Guest Editorial

Court Considers Mandatory Fee Arbitration

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.