Tim PierceTim Pierce is ethics counsel with the State Bar of Wisconsin. Reach him by org tpierce wisbar email or through the Ethics Hotline at (608) 229-2017 or (800) 254-9154.

    In return for this flexibility, the lawyer must make certain written disclosures to the client and agree to participate in and abide by fee arbitration, if the client makes a timely objection to the lawyer’s fees and requests fee arbitration.

    So, a lawyer who uses the SCR 20:1.5(g) alternative is agreeing to binding fee arbitration if timely requested by the client at the end of the case.

    Section 767.264(2)(a) provides as follows:

    (2) Attorney fees and other amounts owing. (a) Upon making an order for dismissal of, for substitution of attorney in, for withdrawal of attorney from, or for vacation of a judgment granted in an action affecting the family, the court shall, prior to or in its order, grant separate judgment in favor of an attorney who has appeared for a party to the action and in favor of a guardian ad litem for a party or a child for the amount of fees and disbursements to which the attorney or guardian ad litem is, in the court's judgment, entitled and against the party responsible for the fees and disbursements.

    When a lawyer in a family law matter seeks to withdraw from a matter – whether on their own motion or because of discharge by the client – that lawyer would routinely seek a judgment for outstanding fees pursuant to this statute.

    But if the lawyer has used the alternative protection for advanced fees and is granted a judgment for fees, must the lawyer still provide the required notices and abide by the client’s request for fee arbitration? If the lawyer uses the alternative protection, may the lawyer even seek a judgment for fees? Which controls – the statute or the lawyer’s obligation under the disciplinary rules?

    The first part of SCR 20:1.5(g) states:

    A lawyer who accepts advanced payments of fees may deposit the funds in the lawyer's business account, provided that review of the lawyer's fee by a court of competent jurisdiction is available in the proceeding to which the fee relates, or provided that the lawyer complies with each of the following requirements:

    The Wisconsin Comment to that rule states, in relevant part;

    The provision regarding court review applies to a lawyer's fees in proceedings in which the lawyer's fee is subject to review at the request of the parties or the court, such as bankruptcy, formal probate, and proceedings in which a guardian ad litem's fee may be subject to judicial review. In any proceeding in which the lawyer's fee must be challenged in a separate action, the lawyer must either deposit advanced fees in trust or use the alternative protections for advanced fees in this subsection.

    This means that, if the lawyer’s fee are subject to judicial review in the case, the lawyer is permitted to place advanced fees into the business account without using the alternative protection for advanced fees.

    The reason for this is that the original purpose of the alternative protection for advanced fees is to provide a forum for fee disputes other than filing a grievance with the Office of Lawyer Regulation (OLR). So, if the lawyer’s fees must, or may, be approved by the court, and if the client has that opportunity to object to the lawyer’s fees before the court, that hearing affords the client an opportunity to contest the lawyer’s fees outside of fee arbitration.

    This means that the lawyer who obtains a judgment for fees after the client has an opportunity to be heard need not offer the client an opportunity to participate in fee arbitration, as otherwise required by SCR 20:1.5(g).1

    Lawyers who practice family law should not assume that, because there is a possibility that the lawyer may obtain a judgment for fees, the lawyer is free to place advanced fees in the lawyer’s business account without complying with SCR 20:1.5(g).

    In a normal case where there is no withdrawal and judgment for fees, the lawyer still must send the client a closing letter with the required fee arbitration language. Moreover, because the lawyer has no way of knowing in advance whether there will be a motion for a judgment for fees, the lawyer must ensure that that the lawyer makes all required written disclosures to the client when placing advanced fees into the operating account.

    In the case, however, where the lawyer does obtain a judgment for fees pursuant to section 767.264(2)(a) and the client is afforded the opportunity to object to the lawyer’s fees, the statute trumps the requirements of SCR 20:1.5(g).

    Endnotes

    1 This assumes that the client, of course, would have the opportunity to object to the lawyer’s entire fee at the hearing on the judgment for fees. The purpose of SCR 20:1.5(g) is to permit the client to request arbitration of the lawyer’s entire fee at the end of the representation, and if that opportunity is not offered at the hearing, the OLR may view the lawyer as being obligated to fulfill the requirements of SCR 20:1.5(g) as to the portion of the fee not considered at the hearing.

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