Guest Editorial
Court Considers Mandatory Fee Arbitration
On March 13 the Wisconsin Supreme Court held a public hearing on a
petition, filed by Gerald C. Sternberg, to create a mandatory fee
arbitration system for lawyer-client disputes. At its March 2 meeting,
the State Bar Board of Governors voted to appear in opposition to the
petition, but to support the study of mandatory fee arbitration in
specific cases. For more on this topic, visit WisBar at www.wisbar.org/committees/caz00/ccmfarb01.html.
To comment on this topic, contact your district governor or Kris Wenzel,
kwenzel@wisbar.org, at the State
Bar.
The Case for Mandatory Fee Arbitration in Wisconsin
by Gerald C. Sternberg
THERE ARE SEVERAL GOOD REASONS TO support mandatory fee arbitration
for lawyers in Wisconsin. For clarification, mandatory fee arbitration
would mean that if a client requests fee arbitration, the lawyer would
be mandated to participate in that process. The reasons are these:
1) For starters, effective Oct. 1, 2000, among a
number of other changes, the Wisconsin Supreme Court adopted a diversion
from discipline program (SCR 22.10) that will be used, in part, to
handle grievances that primarily are over fee disputes with lawyers,
where the fee is not one that appears to be of a clearly unreasonable
amount under SCR 20:1.5(a). In that regard, the court has given the
director of the Office of Lawyer Regulation (OLR) latitude to enter into
an agreement with the lawyer involved to have the matter diverted to fee
arbitration.
If the lawyer agrees with the OLR director to handle the matter in
that fashion, his or her written agreement to do so makes the lawyer's
participation mandatory. It is reasonable to believe that a majority of
grievances about fees will be diverted to fee arbitration as one of the
several categories of matters that the director believes can better be
handled without an ethics investigation for the purpose of expediting
disposition and achieving greater client satisfaction. It does not make
good sense to require lawyers to participate in fee arbitration through
diversion from discipline, but not in other fee arbitration requests
where no grievance is filed, since doing so will only encourage the
filing of more grievances over fee disputes in order to achieve the
lawyer's participation.
2) There is not a very persuasive argument for the
lawyer not to be at the table if the client requests fee arbitration; it
effectively makes the fee arbitration a waste of time for the client.
Lawyers opted not to participate in 31 of 67 requests (46 percent) to
the State Bar for fee arbitration by a client in the last fiscal year.
There is no reason to believe that the last fiscal year (FY00) was
atypical since, in the 1999 Survey of Fee Arbitration Programs done by
the American Bar Association, which is an appendix to my petition to the
Wisconsin Supreme Court, the State Bar of Wisconsin fee arbitration
program stated that the most common problem experienced by the program
was "lack of participation by a lawyer against whom a client has a
dispute."
3) It would very likely increase public confidence
in the profession if lawyers who are the subject of fee arbitration
requests were required to participate. Many disputes clients have with
their lawyers revolve around the fee issue. Because lawyer fees are
relatively high compared to what many clients themselves earn, and since
fee agreements are not required to be in writing, except in the
contingent fee situation, it is not unusual to have tension relating to
the fee issue at some point in the lawyer-client relationship, or at its
conclusion. If, as a profession, we provide a fair process where the
lawyer who can best explain his or her fee must participate, clients
will have a natural remedy to dispute fees in a way that meaningfully
resolves the dispute. We do currently have a fair process of fee
arbitration in Wisconsin: the State Bar and the Milwaukee Bar do a very
commendable job. We ought to take the initiative as a profession to seek
increased client satisfaction with respect to lawyer fees by using this
process in all cases where the client seeks to do so. It would be an
example of us "seizing the future" rather than acting merely in response
to a request for change from outside the profession "down the road."
4) Given our lawyer population in Wisconsin, the
relatively small number of fee disputes handled by our system
demonstrates that our fee arbitration system is underused. Given that
lawyer-client fee disputes are not uncommon, and having a lawyer
population of near 20,000, 67 matters handled by the State Bar program
and approximately 30 handled each year by the Milwaukee Bar Association
program, according to its executive director, would seem to suggest that
our current system is not being used to the full extent of its
potential.
5) Another benefit of making the fee arbitration
system mandatory is likely to be that the bulk of fee disputes will be
handled within the mandatory fee arbitration programs, and only clearly
unreasonable or aggravated fee issues will require investigation by the
OLR.
6) There is no constitutional impediment of which I
am aware in having a mandatory fee arbitration system. While the two
state supreme court decisions in Maine and New Jersey on this issue,
Anderson v. Elliot, 555 A.2d 1042, 1047 (Me. 1989), and In re LiVolsi,
428 A.2d 1268, 1270-72 ( N.J. 1981), certainly have no effect in
Wisconsin, they are instructive for the strength of their analysis. In
both cases, mandatory fee arbitration was held to be constitutional.
7) There is more flexibility in the ABA Model Rules
for Fee Arbitration, which is the basis for my petition, in the respect
that the client or lawyer can bring a lawsuit regarding the fee dispute
if either acts to do so within 30 days of receiving what he or she
considers an unacceptable fee arbitration decision. If that lawsuit is
not brought, and I do not believe that parties will do so in most cases,
the fee arbitration decision is binding on both parties. Or, the parties
can agree to be bound by the arbitration decision at any point in the
arbitration process. It is my understanding that this flexibility of
bringing a lawsuit if a party feels aggrieved by the arbitration
decision does not exist in states such as Maine and New Jersey, where
the mandatory and binding arbitration precludes court litigation.
Lawyers considering a mandatory fee arbitration system should ask
themselves three questions:
1) What good does it do the individual lawyer whose
fee is the subject of a fee arbitration request not to participate?
2) What does it say about us as a profession when
that happens?
3) What good does it do the individual client to
have an advisory opinion that is based on his or her evidence only?
I would suggest to you that adoption of the Model Rule for use by the
existing fee arbitration programs will improve public confidence in the
system of fee dispute resolution, promote its use to a greater extent,
and give "teeth" to the existing programs to make them more viable.
Wisconsin Lawyer