October 2001

The WSBA Fee-Arbitration Program: What's in It for You?

by Fred Diamondstone • ADR Standing Committee Member

Counselor, how do you resolve fee disputes with your clients? Do you simply write off the fee, or refund the money you believe you earned? Do you dread filing a lawsuit to collect the fee? Do you bring a lawsuit, and face the almost obligatory counterclaim for malpractice? There is an alternative.

The WSBA Voluntary Fee-Arbitration Program has only one purpose: to decide the fair and reasonable value of a lawyer's legal services for a client.¹ The program has helped resolve hundreds of attorney-client fee disputes since its inception in the 1970s. Recent program statistics show the following number of cases resolved:

While hearings typically involve relatively small- to moderate-sized fee disputes, it is not unusual for cases in the $20-30,000 range to be scheduled for hearing. In the past, three cases have been scheduled that involved claims of $100,000 or more, and two of those cases settled prior to hearing.²

Other options, of course, are either to write off the fee or to litigate the fee claim. Insurance carrier Seabury & Smith, as a part of their application process, specifically asks whether the lawyer sues for fees. The reason is simple: the insurer perceives that there is a greater than 50 percent likelihood of a counterclaim.³ Another carrier, Great American Property and Casualty Group, estimates that 10 percent of the malpractice claims that they review are brought as counterclaims in response to a suit for fees. They note that even where the insured lawyer chooses to handle the counterclaim without notifying the carrier, the lawyer has the obligation to notify the carrier at renewal. This requirement is in response to a question on the renewal application, which asks whether a claim has been made against the lawyer in the past 12 months.⁴ 

A useful feature of the WSBA's arbitration program is that either party may require the other to deposit the disputed amount in trust with the Bar Association; the WSBA will distribute the award according to the decision. Furthermore, RCW 7.04.150 provides that the award is enforceable through confirmation by the court; hence, if a hearing occurs, collections should not be an issue.

A review of program statistics for the year 2000 reveals three significant trends. First, fee arbitration petitions tend to be filed by clients rather than attorneys. Second, attorneys tend to decline arbitration or do not respond to the request for fee arbitration. Third, awards tend to result in favor of attorneys. The following tables provide additional information.

The majority of cases are closed without a hearing, mostly due to attorneys declining to participate or not responding to hearing requests. The second most frequent reason for closing a file without arbitration is that the parties resolve their dispute before proceeding to a hearing. In both cases, the $75 filing fee paid to the WSBA is returned to the participants.

Of the 42 hearings conducted, clients requested hearings in 30 cases, both parties made requests in six, and attorneys requested hearings in the remaining six cases. In 18 of the cases, the entire amount in dispute was awarded to the attorney. In 21 cases, the award to the attorney was less than the entire disputed amount, but more than half. The remaining three cases resulted in awards in favor of the client.

A case is heard by a one- or three-member arbitration panel, depending on the amount in dispute. Where the disputed amount exceeds $5,000, the dispute is heard by a three-member panel composed of one lawyer and two nonlawyers, unless the lawyer and client agree to have the case decided by a single lawyer arbitrator. The arbitration program is based on RCW 7.04, which provides that the arbitration award is binding, and both parties waive their right to bring or defend an action in court except to the limited extent that RCW 7.04 may allow otherwise.

Arbitrators are experienced in hearing fee disputes. Many lawyers have served on the panel for numerous years and have substantial dispute-resolution experience. The majority of nonlawyers have served for more than 10 years, and contribute their knowledge from backgrounds in business and community service. All volunteers take their responsibility very seriously to be fair, serve members and the public, and maintain the confidentiality of the proceedings.

The Bar has surveyed participants to determine program satisfaction and to address possible changes in the arbitration program. Although the return rate on exit surveys is low (25 percent), most respondents gave the program high marks. Ratings of the WSBA's administrative services and process ranged from fair to outstanding. Respondents gave uniformly good to excellent ratings with respect to the overall performance of the arbitrators and the fairness of the process.

The Bar has identified arbitrators, both lawyers and lay persons, throughout the state. The program, which is voluntary, inexpensive, confidential and nondisciplinary, is one of the most effective ways to resolve fee disputes. WSBA staff would be pleased to answer any questions about the fee arbitration or mediation programs and assist in processing requests for fee arbitration. For information, contact Talia Clever at 206-733-5923 or taliac@wsba.org.

NOTES

1. For other disputes between lawyers and clients, disputes between lawyers, or between lawyers and other professionals, consider the WSBA's Mediation Program.

2. All statistics were kept by or derived from reports of the WSBA's ADR Program administrative staff. No data identifying the parties are included in the program statistics.

3. Telephone call with Pam Blake, Seabury & Smith, July 2001.

4. Letter of Jeff Goode, Great American Property and Casualty, vice president for claims, dated July 24, 2001.

Confidentiality is, and always has been, a hallmark of the Lawyers' Assistance Program (LAP). Previously, LAP confidentiality was covered in Rule for Lawyer Discipline (RLD) 12.17. Now, Admission to Practice Rule 19(b)(2) (adopted by the Washington State Supreme Court on June 12, 2001, with an effective date of September 1, 2001) addresses LAP confidentiality. With the adoption of APR 19, RLD 12.17 has been repealed. APR 19(b)(2) uses the same language as RLD 12.17. It states:

Confidential communications between a lawyer and staff or peer counselors of the Lawyers' Assistance Program shall be privileged against disclosure without the consent of the client to the same extent and subject to the same conditions as confidential communications between a client and psychologist.

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