It happens from time to time that attorneys and clients disagree upon fees for services rendered. While attorneys and clients must always agree upon fees prior to requested services, certain events can cause the agreement between the parties to require altering. In these cases, in order to move forward, a fee modification needs to occur.
The California state bar offers a Mandatory Fee Arbitrary Program to assist lawyers in resolving fee disputes with clients. If a client requests an arbitration, it is mandatory. And is provided through the local bar located in the county that the attorneys office is in. Read further for the basics on the Mandatory Fee Arbitration Program.
The Mandatory Fee Arbitration Program is a confidential, informal, and low-cost forum serving to resolve attorney-client fee disputes. At times, attorneys and clients may end up in a disagreement if a client changes their mind about how much they want to pay their attorney upon awarding a settlement. In these cases, this must be solved immediately and the funds cannot move from the client trust account until the dispute has been resolved. Further, if there is an attorney-client dispute after a fee agreement has been signed by both parties the use of the fee arbitration program is mandatory. In these cases, there must be a moderator– or “arbitrator”, or neutral party to hear and rule on the dispute. This is why the program exists.
If the attorney initiates a fee arbitration, it is necessary to provide a “Notice of Client’s Rights to Fee Arbitration” form from the State Bar to the client. This form must be approved by the State Bar before they file a lawsuit, to protect the client. Within 30 days of receiving the notice, the client can request mandatory fee arbitration with the local State Bar association. If fees are not paid and/or arbitrations requested within 30 days, then the client forfeits the right to arbitration. It is then acceptable for the attorney to take legal action to collect unpaid fees or costs.
If the client does submit the request for arbitration the process begins. Depending on the amount being disputed, either one unbiased arbitrator or a group of three unbiased arbitrators will hear the client and attorney regarding the dispute. The arbitrator(s) will either agree to the attorney refunding fees already paid or the client owes the previously agreed upon amount to the attorney.
Multiple factors go into determining the award and who should get it during the arbitration hearing. Arbitrators (neutral parties) will use the evidence at the hearing and written submissions to make their decisions. They consider the attorney's performance throughout the case to reach the decision regarding the owed fees and costs. The arbitrators also weigh in on if the fee amount is appropriate for the amount of work done by the attorney on the client's case. Decisions such as if the award is binding or nonbinding, the client and attorney will decide. Other factors weighed by the arbitrators to make a determine an award include:
It is most likely that a decision will not be reached during the hearing. Post-hearing, the attorney will receive the “Findings and Award” and “Notice of Your Rights After Arbitrations” from the arbitrator. This letter explains options after the award decision has been reached. It includes information on any refunds, outstanding fees, or no actions or money being owed to either party. The arbitrator may also allocate who must pay the program filing fee– no matter who paid the fee initially.
Disputes between attorneys and clients happen. But your bookkeeping and compliance standing should not suffer simply because a client dispute arises. With the experienced SmartBean® team by your side, you can focus on tasks that keep you in compliance and serving your clients. SmartBean® offers free consultations! Call today and learn how we can be of service to you and your firm!
