MODEL RULES FOR FEE ARBITRATION RULE 1

Rule 1 GENERAL PRINCIPLES AND JURISDICTION

  1. Definitions. The following definitions shall apply in all fee arbitration proceedings.
    (1) "Client" means a person or entity who directly or through an authorized representative consults, retains or secures legal service or advice from a lawyer in the lawyer's professional capacity.
    (2) "Commission" means the Fee Arbitration Commission.
    (3) "Decision" means the determination made by the panel in a fee arbitration proceeding.
    (4) "Lawyer" means a person admitted to the practice of law in [name of jurisdiction], or any other person who appears, participates or otherwise engages in the practice of law in this [jurisdiction], regardless of the status of his or her license. In these rules, the term "lawyer" includes a lawyer's assignee.
    (5) "Panel" means the arbitrator(s) assigned to hear a fee dispute and to issue a decision.
    (6) "Party" means the client, lawyer, the lawyer's assignee and any third person or entity who has been joined by the client or lawyer in the proceeding.
    (7) "Petition" means a written request for fee arbitration in a form approved by the Commission.
    (8) "Petitioner" means the party requesting fee arbitration.
    (9) "Respondent" means the party with whom the petitioner has a fee dispute.
  2. Establishment; Purpose. It is the policy of the [highest court of the jurisdiction] to encourage the informal resolution of fee disputes between lawyers who practice law in [name of jurisdiction] and their clients and, in the event such informal resolution cannot be achieved, to provide for the arbitration of such disputes. To that end, the [highest court of the jurisdiction] hereby establishes through adoption of these rules, a program and procedures for the arbitration of disputes concerning any and all fees and/or costs paid, charged, or claimed for professional services by lawyers.
  3. Arbitration Mandatory for Lawyers. Fee arbitration pursuant to these rules is voluntary for clients and mandatory for lawyers if commenced by a client.
  4. Effect of Arbitration.
    (1) The Fee Arbitration is binding where all parties have agreed in writing that it will be binding.
    (2) In the absence of a written agreement to be bound by the arbitration, the decision automatically becomes binding, unless, as permitted under Rule 7B, any party seeks a trial de novo pursuant to the [jurisdiction's rules of civil procedure] within 30 days after service of the decision. This 30 day time period shall not be extended by an application for modification under these rules.
    (3) After all parties have agreed in writing to be bound by an arbitration award, a party may not withdraw from that agreement unless all parties agree to the withdrawal in writing. At any time during the proceedings, the parties may agree in writing to be bound by the decision.
  5. Jurisdiction. Any lawyer, as defined in Rule 1A(4), is subject to these rules for fee arbitration.

  6. Disputes not Subject to Arbitration. These rules do not apply to the following:
    (1) Disputes where the lawyer is also admitted to practice in another jurisdiction, the lawyer maintains no office in [name of jurisdiction], and no portion of the legal services was rendered in [name of jurisdiction];
    (2) Disputes where the client seeks affirmative relief for damages against the lawyer based upon alleged malpractice or professional misconduct;
    (3) Disputes where entitlement to and the amount of the fees and/or costs charged or paid to a lawyer by the client or on the client's behalf have been determined by court order, rule, or decision;
    (4) Disputes where a third person is responsible for payment of the fees and the client fails to join in the request for arbitration; and
    (5) Disputes where the request for arbitration is filed more than [four] year(s) after the lawyer-client relationship has been terminated or more than [four] year(s) after the final billing has been received by the client, whichever is later, unless a civil action concerning the disputed amount is not barred by the statute of limitations.

  7. Notice of Right to Arbitration; Stay of Proceedings; Waiver by Client.
    (1) Prior to or at the time of service of a summons in a civil action against his or her client for the recovery of fees, costs, or both for professional services rendered, a lawyer shall serve upon the client [by certified mail return receipt requested] a written notice of the client's right to arbitrate. The notice, in a form approved by the Commission, shall include a provision advising the client that failure to file a Petition for Fee Arbitration within 30 days of service of notice of the right to arbitrate shall constitute a waiver of the right to arbitrate. Failure to give this notice shall be grounds for dismissal of the civil action.
    (2) If a lawyer commences a fee collection action in any court, the court shall issue an order of stay upon the client giving notice to the court and the lawyer that a Petition for Arbitration was filed with the commission within [thirty] days of service of the notice of the right to arbitrate.
    (3) After a client files a Petition, the lawyer shall refrain from any non-judicial collection activities related to the fees and/or costs in dispute pending the outcome of the arbitration.
    (4) Unless all parties agree in writing to the arbitration, the right of the client to petition or maintain an arbitration is waived if:

    (a) the client fails to file a Petition for Arbitration within [thirty] days of service of the notice of right to arbitrate pursuant to these rules; or
    (b) the client commences or maintains a civil action or files any pleading seeking judicial resolution of the fee dispute, or seeking affirmative relief against the lawyer for damages based upon alleged malpractice.

Comment
A fee arbitration system provides lawyers and clients with an out-of-court method of resolving fee disputes that is expeditious, confidential, inexpensive, and impartial. The court should ensure adequate funding for an effective program.

Although these rules only address fee arbitration, consideration should be given to the development of mediation as a component of the program as a prerequisite or alternative to fee arbitration.

A client who believes he or she may have been overcharged by a lawyer may have the lawyer's fee reviewed without incurring the expense of formal litigation. Participation in the Fee Arbitration Program is mandatory for lawyers if the request for arbitration is commenced by a client. The decision is binding only upon written agreement of the parties. In the absence of a written agreement to be bound by the arbitration decision, any party may seek a trial de novo within 30 days after service of the decision. The decision becomes binding if no party seeks a trial de novo within the 30 day period. The program is voluntary for the client since the lawyer regulatory system has no power to regulate the consumer of legal services. However, nothing in these rules precludes a lawyer and a client from entering into a contract to participate in binding arbitration under these rules as permitted by law.

A lawyer must notify a client of the availability of the Fee Arbitration Program prior to or at the time of service of a summons in a civil action against the client to recover fees and/or costs for professional services. The rule provides that notice be sent by certified mail return receipt requested. However, a jurisdiction may substitute such other means of service as will reasonably establish receipt. The client must file a Petition for Fee Arbitration within [thirty] days of service of such notice or the client waives the right to petition or maintain an arbitration proceeding under these rules. If all parties agree, the fee arbitration can proceed even if the client did not file the Petition for Fee Arbitration within the [thirty] day period. The client also waives the right to petition or maintain an arbitration if the client commences or maintains a civil action or files any pleading seeking judicial resolution of the fee dispute or seeking affirmative relief against the lawyer for damages based on alleged malpractice. This prevents the same facts from being the subject matter of the arbitration and a civil action. Nothing herein precludes a client from filing a complaint with the disciplinary authority. Nothing in these rules prevents the filing of a malpractice action after a decision is rendered in the fee arbitration proceeding. In accordance with Rule 7B(4), a decision under these rules is not admissible in a subsequent malpractice action.

The scope of these rules includes costs as well as fees. In many cases, fees and costs are inextricably linked. The fee arbitration process should be able to resolve both issues in one process.

The Fee Arbitration Program can be expanded to handle disputes between lawyers if all parties agree to be bound by the decision of the panel.

An alternative approach, which currently works effectively in those jurisdictions where it has been adopted, is to provide for arbitration which is both mandatory and binding in all cases. Under such a system, the arbitration decision is binding on the parties subject to appeal only in cases of demonstrable and fundamental unfairness in the procedures utilized in deciding the matter.

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