Volume 3, Number 1
MANDATORY FEE ARBITRATION UNDER NEW YORK'S MATRIMONIAL RULES
By Professor Lester Brickman
MANDATORY
FEE ARBITRATION UNDER
By:
Professor Lester Brickman*
I. INTRODUCTION
In
recent decades, public dissatisfaction with lawyers has mounted ceaselessly. A
significant portion of that dissatisfaction is attributable to concerns about
lawyers' integrity and fees.[1] Indeed, "[n]o single issue between
lawyer and client arises more frequently or generates more public resentment
than fee problems."[2] Despite the near ubiquity of fee disputes,
client complaints to disciplinary agencies about excessive fees are almost
always rejected because most disciplinary boards do not accept jurisdiction
over claims of excessive fees.[3]
To deal with
this failure of the disciplinary system[4]
and mounting public criticism of the bar, many states have instituted fee
arbitration programs;[5]
twelve states, including New York in the area of matrimonial law,[6]
have instituted mandatory fee arbitration programs[7]
empowering clients (and sometimes lawyers as well) to compel their attorneys to
arbitrate fee disputes.
In July 1992,
the Administrative Board of New York State, in reaction to the public outcry
generated by a report issued by the New York City Department of Consumer
Affairs detailing severe lawyer abuse of matrimonial clients, especially the
non-monied spouse in matrimonial cases,[8]
established a Committee to Examine Lawyer Conduct in Matrimonial Action. This
Committee set out to study the role of attorneys in matrimonial actions in
order to "lead to recommendations that will have a significant impact on
the ultimate ability of the court system to improve the providing of a fair and
effective tribunal for the hearing of matrimonial actions. . . "[9] One of the Committee's recommendations was to
give clients the right to elect to arbitrate attorney fee disputes in domestic
relations cases. This recommendation was premised on the findings that: (1) fee
arbitration resulted in the "expeditious and cost-effective resolution of
a potentially protracted dispute, and is, therefore, generally favored by
litigants and attorneys;" and (2) "[a]ttorneys who successfully
participate in mandatory fee arbitration have established a practice of
frequent billing, detailed fee statements, and better communication with their
client."[10] In 1993, the Appellate Divisions of the New
York State Supreme Court adopted new rules for attorney conduct in domestic
relations matters in response to the Committee's proposals. Among those rules
was a directive to the Chief Administrative Judge of the Courts to establish
and operate a fee arbitration program for attorney-client fee disputes in
domestic relations matters.[11]
Since the
inception of
II.
All
attorneys who undertake to represent a client in New York in a matrimonial
matter, that is, one involving divorce, separation, annulment, custody,
visitation, maintenance, child support, or alimony, or to enforce or modify a
judgment or order in connection with such matters, are governed by special
rules of court.[17] This article will discuss several of these
rules as well as principles to guide arbitrators engaged in arbitration of
matrimonial fee disputes.
A. What
Documents Must a Matrimonial Attorney Provide to a Client Prior to
Representation?
Section
1400.3 of the court rules, setting forth the "Procedure For Attorneys in
Domestic Relations Matters," (see Appendix C) requires that an attorney
"who undertakes to represent a party and enters into an arrangement for,
charges or collects any fee from a client shall execute a written agreement
with the client setting forth in plain language the terms of compensation and
the nature of services to be rendered . . . signed by both client and attorney.
. ."[18] Additionally, § 1400.2 requires that a
prospective client be furnished with a Statement of Client's Rights and
Responsibilities (see Appendix B) at the initial conference or first
consultation and prior to the signing of a written retainer agreement.[19]
B.
Statement of Client's Rights and Responsibilities
At
the initial meeting between the lawyer and the prospective matrimonial client,
and prior to the signing of a written agreement, the attorney must provide the
prospective client with a Statement of Client's Rights and Responsibilities, as
prescribed by the Appellate Divisions of the Supreme Court,[20]
and obtain a signed acknowledgment or receipt from the prospective or actual
client. If the attorney has failed to provide the requisite statement at the
initial conference or first consultation and prior to the signing of a written
retainer agreement, then the attorney is not entitled to any fee, irrespective
of any work done or results obtained.[21] Similarly, if the client has already paid a
fee and the attorney has failed to provide the requisite statements, and this
failure would have precluded the attorney from seeking a fee, the client should
be able to recoup any fees paid.[22]
Even if the initial meeting between a matrimonial attorney
and the prospective or actual client is solely for the purpose of a
consultation and not to represent the client in a matrimonial matter, the
attorney is nonetheless required to give that prospective or actual client a
copy of the Statement of Client's Rights and Responsibilities.[23]
C. The
Written Retainer Agreement
A
lawyer who agrees to be hired in a matrimonial matter must enter into a written
retainer agreement, signed by both the lawyer and the client, which sets forth
in plain language the purpose of the representation and the details of the fee
arrangement.[24]
If there is an action filed in the Supreme Court, then a copy of the signed
retainer agreement must be filed with the court (along with the statement of
net worth).[25]
In the event the attorney has not timely filed a copy of the signed retainer
agreement with the court, as required, along with the statement of his or her
client's net worth, then the attorney is not entitled to a fee.[26]
The required contents of the
written retainer agreement are set forth in detail in §1400.3 and are included
in Appendix A. If an attorney fails to enter into a written retainer agreement
with a client, then irrespective of the amount of work the attorney has
performed or the results obtained, the attorney is not entitled to a fee.[27]
However, if there was a written and signed retainer agreement, which did not
meet the precise requirements of §1400.3, as set out in Appendix A, the
attorney may nonetheless may be entitled to a fee, provided she substantially
complied with the Matrimonial Rules requirements and the client waived his
right to arbitration of the fee dispute.[28]
If the client has already paid a fee, then the attorney's
failure to provide the requisite statements should entitle the client to
recoupment.[29] However, at least one court[30]
has held that "where a retainer agreement fails to comply with the
provisions of the matrimonial rules, the court need not return fees properly
earned by an attorney" and that the cases holding that failure to comply
with the requirements of the Matrimonial Rules precluding a lawyer from
collecting fees, are not authority for the proposition that the client in such
a case may obtain disgorgement of any fees already paid.[31] Markard v. Markard is properly limited
to its facts: namely, that the violation of the Matrimonial Rules (a provision
in the retainer agreement waiving itemized billing in contravention of the
required terms of the retainer agreement, see Appendix A, ¶ 9, and of the
Statement of Client's Rights and Responsibilities) was not of sufficient
magnitude as to invoke the forfeiture outcome; that the client discharged the
lawyer without legal cause and therefore was obligated to pay the lawyer
quantum meruit for the work done up to discharge (which was determined to be
the substantial portion of the $10,000 retainer fee); and that had the client
sought arbitration of the fee instead of simply demanding the disgorgement of
the fee already paid, then the amount of the fee already paid would have been a
proper subject of the arbitration. To the extent that Markard is to be
read as distinguishing between fees already paid and fees to be paid for
purposes of protecting client's correlative rights under the Matrimonial Rules,
it should be rejected as inconsistent with the public policy articulated by the
New York Court of Appeals in In re Cooperman.[32] In that case, the Court of Appeals declared
that the policy articulated in Martin v. Camp,[33]
that a client could discharge an attorney at any time without cause and without
penalty, would apply both to fees yet to be collected as well as to fees
already collected and denominated as nonrefundable.[34]
It is incumbent on the arbitrator to make certain that these
court rules are adhered to – whether or not the client seeking arbitration has
raised the issue.
If
a prospective client hires a matrimonial attorney prior to the filing of a matrimonial
claim, action, or proceeding, then the attorney must comply with the
Matrimonial Rules.[35]
However, if the retention is for the sole purpose of consulting with that
attorney and not for the purpose – at that time – of hiring the attorney to
represent the client in a matrimonial matter, then the charging of a
consultation fee alone does not trigger the requirement that a signed retainer
agreement must have been first obtained.[36]
Even though there is no requirement that the fee agreement for the consultation
be in writing, it is the better practice for the attorney to enter into a
written retainer agreement even if the sole purpose of the meeting is for
consultation. Moreover, in the event that there is a fee dispute regarding such
a consultation and that dispute is included in the issues presented in a
matrimonial arbitration, the attorney would have the burden of establishing
that an agreement was entered into for a consultation as well as for the amount
of the fee claimed. If the client claims, and the attorney denies, that the
attorney agreed to provide a consultation without fee and there is neither
conclusive documentary evidence nor persuasive demeanor evidence, then the
failure of the attorney to meet the requisite burden of proof may be a basis for
denial of the attorney's claim for a consultation fee.
If
the initial meeting(s) are for consultation only, but the relationship changes
to one of representation, then the attorney must enter a written retainer
agreement with the client as soon as the change occurs.
D. Notice
of Right to Fee Arbitration
In
the event of a fee dispute between a matrimonial attorney and client, the
client has the right to seek binding arbitration of the dispute provided that
the amount in dispute – whether or not the attorney has already been paid – is
not in excess of $100,000.[37]
It is the attorney's duty to provide the client with written notice that the
client may submit the dispute to arbitration.[38]
If an attorney fails to give the client such notice, the client is entitled to
dismissal of an action brought by the attorney to recover a fee.[39]
Denial of fees sought in a suit against the client for nonpayment on the basis
of failure to give notice of the right to arbitrate, is consistent with the
intent of the Matrimonial Rules to empower clients to seek fee arbitration.[40]
If the dispute is about fees already paid and the attorney did not give the
client notice of the right to arbitrate, then it does not follow – as it does
in the cases where the attorney has failed to provide the client with a copy of
a Statement of Client's Rights and Responsibilities or of the retainer
agreement[41]
– that the attorney should have to disgorge the fee. Since there (presumably)
was no fee dispute when the advance fee payment was made, the client's rights
under the Matrimonial Rules have not been violated. However, once the client
disputes the attorney's fee as to fees already paid, the attorney at that point
should be required to notify the client of the right to arbitrate the dispute.
It is unclear whether failure to notify the client at that point of his right
to arbitrate should result in per se disgorgement. However, it is reasonably
clear under the Matrimonial Rules that if some or all of the fee is paid in
advance and, after services are rendered, the charges against that advance fee
are disputed, then the fee dispute is subject to arbitration under the
Matrimonial Rules.[42]
Upon receipt of notice of the
right to seek fee arbitration, the client then has 30 days to file the request
for arbitration; if the request is not filed within the 30-day period, the
attorney may commence an action to recover the fee and the client no longer has
the right to request fee arbitration.[43]
The lawyer, upon written consent from the client to submit the dispute to
arbitration, may also initiate arbitration.[44]
While
the consequences of failure to abide by the Matrimonial Rules by providing a
client with: (1) a Statement of Client's Rights and Responsibilities; (2) a
written retainer agreement; or (3) a notice of the right to fee arbitration,
have been discussed and spelled out, the Rules are silent about how these
requirements mesh with lawyers' rights to assert retaining and charging liens.
E.
Retaining and Charging Liens[45]
At common law, two kinds of liens are available to an
attorney to aid in collection of his fee. First, a general possessory lien,
also known as a retaining lien or a general lien, functions as a form of
security for an attorney's fees and affords an attorney the right to retain client
papers and property in the attorney's possession until the client has satisfied
all balances owed to the attorney.[46]
Second, a charging lien can be imposed by an attorney upon the proceeds of a
judgment realized by a client through the efforts of such attorney.[47]
While the legislature has codified and expanded the charging lien under
Sections 475 and 475-a of the Judiciary Law,[48]
the retaining lien is still governed by common law rules.[49]
Generally, an attorney has a common law retaining lien
upon papers, money,[50]
and other client property that comes into the attorney's hands during the
course of his professional employment.[51] The attorney may withhold the property until
the lien is satisfied or adequately secured.[52]
If the client seeks the attached property and does not agree with the
attorney's valuation of the lien, the client may petition the court for an
order to turn over the property, at which time the attorney is entitled to a
summary determination fixing the value of his services.[53]
New York courts, in the exercise of their authority to
define and effectuate the fiduciary obligation owed by an attorney to a client,
have declined to allow an attorney to enforce a retaining lien when a client
would be unfairly prejudiced by the attorney's continued retention of client
property.[54] In matrimonial decisions involving exigent
circumstances (usually client indigence and necessity of papers to preparation
or continuation of the representation), the courts have declined to enforce
retaining liens in appropriate circumstances.[55]
Retaining and charging liens are not directly germane to fee
arbitration under the Matrimonial Rules; arbitrators have no authority to rule
on the validity of either lien – the issue is one reserved to the courts.
However, several of the judicial decisions on the liens' validity in particular
cases directly address the scope and purposes of the Matrimonial Rules, and are
therefore of interest to matrimonial fee arbitrators. In particular, a series
of contradictory rulings address whether a matrimonial attorney can invoke a
common law retaining lien if the attorney has failed to provide the client with
written notice of the right to arbitrate the fee. Several courts have held that
DR2-106(e) of New York Code of Professional Responsibility, which states that
in domestic relations matters, "a lawyer shall resolve fee disputes by
arbitration at the election of the client,"[56]
is to be interpreted to abrogate the attorney's right to impose a retaining or
charging lien if she failed to provide the client with written notice of the
right to arbitrate the fee.[57]
However, other courts focusing on the fact that the Matrimonial Rules, as
initially drafted, contained a provision abrogating the common law retaining
lien, but noting that that provision was deleted from the Rules due to
opposition from the matrimonial bar, have held that there is no basis for
concluding that the Rules abrogate the retaining lien by implication.[58]
Both sets of rulings are based upon sound reasoning.
Ultimately, the New York Court of Appeals will have to resolve the issues of
(1) whether an attorney can be granted a charging lien if the attorney has
failed to comply with provisions of the Matrimonial Rules;[59]
and (2) whether an attorney can invoke a common law retaining lien so as to
effectively compel a client who has retained a new attorney, and who requires
immediate access to his file in order to proceed, to pay the discharged
attorney's fee, and thereby, essentially invalidate the client's right to
invoke the arbitration procedures created by the Matrimonial Rules.[60]
F. Rules
Regulating Types of Fees and Security Interests in Matrimonial Cases
Lawyers
are prohibited from charging a contingent fee in matrimonial matters, that is,
a fee which is a percentage of, or otherwise determined by, the amount of
maintenance, support, equitable distribution, or property awarded.[61]
All lawyers, but in particular, matrimonial lawyers, are
prohibited from charging nonrefundable retainers. Nonrefundable retainers are
fees paid in advance to secure a lawyer's commitment to provide matrimonial
services or for specific matrimonial services to be rendered, which the lawyer
is to keep even if the client thereafter terminates the lawyer's services
before the fee has been fully earned.[62] A
client may terminate a lawyer for any reason – what is known in the law as
"without cause"[63] –
at any time during the representation. If the client does so, he is obligated
to pay the lawyer the reasonable value of the services rendered to that point.
However, the client is not required to pay the lawyer any damages for breach of
contract or for fees that the lawyer expected to earn but which were denied to
the lawyer because of the termination.[64]
A matrimonial lawyer may not obtain a confession of judgment
or promissory note, take a lien on real property, or otherwise obtain a
security interest to secure his or her fee unless: (1) the retainer agreement
provides that a security interest may be sought; (2) notice of an application
for a security interest has been given to the other spouse; and (3) the court
grants approval for the security interest after submission of an application
for counsel fees.[65]
III.
CONDUCT OF THE ARBITRATION
A. Conduct
of a Matrimonial Fee Arbitration
After
the attorney, who has the burden of proof,[66]
has presented his case, then the client can present his or her views about the
services rendered and the time that the attorney claimed to have devoted to the
matter.[67] Each side may call witnesses in support of
their presentation,[68]
who are subject to cross-examination.[69]
The client has the right to present the final argument.[70]
Arbitrators are not required to apply formal rules of evidence and have the
right to issue subpoenas and administer oaths.[71]
B. Burden
of Proof
It
is a general proposition of law that "[a]n attorney has the burden of
showing that a fee contract is fair, reasonable and fully known and understood
by the client."[72]
"Even in the absence of fraud or undue influence, an agreement to pay a
legal fee may be invalid if it appears that the attorney got the better of the
bargain, unless [the attorney] can show that the client was fully aware of the
consequences and that there was no exploitation of the client's confidence by
the attorney."[73] The rules for conduct of matrimonial fee
arbitration expressly state that the attorney has the burden to prove by a
preponderance of the evidence[74]
that the fee is reasonable.[75]
In order to meet this burden, the attorney must present documentation of the
work performed and the billing history.[76]
Simply
conforming to the matrimonial rule requirements, so that the fee arrangement is
detailed in plain language and does not contain a nonrefundable fee clause,
does not establish that the fee is reasonable.[77] If the lawyer meets his or her initial burden
of proof with respect to the unpaid fee by presenting documentation
establishing: (1) the number of hours devoted to the representation; (2) that
the written retainer agreement sets forth an hourly rate; and (3) further
demonstrates that she has conformed to the requirements of the Matrimonial
Rules,[78]
then the burden shifts to the client. He can then seek to demonstrate that
either the hourly rate or the number of hours listed was excessive or that
other reasons exist for denying part or all of the fee claim, such as a breach
of the standards of care or conduct, or of the ethics code. If the arbitrator
concludes that the evidence is evenly balanced on both sides, then the attorney
has not established by a preponderance of the evidence that the fee is
reasonable.
C. Effect
of Account Stated
Frequently,
when seeking payment for legal services, lawyers will assert the legal rule of
an "account stated" in support of the right to a fee that has been
evidenced by sending bills for those fees to the client. The general rule for
enforcement of accounts stated is that where the client has not objected to the
bills sent by the lawyer, i.e., to the "account," then the client has
no defense to the action of the attorney to collect the outstanding fee.[79] The thrust of the "account stated"
argument in support of a claim for legal services is mitigated in judicial
proceedings by a competing principle, namely that courts carefully scrutinize
lawyer-client fee agreements.[80]
Moreover, a claim of fraud, mistake, or other equitable consideration, is
recognized as posing an exception to the account stated rule.[81]
Since arbitration is by its very nature an equitable
proceeding, the assertion by the lawyer of an "account stated" is not
accorded the same legal status as it would if brought in a court of law.
Indeed, the matrimonial fee arbitration rules displace the "account
stated" rule with regard to matrimonial fee arbitration.[82]
To hold otherwise would effectively negate the remedial purpose that underlies
the fee arbitration rules governing domestic relation matters. The fact that
the lawyer periodically submitted bills for legal services to the client, and
the client raised no objection to them at the time of receipt, may be taken
into account by the arbitrator in assessing the validity of the client's claims
that the fee is excessive; but the function of the arbitrator is to come to a
fair and reasonable determination. It may be that the effect of arguing an
"account stated" by the attorney in matrimonial fee arbitration is to
sustain the lawyer's initial burden of proof; even so, that does not preclude
the client from countering with evidence of the unreasonableness of the fee.[83]
D. Reason
for Arbitrator's Decision
Whether
an arbitrator decides to reduce a disputed legal bill or disbursement, or award
the attorney the full fee claimed, the arbitrator should include the reasons
for doing so in the decision. Failure to refer to evidence or other basis in
reason for the reduction of a fee or disbursement is grounds for overturning
the arbitrator's decision on appeal.[84]
The arbitral decision will be upheld, however, if the award has evidentiary
support and is neither arbitrary nor capricious.[85]
Accordingly, while recognizing that many matrimonial fee arbitrations under the
New York rules do not involve large sums,[86]
but also recognizing the applicable decisional law, the arbitrator should
include at least a few sentences in the report setting forth the reasons for
the decision.
E.
Confidentiality
All
proceedings under the fee arbitration program are confidential except to the
extent necessary to take ancillary legal action with respect to a fee matter.[87] If during the course of arbitration, an
arbitrator who is an attorney hears information leading him to believe that the
attorney seeking a fee has violated the Code of Professional Responsibility,
under DR 1-103(a) of the Code,[88]
the arbitrator-lawyer may then have a duty to report that violation to a court
or disciplinary agency.[89]
Doing so, however, would create a conflict between the confidentiality
requirement in the Matrimonial Rules and the Code requirement. While it would
be best for this conflict to be resolved anticipatorily by a ruling from the
Appellate Division, until such time, the attorney-arbitrator is best advised to
seek the advice of the Administrative Judge.[90]
IV. THE
ARBITRATOR'S SUBSTANTIVE TASK
In
fee arbitration, the beginning point for the arbitrator – after the ground
rules have been established – is the retainer agreement. Assuming all of the
procedural requirements have been met and the attorney is seeking a fee that is
in accord with the terms of the retainer agreement, is there more for the
arbitrator to consider? In a word, yes.
To
be sure, an arbitrator may reasonably presume that if there has been a knowing
and voluntary acceptance of the retainer agreement terms by an informed client,
then that establishes the presumptive validity of the fee being sought. This
presumption, however, is a beginning point for further inquiry. Attorney fees
are treated differently from prices negotiated in a commercial context between
a buyer and seller. Attorneys are fiduciaries for their clients, and their fees
are always subject to the imposition of a reasonableness requirement by courts.
To be sure, courts will enforce fee agreements to which the client has given
informed consent, and the more sophisticated the client, the more likely it is
a court will find the contract enforceable as written. Nonetheless, there are
thousands of examples in the judicial literature of courts voiding fee
agreements for a variety of reasons – mostly based on the attorney's fiduciary
status.
In
the paragraphs that follow, I will attempt to set forth some guiding principles
that highlight the types of circumstances that have precipitated judicial
invalidation of fee agreements or the fees generated by those agreements. In
doing so, I am not suggesting that arbitrators should start with a bias against
the enforceability of matrimonial fees. I do, however, seek to point out
instances in which it is appropriate for arbitrators to carefully examine and,
in some instances, look critically if not skeptically, at certain matrimonial
fees.
A
beginning point for such an approach is to consider what other fee arbitrators
have done. Unfortunately, little is known about the results of fee arbitration
programs – including New York's.[91]
What little data we have indicates that matrimonial fee arbitrators have
reduced fees sought in approximately two thirds of the matters submitted to
arbitration and that the average award approximates 75 percent of what the
attorney was seeking.[92] At best, however, while this provides some
limited perspective with which to approach the arbitration process,[93]
each arbitration presents a set of facts that must be evaluated on its own
merits.
A. The
Context of the Fee Dispute
Some
perspective in approaching the arbitrator's task is important, especially for
arbitrators without prior experience in matrimonial matters. It is probably
often the case that client complaints about fees are motivated at least in part
by emotional reactions to the break up of the marriage and by the litigation
process itself. Even a successful outcome from the perspective of one of the spouses
results in the termination of a marriage and consequent feelings of guilt and
anger.[94]
The propensity of a client caught up in a divorce proceeding may be to
use the process to inflict harm on the other spouse. One clear effect of such
efforts is an increased contentiousness in the litigation process that, in
turn, yields higher legal fees. Most experienced divorce practitioners seek to
minimize these propensities.[95] Some however, whether from inexperience or
indifference, allow these propensities to manifest in the form of protracted
litigation. Still, others may actively foment this propensity, using dilatory
tactics and overlawyering, for self-interested purposes. Moreover, it may be
hard to distinguish such motivation from "hardball" litigation tactics
designed to attain a tactical advantage.
The
arbitrator's impression of how the lawyer resolved the ubiquitous conflict of
interest, between the lawyer's self-interest in generating higher fees and
professionally responsible behavior that is self-disinterested and fully
determined by the client's needs, will necessarily color her determination of
whether the fee claimed is reasonable.
It
is also important for the inexperienced arbitrator to have some appreciation of
the practitioner's view of the financial realities of divorce representation,
where one of the spouses earns the bulk of the family's income. The attorney
for the moneyed spouse is usually paid monthly or bi-monthly. If a fee dispute
arises, then it is either in the context of the aftermath of the termination of
that lawyer's services or is limited to the final bill in the representation.
In either of these scenarios, the amount of the fee in dispute will usually be
only a small percentage of the total fees billed.
However,
while an attorney representing the non-moneyed spouse[96]
will usually require a retainer payment to take the case,[97]
often the bulk of that attorney's fee will not be available until the
conclusion of the case, when the division of the marital property has been
settled, or ordered, and the property actually distributed.[98]
In that circumstance, it was undoubtedly the expectation of both lawyer and
client that all, or a large portion of the fee, would be paid out of the
marital proceeds transferred to the non-moneyed spouse.
Thus,
while the attorney for the non-moneyed spouse is sending periodic billing
statements,[99]
there is no expectation of current payment. Indeed, in some realistic sense,
payment is contingent upon a successful outcome.[100] This
may encourage the client to demand that no expense be spared in obtaining the
fullest possible share of the marital proceeds. An attorney who does so may
then find that at the conclusion of the representation, the client has a more
jaundiced view of the value of the attorney's efforts.
From
the client's perspective, objecting to a periodic fee statement may be seen to
place in jeopardy the zealousness of the lawyer's efforts and may even lead to
a termination of services, which could adversely affect the client's strategic
position in the litigation. Thus, the muting of any fee issues may not reflect
acquiescence, let alone consent.
From
the attorney's perspective, however, after having rendered faithful service for
long periods of time, often years, in reliance on the client's silence as
constituting assent to the periodic billings, the implicit content of the
demand for arbitration of the fee – that the fee is unreasonably high – is seen
as an unfair act. But for the existence of the matrimonial fee arbitration
program, if the client failed to pay the fee, the attorney could sue, and
likely prevail, by showing that she had sent periodic bills to the client and
the client had not objected.[101]
The arbitrator must mold these
contradictory perspectives into an approach that neither penalizes the attorney
because she represents the non-monied spouse nor fails to effectuate the
objectives of the matrimonial fee arbitration program.
B. Guiding
Principles
"[A]ttorney-client
fee agreements are a matter of special concern to the courts and are
enforceable and affected by lofty principles different from those applicable to
commonplace commercial contracts."[102]
Although courts thus arrogate to themselves considerable discretion in the determination
of disputed attorney fees, arbitrators may be thought to have an even greater
range of discretion and are not bound to act as would a court when faced with
the same competing claims. In exercising such discretion, arbitrators and, in
particular, fee arbitrators, should resolve fee disputes according to
principles of justice and equity.[103]
Moreover, matrimonial fee arbitration is a consumer
protection remedy. Accordingly, the arbitrator should approach the fee issue
from the perspective of what is reasonable. In determining how to respond to a
client's claim that the fee is too high, the arbitrator should understand that
he or she is not necessarily deciding whether the lawyer's conduct is
unethical, but whether it has resulted in such an enrichment of the lawyer, at
the expense of the client, that it offends the decision maker's sense of
fairness and equity.[104]
If there is an ethical violation or breach of a lawyer's fiduciary obligation,
then that is also to be taken into account by the arbitrator in determining a
reasonable fee.[105]
V.
DETERMINATION OF REASONABLENESS OF FEE
A
fee shall be considered excessive when "after a review of the facts, a
lawyer of ordinary prudence would be left with a definite and firm conviction
that the fee is in excess of a reasonable fee."[106]
What constitutes a reasonable fee will vary from one set of facts to another
because there is no precise measure of reasonableness.[107]
Factors to be considered in determining the reasonableness of a fee include
(but are not limited to): (1) the time and labor required, the novelty and
difficulty of the questions involved and the skill requisite to perform the
legal service properly; (2) the likelihood, if apparent or made known to the
client, that the acceptance of the particular employment will preclude other
employment by the lawyer; (3) the fee customarily charged in the locality for
similar legal services; (4) the amount involved and the results obtained; (5)
the time limitations imposed by the client or by circumstances; (6) the nature
and length of the professional relationship with the client; (7) the
experience, reputation and ability of the lawyer or lawyers performing the
services; and (8) whether the fee is fixed or contingent.[108]
If
the arbitrator determines that the fee the lawyer is seeking to collect
according to the terms of the retainer agreement is excessive, then it will be
necessary to determine a reasonable fee. This calculation may involve: the
denial of some of the attorney's billing; the denial of some expenses claimed;
a more fundamental determination of a reasonable fee in light of the factors
listed above;[109]
or an essentially identical list of relevant factors set forth in a leading
case, as follows: Long tradition and
just about a universal one in American practice is for the fixation of lawyers'
fees to be determined on the following factors: time and labor required, the
difficulty of the questions involved, and the skill required to handle the
problems presented; the lawyer's experience, ability and reputation; the amount
involved and benefit resulting to the client from the services; the customary
fee charged by the Bar for similar services; the contingency or certainty of
compensation; the results obtained; and the responsibility involved.[110]
A.
Excessiveness of the Fee: The Hourly Rate
It
will usually be the case that the hourly rate fee set forth in the retainer
agreement will be accepted by the arbitrator because it is the product of a
voluntary agreement between the lawyer and client. However, the arbitrator can
determine that the hourly rate quoted was unreasonable even though the client
agreed to it when he or she signed the retainer agreement. For example, it
would be plausible to find that a substantial hourly rate, e.g., $300-$500,
which some lawyers may reasonably charge a wealthy client, would be
unreasonable if charged to someone of modest means, especially where it would
yield an amount equal to a substantial portion of that spouse's reasonable
expectation of the amount of marital assets to be awarded.[111]
Moreover, even though the client necessarily agreed to the hourly rate by
signing the retainer agreement, if the client was sufficiently unsophisticated
and did not realize that they were agreeing to pay top dollar and the lawyer
did not explain to them that this was so, that may also be a basis for a
reduction of the hourly rate.[112]
Finally, if the law firm has differential hourly rates for
senior partners, junior partners, associates, or contract lawyers, then the
arbitrator should examine whether, for example, specific services performed by
a partner were sufficiently routine or uncomplicated that they could have been
performed by an associate at a lower hourly billing rate. In that case, the
hourly rate fee should be reduced to the associate level.[113]
B.
Excessiveness of the Fee: Number of Hours Billed
In
the typical fee dispute, the number of hours expended is frequently at the core
of the dispute. The client will typically complain that the amount of time
being billed is excessive.
In
addressing this contention, the arbitrator should attempt to obtain an overall
assessment of the degree of protraction of the litigation. For example, did the
opposing party use dilatory tactics or otherwise engage in obstructionist
behavior?[114]
Was the case unduly litigated and, if so, did the attorney actively engage in
that protraction or were her efforts essentially responsive? If the attorney
was the aggressor in unduly protracting the litigation, was that sought by the
client? If so was the client informed of the effect of such a litigation
strategy on the attorney's fee?
In
addition, the arbitrator should seek to determine how much time was billed for
communicating with the client. Did the client have emotional needs that required
the attorney to properly devote significant amounts of time to meetings and
telephone calls with the client? Did the attorney make the client aware that
such activities would be reflected in the attorney's billings and that
therefore the client needed to balance his needs for information and perhaps
"hand-holding" against his budgetary constraints?
After
gaining some overall sense of whether the time spent was commensurate with the
complexity of the litigation, and appropriately attended to the client's
personal needs, the arbitrator should then focus on the accuracy of the
attorney's time records. If the attorney has failed to maintain adequate time
and billing records, that may require the arbitrator to disallow some of the
claimed charges based upon the inadequacy of the evidence supporting them.[115] The fact that the attorney actually expended
the time is not necessarily dispositive of the fee dispute. If the lawyer is
inexperienced and bills for time that most lawyers would not have needed to
expend because of their basic familiarity with matrimonial law, then it would
be appropriate to reduce the number of hours for purposes of calculating a
reasonable fee.[116]
Thus, it is necessary to determine whether the time spent was reasonable under
the circumstances.[117] If a portion of the time was improperly
spent, as for example, in the bringing of a frivolous motion, then it should be
disallowed.[118]
While a matrimonial attorney's fee is not dependent upon attainment of a
successful outcome for the client, the arbitrator should consider the benefit
to the client as a result of the services;[119]
that is, the hours spent must be of value to the client.[120]
For example, if a lawyer misses a court appearance and, as a consequence, has
to appear at a "show cause" hearing necessitated by the missed
appearance, the time spent doing so does not confer value on the client and
should not be counted towards the lawyer's fee. Indeed, by the same reasoning,
any time expended by the lawyer that would not have had to be expended but for
the lawyer's failure to meet a time deadline, file a pleading, etc., is not
properly chargeable to the client.
If
the attorney prepared a legal document that was not timely filed or otherwise
used on the client's behalf, that raises serious doubt that the client has
received the value of that service; fees may then be adjusted to be
commensurate with the actual value of the services to the client.
An
attorney may bill for travel time, for example, the time required to travel to
and from his office to a court or deposition provided that there is a
"portal to portal" provision in the retainer agreement. The absence
of such a provision should not necessarily disable the lawyer from charging for
travel time, but would then be a factor in determining the reasonableness of
the charges. Even if there is a provision in the retainer agreement providing
for billing for travel time at the full hourly rate fee set forth, and
extensive travel time is involved, e.g., air or train travel or extensive
driving time, in the event these charges are contested, then the reasonableness
of charging the full hourly rate for such travel time is appropriately
considered. The customary practice of lawyers in the community may be
considered,[121]
but customary practice is "not always reasonable."[122]
If the lawyer is part of a firm and confers with other
lawyers in the firm regarding the subject matter of the client's
representation, then it is appropriate to bill for that time. It may or may not
be appropriate, however, to bill for the time of the other lawyer or lawyers in
the firm who were consulted. If they have not been working on that matter, and
are asked to prepare a document, such time is appropriately billed. It is a
much closer question, however, if the conference is for the purpose of seeking
advice or discussing strategy. Billing for such time can easily be an abusive
practice and any such billings should be carefully scrutinized.
If
the lawyer appears in court at a scheduled time for a hearing but the hearing
is delayed, the lawyer is entitled to charge for the time spent waiting in
court. If during that time, the lawyer calls his or her office to check on
phone messages or to give instructions regarding scheduling other matters, that
time, if it is de minimus, can be included as part of "waiting
time" and is properly chargeable to the client. If, however, the lawyer
works on or transacts other clients' business while waiting for the judge,
whether by phone or by reading documents, that time is not properly chargeable
to the matrimonial client (though it may, and probably will, be charged to the
client on whose behalf that work was done). Charging both the matrimonial
client for the time spent waiting, and another client for some of that time productively
expended for the latter, constitutes unethical double billing.[123]
If the client simply asserts that the lawyer's total fee is
too high and points out, for example, that the spouse's lawyer's fee was 30 or
50 percent less than his or her own lawyer's fee and that the differential is
not mostly accounted for by a difference in the hourly rates, such evidence is
not dispositive of the claim that the fee is unreasonable; it would, however,
be a basis for questioning the lawyer as to why his or her total number of
hours was substantially greater than that expended by opposing counsel and
inquiring further into whether the time was spent in ways which were productive
and valuable to the client. It may be the case, for example, that the attorney
for the non-monied spouse properly devoted considerable time to the effort of
identifying the monied spouse's assets, thereby accounting for a significant
differential in the amount of hours billed.[124]
Essentially, the task of the
arbitrator is to determine whether the number of hours billed to the client was
time reasonably spent on behalf of the client or was reasonably necessary to
attain the client's objectives and provided the client with commensurate value.
Hours that are "excessive, redundant, or otherwise unnecessary"
should not be compensated.[125]
C.
Excessiveness of the Fee: Disproportionateness to the Financial Resources of
the Client or to the Relief Sought
If
the combination of the hourly rate and the number of hours actually expended
yields a fee that is grossly disproportionate to the limited financial
resources of the matrimonial litigants or to the value of the services, then
the fee may be deemed excessive. It may then be reduced to a reasonable amount
in light of the complexity of the matter and the amount of the marital assets.[126] However, the fact that the client complained
of a "lack of progress" in the matrimonial action is not, in and of
itself, a basis for reducing the fee.[127] The obligation of a client to pay the
attorney is not conditioned on the success of the lawyer's efforts.[128]
D. Bill
Padding
If
an attorney is highly competent and expends five hours of effort to accomplish
what most other attorneys would require ten hours to do, and the attorney then
bills for ten hours of time to reflect the proper value of the work done, that
would be illegal, unethical, and a breach of the lawyer's fiduciary obligation.[129]
The appropriate way for the attorney to obtain payment commensurate with his
value is to reflect that value in a higher hourly rate or fixed fee. If an
attorney has misstated his hours, then the arbitrator should, at a minimum,
disallow the padded hours.
If
the bill padding was found to be egregious, then the arbitrator should not only
eliminate the padded hours from the fee but may also diminish the fee by an
amount to reflect the egregiousness of violating both the lawyer's standard of
care[130]
and the fiduciary obligation to the client.[131]
If the arbitrator concludes that the attorney has billed for
more hours than should have been required to perform the work, then the
additional hours being charged may be disallowed[132]
and quantum meruit (the reasonable value of the services) would then be the
appropriate measure of recovery under such circumstances.[133]
E. Expenses
and Disbursements
It
is not uncommon for lawyers to bill clients for certain expenses that they
incur on behalf of the client. These expenses may include secretarial, travel,
long distance telephone calls, messenger, investigative, postage, overnight
mail, copying, computerized legal research, meals, and others. Some are
permissible expenses to be charged to the client and some are not.[134]
The
beginning point of the "expense" issue is the retainer agreement. The
lawyer must list with clarity in the retainer agreement the expense items that
will be billed to the client. If the retainer agreement confers authority on
the lawyer to hire an expert witness at the client's expense, then if the fee
of the expert is unusually high or high in relation to the value of the marital
estate, the attorney may be held to have nonetheless had an obligation to
notify the client in advance of the expert's fee and obtain consent.
If
a lawyer fails to identify costs that are to be paid by the client in the
retainer agreement, then it may be proper to deny reimbursement to the lawyer
for office costs such as long distance copying, faxing, and messengers.
However, the client must remain responsible for litigation costs such as filing
fees, expert witness fees (to which the client has consented), and court
reporter costs. Even if the lawyer is still allowed to charge the client
certain direct office-type costs despite not listing them in the retainer
agreement, e.g., copying, long distance, outgoing faxes, it is not appropriate
to mark up these items by adding a profit margin on top of actual costs.[135]
If copying costs are listed in the retainer statement as being billed at 25¢ a
page and faxes at $2.00 per page, then it is likely that the lawyer is marking
up these items by adding a profit margin.[136]
It is debatable whether these mark-ups are permissible.[137]
If these costs add up to substantial amounts, the arbitrator may determine that
such mark-ups are unreasonable.
Even
if certain expenses are listed in the retainer agreement as being the
responsibility of the client, that is not necessarily dispositive of the issue.
For example, it is traditionally understood that secretarial services, library
costs, rent, telephone, and utilities are a part of the lawyer's overhead – which
the attorney's hourly or fixed rate must cover – and therefore are not properly
billable to the client.
Some
courts disallow separate billing for computerized legal research services such
as LEXIS and WESTLAW – even at cost – because they see such research costs as
part of a firm's overhead.[138]
They compare such research costs to library costs that are not properly passed
on to a client directly but rather are absorbed by the firm and paid for from
hourly fee revenues. The trend, however, is to allow such separate billing of
at least some part of these expenses,[139]
provided that this is so stated in the retainer agreement. It is doubtful,
however, that firms can mark up those services by adding a profit percentage.[140] If the retainer agreement does not indicate
that a profit margin will be added to the computerized legal research service
costs, then the mark-up should be disallowed.[141]
If the lawyer has indicated a use rate in the retainer agreement which reflects
a mark-up, but the existence of a mark-up is not specifically noted and the
lawyer has not told the client that the costs will be marked up by the addition
of a profit margin, then the mark-up may be disallowed.[142]
Many law firms today employ
paralegals to assist in the practice of law and separately bill for paralegal
time just as they do for lawyer time. While it is arguable that a
"reasonable attorney's fee" means "a fee for services rendered
by an individual who has been licensed to practice law," the prevailing
practice today is to allow such charges to be separately billed. That said, it
is important to consider what work it is that the paralegal did. The mere fact
that work has been done by a paralegal is not dispositive of the issue of
whether that work was of a paralegal level for billing purposes. If the work
involves delivering documents to the court house for filing, filing of
documents in the office, obtaining a signature on a document, or typing a form
document by filling in information elicited by the attorney from the client, the
aforementioned are more properly characterized as secretarial work, and hourly
billings for such work may be rejected because they are part of the lawyer's
overhead.[143]
If the work being billed for involves legal research or investigative work, or
the construction of legal documents where a more complex task is involved than
merely filling in the blanks, that work, when done by a paralegal, may properly
be separately billed for at the rate set forth in the retainer agreement.
VI.
TERMINATION BY THE CLIENT
Under
New York law, a client has an absolute right to discharge an attorney at any
time during the course of the representation, irrespective of whether there is
legal cause to do so.[144]
"If the discharge is without cause and before the completion of [the
lawyer's] services, then the amount of the attorney's compensation must be
determined on a quantum meruit basis."[145]
Quantum meruit is generally defined to mean the reasonable value of the service
rendered. This rule, initially formulated to apply to attorneys hired on a
contingency fee basis, has been extended to apply to hourly rate attorneys as
well.[146]
Accordingly, if a matrimonial lawyer was hired to represent
a party in a divorce proceeding on an hourly rate basis and is discharged by
the client prior to the completion of the task, then the attorney is not
entitled to the hourly rate fee agreed upon but rather to quantum meruit – the
reasonable value of the lawyer's services. It is commonly supposed that quantum
meruit in the matrimonial context is the product of a reasonable hourly rate
and the number of hours reasonably expended by the attorney, and therefore, the
fee agreement may be looked to for a determination of a reasonable hourly rate.
However, the factors set forth above, to determine the reasonableness of a fee
are also the factors to be used in the calculation of quantum meruit.[147] Therefore, a quantum meruit calculation can
yield a fee that could be more or less than the fee set in the retainer
agreement.[148]
Nonetheless, it would be inconsistent with the consumer protection purposes
that underlay the establishing of the matrimonial fee arbitration process –
except in the most unusual of circumstances – for an arbitrator to award a
matrimonial attorney more than the fee established in the retainer agreement.
This position is accentuated by the fact that a client may well have discharged
the lawyer for valid reason, but even if that can be reasonably described as
"good cause," that usually falls short of the "legal cause"
that would entitle the client to offset some or all of the fee claims.[149]
In conducting matrimonial fee arbitration where the attorney
has been discharged prior to the completion of services, the arbitrator should
be guided by the same principles of justice, equity, and reasonableness as
would apply if the attorney had completed the services which were the subject
of a fee dispute.
VII.
STANDARD OF CARE, FIDUCIARY AND ETHICAL ISSUES
A. Claims
of Malpractice
Clients
contesting lawyers' fees often assert by way of defense that the attorney
violated the standard of care owed to the client, i.e., committed the tort of
malpractice.[150]
When such a claim is raised in a matrimonial fee arbitration proceeding, it is
incumbent on the arbitrator, for the reasons set out herein, to give full
consideration to the client's claim.
If
a client claims that the fee is excessive because, inter alia, the
attorney neglected the client's case, lacked adequate skills and knowledge, or
did a poor job in representing the client (incompetence) or failed to: prepare
adequately for hearings, investigate properly the facts or the other spouse's
financial circumstances, or retain necessary experts such as a child
psychologist or forensic accountant, the client is also raising claims that
sound in malpractice. These assertions, which are both arguments that the fee
is excessive and that malpractice has been committed, are for all practical
purposes identical in this context and amount to a claim that the way the case
was handled adversely affected the value of the lawyer's services to the
client, and should therefore result in a fee reduction or elimination.[151]
Under
New York law, where a client raises issues of malpractice in a court action
involving the value of professional services or in fee arbitration, the
outcomes of both the court action and the arbitration are usually preclusive of
the malpractice claim. Stated simply, the client cannot thereafter sue the
attorney for malpractice.[152]
This is because the quality of the lawyer's work is necessarily taken into
account by the judge or the arbitrator in determining the amount of the fee to
which the attorney is entitled.[153] Accordingly, failure of the arbitrator to
take the client's claims of malpractice into account may well result in the
forfeiture of all client rights to assert a claim of malpractice against the
attorney.
Quite
apart from its preclusive effect on any subsequent action for malpractice, the
policy issues promoting fee arbitration should lead the arbitrator to give full
consideration to a client's claim of malpractice. As noted above, fee issues
and malpractice claims are often intertwined;[154]
forcing the client to bring a separate malpractice action to protect his
interests is likely to undermine the purposes of fee arbitration by
substantially inflating the cost of seeking an equitable disposition of a
dispute between client and lawyer.
Even
if the client does not specifically, or knowingly, raise issues of malpractice,
it is not unlikely that if the client thereafter seeks to sue the lawyer for
malpractice, a court will find that the issue of the lawyer's competence
"was reasonably and plainly comprehended to be within the scope of the
[fee] dispute submitted to arbitration."[155]
Nonetheless, the arbitration program created by the Matrimonial Rules is not
intended to be a forum for the adjudication of significant malpractice claims.[156]
Moreover, quite apart from this intent, fee arbitrations of the type that take
place under the Matrimonial Rules are simply not an appropriate forum for the
adjudication of malpractice issues. Generally, clients in matrimonial fee
disputes invoking fee arbitration will be ill-informed about the legal
technicalities of breach of the standard of care. Moreover, there are usually
no witnesses testifying on the issue and often little more will be available to
the arbitrator besides the competing claims of the lawyer and client.
Therefore,
even apart from general criticisms of the preclusion policy,[157]
the policy of preclusion is especially ill-suited for application to
matrimonial fee arbitration as provided for in New York. However, until such
time as the preclusion issue is held inapplicable, then for the reasons stated,
arbitrators must accept and consider evidence relating to claims of
malpractice, but only to the extent that such claims affect the fees to which
the attorney is entitled. In deciding the appropriate level of fees to be
awarded, the arbitrator should evaluate whether the alleged malpractice
affected the value of the services provided to the client in the disputed
matter. If the attorney's actions reduced the value of the services, the
arbitrator should reduce the fee to account for the decreased value. However,
while the matrimonial fee arbitrator may award a refund of unearned fees and/or
costs that were previously paid to the attorneys, the arbitrator may not
affirmatively award damages to the client. In other words, the matrimonial fee
arbitrator who finds that the attorney committed malpractice can deny the
attorney's fee claim and order disgorgement of fees previously paid, but may
not award any amounts beyond that to the client.
If
a client asserts claims of malpractice, or which sound in malpractice, and it
appears that the client has a viable claim for damages substantially in excess
of the amount of the fees paid or claimed, then the arbitrator may wish to
interrupt the proceedings and notify the Administrative Judge of the judicial
district so that the latter can determine whether to discontinue the arbitration.[158]
If the Administrative Judge decides to proceed with the arbitration, then the
arbitrator may inform the client of the likelihood that he or she is foregoing
the right to bring a subsequent malpractice claim in a court so that the client
can consider whether to proceed with the arbitration.
B. Breach
of Fiduciary Obligation
While
malpractice concerns a lawyer's standard of care, a breach of fiduciary conduct
is said to involve the lawyer's standard of conduct.[159]
The attorney-client relationship is fiduciary in nature and is governed by a
series of special obligations imposed on the lawyer for the client's benefit.
The fiduciary obligations of the lawyer include: maintaining confidentiality;
acting with undivided loyalty; avoiding conflicts of interest; operating
competently; presenting information and advice honestly and freely; acting
fairly; and safeguarding client property.[160] In some instances, malpractice and fiduciary
obligation overlap. But claims, for example, that the lawyer disclosed
confidential information, had a conflict of interest, did not secure the
client's informed consent to the fee agreement or the settlement, or engaged in
self-interested behavior at the client's expense, constitute claims of breach
of fiduciary obligation. Unlike malpractice, however, establishing a violation
of a lawyer's fiduciary obligation does not require proof of causation of
specific injury or actual damages.[161]
The theory is that the lawyer, as fiduciary, is in a position of trust and has
agreed to perform compensable services. If he breaches that trust, then he is
not entitled to a full measure of compensation. Denying some, or the entire
fee, minimizes the incentive for the fiduciary to breach his duty of loyalty.
The
prevailing rule is that a lawyer engaging in a clear and serious violation of
duty to the client can be required to forfeit some, or all, of the lawyer's fee
– whether or not it has already been paid.[162]
Accordingly, ignoring such breaches in the course of fee arbitration – that is,
allowing a lawyer to obtain a fee that fiduciary law would limit or disallow –
violates a client's correlative fiduciary rights.[163]
It is not clear that New York courts regard claims of breach
of fiduciary obligation as precluded by a fee arbitration proceeding, as they
do with regard to claims of legal malpractice. Nonetheless, it is at least not
unlikely that courts would so conclude. Therefore, and for independent policy
reasons, arbitrators may take into account whether an attorney has breached a fiduciary
obligation to the matrimonial client and, if so, the seriousness of the
violation, which in turn determines the degree to which fees should be
forfeited or disgorged.[164]
C. Effect
of Violation of the Code of Professional Responsibility on Fees
Many
fiduciary obligations of the lawyer are codified in New York's ethical code,
titled Disciplinary Rules of the Code of Professional Responsibility, and
promulgated as joint rules of the Appellate Division of the Supreme Court.[165] Indeed, much of the law of professional
responsibility is a codification of fiduciary doctrine; therefore, an attorney
breaching a fiduciary standard often violates a specific ethical admonition as
well.[166] Ethical rules are a source of protection
granted to clients apart from the rights accruing to them under fiduciary law.
Violations of the ethical rules can result in disciplinary sanctions including
a letter of caution, an admonition, a reprimand, suspension of the license to
practice law, and disbarment.[167] In addition, a lawyer who commits serious
ethical violation can be barred from receiving any fee.[168]
The Appellate Division, under
authority conferred by statute,[169]
has created the mechanism for enforcement of the Code of Professional
Responsibility.[170]
Whereas enforcement of the Code is not a function of fee arbitration,
arbitrators should not be indifferent to clear violations of the Code of
Professional Responsibility that damage the client's interests. As a leading
ethics scholar has stated, "a lawyer may forfeit the right to a fee if the
lawyer committed a breach of a statute or lawyer code that violated the
lawyer's duty toward his or her client during the course of the
representation."[171]
VIII.
CONCLUSION
In
the final analysis, the arbitrator's task is not quantifiable. If the
procedural requirements of the matrimonial rules have been met, then the fee
may be presumed valid, but it is still subject to a requirement of
reasonableness. As these materials have made clear, the concept of
reasonableness is highly elastic and there is no formulaic template that can be
applied to determine when a fee is excessive.[172]
Despite the ubiquity of attorney-client fee arbitration in the United States,
there has apparently been no attempt to publish a substantive manual on fee
arbitration or guide for fee arbitrators. This effort – which should be
regarded as a work in progress – is an attempt to fill that void. Much work,
however, remains to be done including empirical analysis of what matrimonial
fee arbitrators are actually doing.[173]
APPENDIX A
Retainer
Agreement
1. Names
and addresses of the parties entering into the agreement;
2. Nature
of the services to be rendered;
3. Amount
of the advance retainer, if any, and what it is intended to cover;
4.
Circumstances under which any portion of the advance retainer may be refunded.
Should the attorney withdraw from the case or be discharged prior to the
depletion of the advance retainer, the written retainer agreement shall provide
how the attorney's fees and expenses are to be determined, and the remainder of
the advance retainer shall be refunded to the client;
5.
Client's right to cancel the agreement at any time; how the attorney's fee will
be determined and paid should the client discharge the attorney at any time
during the course of the representation;
6. How
the attorney will be paid through the conclusion of the case after the retainer
is depleted; whether the client may be asked to pay another lump sum;
7. Hourly
rate of each person whose time may be charged to the client; any out-of-pocket
disbursements for which the client will be required to reimburse the attorney.
Any changes in such rates or fees shall be incorporated into a written
agreement constituting an amendment to the original agreement, which must be
signed by the client before it may take effect;
8. Any
clause providing for a fee in addition to the agreed-upon rate, such as a
reasonable minimum fee clause, must be defined in plain language and set forth
the circumstances under which such fee may be incurred and how it will be
calculated;
9.
Frequency of itemized billing, which shall be at least every 60 days; the
client may not be charged for time spent in discussion of the bills received;
10.
Client's right to be provided with copies of correspondence and documents relating
to the case, and to be kept apprised of the status of the case;
11.
Whether and under what circumstances the attorney might seek a security
interest from the client, which can be obtained only upon court approval and on
notice to the adversary;
12. Under
what circumstances the attorney might seek to withdraw from the case for
nonpayment of fees, and the attorney's right to seek a charging lien from the
court;
13.
Should a dispute arise concerning the attorney's fee, the client may seek
arbitration; the attorney shall provide information concerning fee arbitration
in the event of such dispute or upon the client's request.
APPENDIX B
Statement
of Client's Rights and Responsibilities
• Your
attorney is providing you with this document to inform you of what you, as a
client, are entitled to by law or by custom. To help prevent any
misunderstanding between you and your attorney please read this document
carefully.
• If you
ever have any questions about these rights, or about the way your case is being
handled, do not hesitate to ask your attorney. He or she should be readily
available to represent your best interests and keep you informed about your
case.
• An
attorney may not refuse to represent you on the basis of race, creed, color,
sex, sexual orientation, age, national origin or disability.
• You are
entitled to an attorney who will be capable of handling your case; show you
courtesy and consideration at all times; represent you zealously; and preserve
your confidences and secrets that are revealed in the course of the
relationship.
• You are
entitled to a written retainer agreement which must set forth, in plain
language, the nature of the relationship and the details of the fee
arrangement. At your request, and before you sign the agreement, you are entitled
to have your attorney clarify in writing any of its terms, or include
additional provisions.
• You are
entitled to fully understand the proposed rates and retainer fee before you
sign a retainer agreement, as in any other contract.
• You may
refuse to enter into any fee arrangement that you find unsatisfactory.
• Your
attorney may not request a fee that is contingent on the securing of a divorce
or on the amount of money or property that may be obtained.
• Your
attorney may not request a retainer fee that is nonrefundable. That is, should
you discharge your attorney, or should your attorney withdraw from the case,
before the retainer is used up, he or she is entitled to be paid commensurate
with the work performed on your case and any expenses, but must return the
balance of the retainer to you. However, your attorney may enter into a minimum
fee arrangement with you that provides for the payment of a specific amount
below which the fee will not fall based upon the handling of the case to its
conclusion.
• You are
entitled to know the approximate number of attorneys and other legal staff
members who will be working on your case at any given time and what you will be
charged for the services of each.
• You are
entitled to know in advance how you will be asked to pay legal fees and
expenses, and how the retainer, if any, will be spent.
• At your
request, and after your attorney has had a reasonable opportunity to
investigate your case, you are entitled to be given an estimate of approximate
future costs of your case, which estimate shall be made in good faith but may
be subject to change due to facts and circumstances affecting the case.
• You are
entitled to receive a written, itemized bill on a regular basis, at least every
60 days.
• You are
expected to review the itemized bills sent by counsel, and to raise any
objections or errors in a timely manner. Time spent in discussion or
explanation of bills will not be charged to you.
• You are
expected to be truthful in all discussions with your attorney, and to provide
all relevant information and documentation to enable him or her to competently
prepare your case.
• You are
entitled to be kept informed of the status of your case, and to be provided
with copies of correspondence and documents prepared on your behalf or received
from the court or your adversary.
• You
have the right to be present in court at the time that conferences are held.
• You are
entitled to make the ultimate decision on the objectives to be pursued in your
case, and to make the final decision regarding the settlement of your case.
• Your
attorney's written retainer agreement must specify under what circumstances he
or she might seek to withdraw as your attorney for nonpayment of legal fees. If
an action or proceeding is pending, the court may give your attorney a
"charging lien," which entitles your attorney to payment for services
already rendered at the end of the case out of the proceeds of the final order
or judgment.
• You are
under no legal obligation to sign a confession of judgment or promissory note,
or to agree to a lien or mortgage on your home to cover legal fees. Your
attorney's written retainer agreement must specify whether, and under what
circumstances, such security may be requested. In no event may such security
interest be obtained by your attorney without prior court approval and notice
to your adversary. An attorney's security interest in the marital residence
cannot be foreclosed against you.
• You are
entitled to have your attorney's best efforts exerted on your behalf, but no
particular results can be guaranteed.
• If you
entrust money with an attorney for an escrow deposit in your case, the attorney
must safeguard the escrow in a special bank account. You are entitled to a
written escrow agreement, a written receipt, and a complete record concerning
the escrow. When the terms of the escrow agreement have been performed, the
attorney must promptly make payment of the escrow to all persons who are
entitled to it.
• In the
event of a fee dispute, you may have the right to seek arbitration. Your
attorney will provide you with the necessary information regarding arbitration
in the event of a fee dispute, or upon your request.
Receipt
Acknowledged:
_______________________________________________________________________
Attorney's
signature
________________________________________________________________________
Client's
signature
_______________________________________________________________________
Date
APPENDIX C
Part 1400.
Procedure For Attorneys In Domestic Relations Matters
§ 1400.1
Application
This Part
shall apply to all attorneys who, on or after November 30, 1993, undertake to
represent a client in a claim, action or proceeding, or preliminary to the
filing of a claim, action or proceeding, in either Supreme Court or Family
Court, or in any court of appellate jurisdiction, for divorce, separation,
annulment, custody, visitation, maintenance, child support, or alimony, or to
enforce or modify a judgment or order in connection with any such claims,
actions or proceedings. This Part shall not apply to attorneys representing
clients without compensation paid by the client, except that where the client
is other than a minor, the provisions of section 1400.2 shall apply to the
extent they are not applicable to compensation.
§ 1400.2
Statement Of Client's Rights And Responsibilities
An
attorney shall provide a prospective client with a Statement Of Client's Rights
And Responsibilities, in a form prescribed by the Appellate Divisions, at the
initial conference and prior to the signing of a written retainer agreement. If
the attorney is not being paid a fee from the client for the work to be
performed on the particular case, the attorney may delete from the statement
those provisions dealing with fees. The attorney shall obtain a signed
acknowledgment of receipt from the client.
§ 1400.3
Written Retainer Agreement
An
attorney who undertakes to represent a party and enters into an arrangement
for, charges or collects any fee from a client shall execute a written
agreement with the client setting forth in plain language the terms of
compensation and the nature of services to be rendered. The agreement, and any
amendment thereto, shall be signed by both client and attorney, and, in actions
in Supreme Court, a copy of the signed agreement shall be filed with the court
with the statement of net worth. Where substitution of counsel occurs after the
filing of the net worth statement, a signed copy of the attorney's retainer
agreement shall be filed with the court within 10 days of its execution. A copy
of a signed amendment shall be filed within 15 days of signing. A duplicate
copy of the filed agreement and any amendment shall be provided to the client.
The agreement shall be subject to the provisions governing confidentiality
contained in Domestic Relations Law, section 235(1).
§ 1400.4
Nonrefundable Retainer Fee
An
attorney shall not enter into an arrangement for, charge or collect a
nonrefundable retainer fee from a client. An attorney may enter into a
"minimum fee" arrangement with a client that provides for the payment
of a specific amount below which the fee will not fall based upon the handling
of the case to its conclusion.
§ 1400.5
Security Interests
(a) An
attorney may obtain a confession of judgment or promissory note, take a lien on
real property, or otherwise obtain a security interest to secure his or her fee
only where:
(1) the
retainer agreement provides that a security interest may be sought;
(2)
notice of an application for a security interest has been given to the other
spouse; and,
(3) the
court grants approval for the security interest after submission of an
application for counsel fees.
(b)
Notwithstanding the provisions of subdivision (a) of this section, an attorney
shall not foreclose on a mortgage placed on the marital residence while the
spouse who consents to the mortgage remains the titleholder and the residence
remains the spouse's primary residence.
§ 1400.6
[Deleted]
§ 1400.7
Fee Arbitration
In the
event of a fee dispute between attorney and client, the client may seek to
resolve the dispute by arbitration, pursuant to a fee arbitration program
established and operated by the Chief Administrator of the Courts and subject
to the approval of the justices of the Appellate Divisions.
APPENDIX D
Part 136.
Fee Arbitration In Domestic Relations Matters
§ 136.1
Application
This Part
shall apply where representation has commenced on or after November 30, 1993,
to all attorneys who undertake to represent a client in a claim, action or
proceeding, or preliminary to the filing of a claim, action or proceeding, in
either Supreme Court or Family Court, or in any court of appellate
jurisdiction, for divorce, separation, annulment, custody, visitation,
maintenance, child support, alimony, or to enforce or modify a judgment or order
in connection with any such claims, actions or proceedings.
§ 136.2
General
In the
event of a fee dispute between attorney and client, whether or not the attorney
already has received the fee in dispute, the client may seek to resolve the
dispute by arbitration, which shall be binding upon both attorney and client. A
client may request arbitration pursuant to section 136.5(e) of this Part either
in response to notice from the attorney pursuant to section 136.5(a), upon
consent pursuant to section 136.5(d), or upon the client's own initiative.
§ 136.3
Organization and Appointment
(a) The
Administrative Judge of each judicial district shall organize and administer a
fee arbitration program in each judicial district pursuant to the rules
contained in this Part. For purposes of this Part, Nassau and Suffolk Counties
shall each be designated a judicial district.
(b) The
Administrative Judge shall appoint attorneys and laypersons to participate in
the program, who shall serve at the pleasure of the Administrative Judge and
without compensation. Attorneys must reside or maintain an office in, and
laypersons must work or reside in, the judicial district for which the program
is established. The Administrative Judge shall consult with local bar
associations with respect to the appointments made in each geographic area.
Each person appointed as an arbitrator shall file with the Administrative Judge
an oath or affirmation to faithfully and fairly try all actions that come
before him or her.
(c)
Disputes involving a sum less than $3000 shall be submitted to one attorney
arbitrator. For purposes of this Part, the term "panel" shall include
a single arbitrator unless the context requires otherwise.
(d)
Disputes involving a sum of $3000 or more shall be submitted to a panel of
three arbitrators, consisting of one attorney, one layperson, and a third panel
member who shall be selected at random from a pool of arbitrators comprised of
both attorneys and laypersons. The chair shall be an attorney, who shall be
selected by the panel members if more than one attorney is on the panel.
(e) The
Administrative Judge shall be responsible for the administration of the
arbitration program and shall distribute and maintain all necessary
documentation required for purposes of the operation of the program. All papers
required to be filed in connection with the arbitration proceeding shall be
delivered to the Administrative Judge. The Administrative Judge may designate
such persons as may be necessary to assist in the administration of the program.
§ 136.4
Jurisdiction
(a) The
arbitration program may not hear any fee dispute in which the amount in dispute
is in excess of $100,000, including disbursements.
(b) The
Administrative Judge may decline to accept or continue to arbitrate a dispute
in which substantial legal questions are raised in addition to the basic fee
dispute or with respect to which no attorney's services have been rendered for
at least two years.
§ 136.5
Arbitration Procedure
(a) Where
the attorney and client cannot agree as to the attorney's fee, the attorney
shall inform the client in writing by certified mail or by personal service
that he or she has 30 days from receipt of the notice in which to elect to
resolve the dispute by arbitration, the result of which is binding upon both
attorney and client. The attorney must include standard instructions developed
by the Chief Administrator regarding the arbitration procedure, and a copy of a
request for arbitration.
(b) If
the client does not file the request for arbitration within the 30-day period,
the attorney may commence an action to recover the fee and the client no longer
shall have the right to request arbitration pursuant to this Part with respect
to the fee dispute at issue.
(c) An
attorney who institutes an action to recover a fee must allege in the complaint
that the client received notice under this rule of his or her right to pursue
arbitration and did not file a timely request for arbitration.
(d) A
client also may consent to the attorney's request to submit the dispute to
arbitration. Such consent must be obtained in writing prior to the initiation
of the proceeding. The request for or consent to arbitration shall specify that
the client has received and read the standard instructions developed by the
Chief Administrator regarding the arbitration procedure, and that the client
waives his or her right to otherwise pursue the claim and agrees to be bound by
the determination of the arbitration panel.
(e) If
the client elects to submit the dispute to arbitration, the client shall file
the request for arbitration with the Administrative Judge in the judicial
district which has or would have jurisdiction over the marital dispute, unless
another is designated by the Chief Administrator. Upon receipt of the request
for arbitration, the Administrative Judge shall serve a copy of the request
upon the named attorney and forward an "attorney fee response" to be
completed by the attorney and returned to the Administrative Judge within 20
days. The attorney shall include with the response a certification that a copy
of the response was served upon the client.
(f) Upon
receipt of the attorney's response, the Administrative Judge shall designate
the arbitrator or arbitrators who will hear the dispute and shall schedule a
hearing. The parties must receive at least 10 days notice in writing of the
time and place of the hearing.
(g) The
client has 30 days following the filing of the request for arbitration within
which to withdraw from the process, but in no event may the client withdraw
after the arbitration has commenced. Withdrawal shall be by notice to the
Administrative Judge.
(h) The
hearing shall be held within 60 days of the receipt by the Administrative Judge
of the request for arbitration.
§ 136.6
Arbitration Hearing
(a) The
rules of evidence need not be observed at the hearing, and a stenographic or
other record may be made. Arbitrators shall have the power to issue subpoenas
and to administer oaths. Parties shall have the right to present evidence and
to cross-examine witnesses.
(b) The
burden of proof shall be on the attorney to prove the reasonableness of the fee
by a preponderance of the evidence. The attorney shall present documentation of
the work performed and the billing history. The client may then present his or
her account of the services rendered and time expended. Witnesses may be
called, and the client shall have the right of final reply.
§ 136.7
Determination of the Panel
(a) The
determination shall be signed by the panel of arbitrators or by at least a
majority of them.
(b)
Within 30 days following the hearing, the panel shall serve upon both parties
by certified mail a copy of its written determination, and also shall transmit
the original of the determination to the Administrative Judge.
§ 136.8
Review
The
client or attorney may seek review of the arbitration award pursuant to Article
75 of the Civil Practice Law and Rules.
§ 136.9
Confidentiality
All
proceedings commenced and conducted in accordance with this Part shall be
confidential, except to the extent necessary to take ancillary legal action
with respect to a fee matter.
§ 136.10
Refusal to Participate in Arbitration
All
attorneys are required to participate in the arbitration process upon the
filing of the request for arbitration by a client in conformance with these
rules. An attorney who refuses to submit to the arbitration process shall be
referred to the local grievance committee of the Appellate Division for
disciplinary action.
§ 136.11
Records of Arbitration Determinations
The
determination of the arbitration panel shall be retained by the arbitration
program.
APPENDIX E
22 NYCRR
Part 1200, § 1200.11 Fee For Legal Services [DR 2-106]
(a) A
lawyer shall not enter into an agreement for, charge or collect an illegal or
excessive fee.
(b) A fee
is excessive when, after a review of the facts, a lawyer of ordinary prudence
would be left with a definite and firm conviction that the fee is in excess of
a reasonable fee. Factors to be considered as guides in determining the
reasonableness of a fee may include the following:
(1) The
time and labor required, the novelty and difficulty of the questions involved
and the skill requisite to perform the legal service properly.
(2) The
likelihood, if apparent or made known to the client, that the acceptance of the
particular employment will preclude other employment by the lawyer.
(3) The
fee customarily charged in the locality for similar legal services.
(4) The
amount involved and the results obtained.
(5) The
time limitations imposed by the client or by circumstances.
(6) The
nature and length of the professional relationship with the client.
(7) The
experience, reputation and ability of the lawyer or lawyers performing the
services.
(8)
Whether the fee is fixed or contingent.
(c) A
lawyer shall not enter into an arrangement for, charge or collect:
(1) . . .
.
(2) Any
fee in a domestic relations matter:
(i) the
payment or amount of which is contingent upon the securing of a divorce or in
any way determined by reference to the amount of maintenance, support,
equitable distribution, or property settlement;
(ii)
unless a written retainer agreement is signed by the lawyer and client setting
forth in plain language the nature of the relationship and the details of the
fee arrangement. A lawyer shall not include in the written retainer agreement a
nonrefundable fee clause; or
(iii)
based upon a security interest, confession of judgment or other lien, without
prior notice to the client in a signed retainer agreement and approval from a
tribunal after notice to the adversary. A lawyer shall not foreclose on a
mortgage placed on the marital residence while the spouse who consents to the
mortgage remains the titleholder and the residence remains the spouse's primary
residence.
(3) A fee
proscribed by law or rule of court.
(d) . . .
.
(e) In
domestic relations matters, a lawyer shall resolve fee disputes by arbitration
at the election of the client.
(f) In
domestic relations matters, a lawyer shall provide a prospective client with a
Statement Of Client's Rights And Responsibilities at the initial conference and
prior to the signing of a written retainer agreement.
* Professor of Law,
I
began by doing the obvious: contacting other mandatory fee arbitration programs
around the country to obtain the substantive training guides that they had
prepared. After extensive investigation, I learned, much to my chagrin, that no
program, mandatory or otherwise, has prepared such a guide; indeed, none
exists. To do the training properly, I concluded that I would have to fill that
void.
Identifying
the specific components that an arbitrator should take into account in
determining whether the fee sought is reasonable, and if not, how to determine
what is a reasonable fee, is a formidable task. It will not do to say, with
apologies to Mr. Justice Potter Stewart, "I know a reasonable fee when I
see it." Nor will it do to merely recite the eight factors set forth in
Rule 1.5 of the Model Rules of Professional Conduct and DR 2-106 of the Model
Code of Professional Responsibility. That simply fails to capture the essential
task of the arbitrator. Moreover, the task is perhaps complicated by the fact
that in New York, when the fee dispute is at least $3000, a panel of three arbitrators
is appointed, one of whom must be a layperson. See infra Appendix
D § 136.3.
Since 46 jurisdictions now have attorney-client fee
arbitration programs, including 12 states with mandatory fee arbitration
programs, the need for some kind of guide is manifest. By preparing the first
such guide, one that reflects a scholarly approach, it is my intent both to
stimulate publication activity focusing on other fee arbitration programs and
jump start a national colloquy with respect to a number of the substantive
"reasonable fee" issues that I have addressed. Arbitration and
especially fee arbitration is a low-visibility but yet high volume enterprise.
Little is known about the principles of decision that prevail. This article may
be seen as an attempt to illuminate a part of the on-going fee arbitration
process.
I am
indebted to Deborah Kahn and Jay Butterman of the New York matrimonial firm
Butterman, Kahn & Gardner, LLP, who have provided me with invaluable
assistance, including insight into the practical aspects of matrimonial law
practice and a well reasoned critique, from the perspective of practicing
lawyers, of several of the conclusions I reached. I am also indebted to
Professors Vivian Berger and Lela Love who critiqued drafts of the article. In
the course of compiling information about other fee arbitration programs, I
have received assistance from James Towery, Chairman of the ABA Committee on
Client Protection; Jerry Larkin of the Illinois Attorney Disciplinary
Commission; David Johnson, Director - Attorney Ethics of the New Jersey
Administrative Office of the Courts; and Jill Sperber, Director of the
Mandatory Fee Arbitration Program of the State Bar of California. Finally, I
wish to thank my research assistant, Kevin Heller for his assistance in carrying
out this project.
[1] According to a recent poll, 69
percent of Americans believe lawyers are only sometimes honest or not usually
honest and 56 percent say lawyers use the system to protect the powerful and
enrich themselves. Stephen Budiansky, How Lawyers Abuse the Law, U.S.
News & World Report, Jan. 30, 1995 at 50, 51. A National Law Journal
survey, reflecting findings of a national poll conducted in mid-July 1993,
found lawyers less well respected than any occupational group except
politicians, and reported the following changes from an earlier poll conducted
in 1986: an increase in the regard of lawyers as "less honest" than
most people from 17% to 31%; and an increase in the belief that lawyers charge
too much from 23% to 43%. See Wall St. J., Aug. 2, 1993, at B3. See
also Gary A. Hengstler, The Public Perception of Lawyers: ABA
Poll, A.B.A.J., Sept. 1993, at 60. (a large percentage of Americans view
attorneys as unethical, uncompassionate and greedy) (hereinafter ABA Poll).
[2]
Lester Brickman, Attorney-Client Fee Arbitration: A Dissenting View,
1990 Utah L. Rev. 277 (citing Report of Commission on Professionalism to the
Bd. of Governors and House of Delegates of the ABA, 112 FRD 243, (1986)); see
also Special Commission on Resolution of Disputes of ABA Section of the
Bar, The Resolution of Fee Disputes: A Report and Model By-Laws, 1974
["Disputes concerning fees are universally recognized as constituting the
most serious problem in the relationship between the Bar and the
public."]; ABA Poll, id. (complaints concerning fee disputes are
the most common grievance claimed by the public).
[3] Lester Brickman, Contingency Fee
Abuses, Ethical Mandates, and the Disciplinary System: The Case Against
Case-by-Case Enforcement, 53 Wash. & Lee L. Rev. 1339, 1354, 1369
(1996). According to the Committee of Professional Discipline of the
Association of the Bar of the City of New York, "[e]ach year, disciplinary
authorities in the State of New York receive a substantial number of complaints
alleging that lawyers' services were overpriced or incompetent. Pure fee
disputes or mixed disputes (that is, disputes involving both fees and charges
of minor neglect or incompetence) can consume a significant percentage of the
scarce resources of disciplinary systems. Ultimately, the authorities dismiss
the great majority of these complaints because they do not involve violations
of disciplinary rules." Helping Lawyers and Clients to Resolve Fee
Disputes: A Proposal for a Pilot Program, 49 The Record of the Bar of the
City of New York 279.
[4] "The existing system of
regulating the profession is narrowly focused on violations of professional
ethics. It provides no mechanism to handle other types of clients' complaints.
The system does not usually address complaints that the lawyer's service was
overpriced or unreasonably slow. The system does not usually address complaints
of incompetence or negligence except where the conduct was egregious or
repeated." Lawyer Regulation for a New Century: Report of the
Commission on Evaluation of Disciplinary Enforcement at the American Bar
Association (the "McKay Commission") (1991), at xv.
[5] See Survey of Fee Arbitration
Programs, ABA Standing Committee on Client Protection (2000); see also
ABA Model Rules for Fee Arbitration, adopted Feb. 23, 1995.
[6] New York has recently adopted a
statewide fee dispute arbitration program that will apply to all
attorney-client relationships formed after June 1, 2001, not just matrimonial
fee disputes. Effective January 1, 2002, N.Y. Comp. Codes R. & Regs. 22, §
136 will no longer be binding and will be replaced by the broader provisions of
N.Y. Comp. Codes R. & Regs. 22, § 137 entitled Part 137 Fee Dispute
Resolution Program. N.Y. Comp. Codes R. & Regs. 22, § 137, Part 137 Fee
Dispute Resolution Program (2002). See also John Caher, Arbitration
Required For Most Fee Disputes, N.Y.L.J., Jan. 29, 2001, at 1, col. 4.
[7] The McKay Commission found that the
thousands of complaints being dismissed every year symbolized a significant gap
between client expectations and the existing system of attorney regulation.
Accordingly, the Commission recommended the establishment of mandatory fee
arbitration programs in all jurisdictions. Id. At the time of the McKay
Commission's recommendation, six jurisdictions had mandatory fee arbitration
programs: Alaska, California, Maine, New Jersey, South Carolina, and Wyoming.
Most other states had enacted statutes offering voluntary fee arbitration on a
statewide basis. A few jurisdictions, including New York, offered no statewide
system of fee arbitration. Today there are ten jurisdictions where fee
arbitration is mandatory if requested by the client: the six listed above and
New York, North Carolina, Ohio, and the District of Columbia. In addition,
there are six states where if the client requests fee arbitration, and the
attorney chooses not to participate, the matter proceeds ex parte and
the attorney will be nonetheless bound unless he institutes a suit to recover
the contested fee within a certain amount of time prescribed by statute. The
six states with this type of statute are: Georgia, Idaho, Maryland, Missouri,
Montana, and Nevada. Finally, in Wisconsin, if the client requests fee
arbitration, and the attorney refuses to participate, the client may request an
advisory opinion. See Bruce R Meckler, Mari Henry Leigh, and Robert J.
Ambrose, Survey of State Arbitration Provisions, 3 Mealey's Attorney
Fees 27 (July 2001).
[8] Woman in Divorce: Lawyers,
Ethics, Fees and Fairness, New York City Department of Consumer Affairs,
March 1992.
[9] See Report of the Committee
to Examine Lawyer Conduct in Matrimonial Actions, May 4, 1993.
[10] Id. at 24. The Committee's
proposal for a fee arbitration program in matrimonial cases was made after an
examination of fee arbitration programs in New Jersey, California, and Erie
County, New York.
[11] N.Y. Comp. Codes R. & Regs. 22,
§ 1400, entitled "Procedure for Attorneys in Domestic Relations
Matter," took effect on November 30, 1993. N.Y. Comp. Codes R. & Regs.
22, § 1400.7 (2001) states:
In the
event of a fee dispute between attorney and client, the client may seek to
resolve the dispute by arbitration, pursuant to a fee arbitration program
established and operated by the Chief Administrator of the Courts and subject
to the approval of the Justices of the Appellate Divisions.
[12] Status Report of the Committee to
Track the New Matrimonial Rules to the Chief Judge and Chief Administrative
Judge, February 1995. The Committee reported that the comments received from
the attorneys who responded to the survey were mixed. Several commentators
expressed frustration with the fee arbitration program, while others were
enthusiastic and considered it a positive aspect of the new matrimonial rules.
[13] Divorce Lawyers Win Most Fee
Disputes, N.Y.L.J., Dec. 14, 1995. Suffolk County had received more fee
arbitration requests than any other county in the State at the time. The Law
Journal reported that "[i]n 80 percent of the 30 cases in Suffolk that
were decided by arbitration, attorneys were found entitled to more than half
the amount in dispute." According to the Law Journal, the Suffolk County
statistics were consistent with reports received from lawyers elsewhere in the
State who felt that they were getting "a fair shake" from the
domestic relations fee arbitration program.
[14] The Domestic Relations Fee
Arbitration Program: A Report to the Chief Judge and Chief Administrative Judge
(of New York), November 1996 (hereinafter Report). According to the Report,
program usage had increased steadily since the program's inception. 1996
requests were projected to exceed 1995 requests by more than 50%. Approximately
two-thirds (65%) of the requests for arbitration proceeded to an arbitration
hearing, whereas 35% of requests resulted in no hearing or settlement. Of the
requests that resulted in no hearing or settlement, approximately 60% were
recent applications for which no hearing had yet been held. The remaining 40%
included cases that were withdrawn, not pursued by the client, or dismissed for
lack of jurisdiction. The overall percentage of arbitration requests that
resulted in a settlement by the parties was approximately 13%. Id. at
10.
[15] Id. at 42. If an attorney
bills $10,000, and the client disputes only $2000 of that fee, then for
purposes of the statistic, only $2000 is in dispute.
A
review of the awards reveals little basis for dissatisfaction on the part of
attorneys; they are winning most fee disputes. That is, in most cases the
attorney was found entitled to the majority of the amount in dispute, with the
average award amounting to nearly three-quarters of the amount in dispute. To
be sure, the attorney's fee was reduced in most cases; but fee arbitration also
saves the attorney the time, effort and expense he or she would have incurred
in litigation. Moreover, fee arbitration is one way to avoid the almost
inevitable counterclaim for malpractice that arises in litigation of fee
disputes. Id. at 41-42. The Report went on to note:
Statistics
on fee arbitration outcomes are difficult to come by. Most states do not keep
them or will
not
make them public for fear they will have a chilling effect on program
participation. What few
statistics
are available indicate that clients win fee reductions in the majority of
cases, although the
amount
of the reduction is not disclosed. A 1991 National Law Journal article surveyed
8 bar-run
programs
and found that clients won fee reductions, whether large or small, in 402 of
the 622
cases
reported. The Joint Committee on Fee Disputes and Conciliation, which is made
up of the
New
York County Lawyers Association, the Association of the Bar of the City of New
York and
the
Bronx County Bar Association, sponsors a voluntary fee dispute resolution
program. The
program
reported that in 1991 clients won reductions 64% of the time.
Id.
[16] This report does not suggest that a
central administrative entity should pass on the qualifications and competency
of arbitrators or dictate policy and practice independently of local
administrators. This report does suggest that the present level of support
provided to local administrators of the fee arbitration program requires
enhancement. It is beyond dispute, for instance, that the integrity and success
of the fee arbitration program is greatly dependent on the court system's
utilization of arbitrators who are demonstrably fair and competent and who
possess appropriate backgrounds and qualifications; yet, to date, the court
system has not adopted any uniform guidelines or standards for screening
prospective arbitrators, monitoring their competency and performance, or
defining the relationship and obligations of arbitrators and program
administrators to the attorney disciplinary process. Furthermore, the fee
arbitration program should prepare and distribute informational brochures and
instructional manuals for the benefit of disputants and arbitrators; prepare
and revise standard forms; perform ongoing surveys of arbitration participants;
prepare annual reports; and formulate and implement policies in collaboration
with local administrators. In order for the program to meet these demands and
achieve its full potential, the court system will have to devote resources and
staff commensurate with the program's growing size and importance. Id. at 26-27.
[17] N.Y. Comp. Codes R. & Regs. 22,
§ 136, Part 136 Rules of the Chief Administrator of the Courts (1999). For
purposes of this guide, the term "matrimonial lawyer" means an
attorney in a matrimonial action, as defined in N.Y. Comp. Codes R. & Regs.
22, §136.
[18] N.Y. Comp. Codes R. & Regs. 22,
§ 1400.3 (2001); see infra Appendix A for the required contents of the
written retainer agreement.
[19] N.Y. Comp. Codes R. & Regs. 22,
§ 1400.2 (2001). See also N.Y. Comp. Codes R. & Regs. 22, §
1200.11(f) (2001); Bar Association Ethical Opinions 1997 WL 1068488 (Op. 685,
N.Y. St. Bar. Assn. Comm. Prof. Eth. 1997) (prospective clients in matrimonial
matters must be provided with the Statement of Client's Rights and
Responsibilities at consultations that occur before the attorney has agreed to
undertake the representation).
[20] N.Y. Comp. Codes R. & Regs. 22 §
1400.2 (2001). The complete Statement of Client's Rights and Responsibilities
that must be given to the prospective client is set forth in Appendix B, infra.
[21] Philips v. Philips, 178 Misc. 2d
159, 678 N.Y.S.2d 244 (Sup. Ct. Nass. County 1998) (attorney was precluded from
recovering fees where he failed to present retainer agreement and statement of
client's rights directly to client, and presentation to brother was
insufficient notwithstanding brother had power of attorney for client);
Rabinowitz v. Cousins, 219 A.D.2d 487 (1st Dep't 1995) (complaint dismissed for
failure to file retainer statement); Marshall v. Chitayat, N.Y.L.J., Oct. 6,
2000 at 27, col. 6; K.E.C. v. C.A.C., 173 Misc. 2d 592, 661 N.Y.S.2d 715 (Sup.
Ct. Kings County 1997) (attorneys were precluded from obtaining payment of
their fees out of money paid by husband to wife where attorneys did not notify
wife of her right to request arbitration of fee dispute (N.Y. Comp. Codes R.
& Regs. 22, § 136.5), did not prove existence of retainer agreement signed
by wife (CLS Code of Prof. Resp. DR 2-106(C)(2)(B); N.Y. Comp. Codes R. &
Regs. 22, § 1200.11(c)(2)(ii)) (2001)) and did not show that wife ever received
Statement of Client's Rights and Responsibilities (N.Y. Comp. Codes R. &
Regs. 22, § §1400.2, 1200.47 (2001))).
[22] Cf. Mueller v. Pacicca, 179
Misc. 2d 392, 684 N.Y.S.2d 753 (City Ct. White Plains, 1998) (where client
never signed retainer agreement, attorney was not entitled to recover any legal
fees and had to refund fees previously collected); Bill Alden, Failure to
Follow Matrimonial Rules Costs Lawyer Her Fee, N.Y.L.J., Oct. 29, 1998
(commenting on Mueller v. Pacicca). But cf. Markard v. Markard, infra
note 30 and text at infra notes 29-34.
[23] N.Y. State Bar. Ass'n. Comm. Prof.
Ethics, supra note 19 (hereinafter N.Y. 685).
[24] N.Y. Comp. Codes R. & Regs. 22,
§ 1200.11(c)(2)(ii) (2001); N.Y. Comp. Codes R. & Regs. 22, § 1400.3
(2001).
[25] N.Y. Comp. Codes R. & Regs. 22,
§ 1400.3 (2001).
[26] Philips v. Philips, 178 Misc. 2d 159
at 161, 678 N.Y.S.2d 244 at 245 (Sup. Ct. Nass. County 1998) (failure to timely
file the retainer agreement precludes right to collect fee).
[27] "The Code [of Professional
Responsibility] effectively precludes an attorney from collecting any fee where
there is no written retainer in any case where one is required under the
matrimonial rules, and certainly, such a fee could not be reasonable if it were
one expressly precluded by court rule" McMahon v. Evans, 169 Misc. 2d 509,
515, 645 N.Y.S.2d 753, 758 (Sup. Ct. Broome County 1996); Julien v. Machson,
245 A.D.2d 122, 666 N.Y.S.2d 147, 148 (1st Dep't 1997) (failure of attorney to
file a copy of written retainer agreement with the court, along with other
failures to comply with the matrimonial rules precluded attorney from
recovering any fee); see also, Forbes v. Forbes, N.Y.L.J., Feb.
26, 1997 at 26, col. 1 (Sup. Ct. N.Y. County 1997); Mueller v. Pacicca, 179
Misc. 2d 392, 684 N.Y.S.2d 753 (City Ct. White Plains, 1998); CPLR § 237, Supp.
Practice Commentaries, at 375.
[28] Flanagan v. Flanagan, 175 Misc. 2d
160, 668 N.Y.S.2d 302 (Sup. Ct. NY County 1997) N.Y. Comp. Codes R. & Regs.
22, §1200.11(c)(2)(ii) (2001) and N.Y. Comp. Codes R. & Regs. 22, § 1400.3
(2001), were designed to eliminate long-standing abuses pertaining to the
retention of counsel in matrimonial cases, and their purpose supports the
conclusion that they must be read to prevent collection of fees in matrimonial
actions where there has been a failure to fully comply with § 1400.3 (which
regulates the contents of a retainer agreement; reargued and reversed, order of
May 13, 1998 which granted attorney's fee request; modified, 267 A.D.2d 80, 699
N.Y.S.2d 406 (1st Dep't 1999) (although the respondent-attorney did not fully
comply with the mandates of N.Y. Comp. Codes R. & Regs. 22, § 1400.2 (2001)
and § 1400.3, which, respectively, require that counsel provide prospective
clients with information as to their rights and responsibilities before
entering into a retainer agreement and that specified provisions be included in
retainer agreements, there was substantial compliance with those requirements
and defendant waived her right to arbitration of the attorneys' fees dispute;
this, along with the fact that counsel rendered substantial services and achieved
reasonably favorable results, entitled attorney to a reasonable fee; attorney
had previously been awarded $41,000 in interim fees and an additional
$29,655.30 upon reargument; modified and reduced to $11,905.30 because attorney
failed to keep sufficiently detailed billing records and brought a frivolous
motion which was included in his fee statement but for which he was not
entitled to a fee)).
[29] Mueller v. Pacicca, 179 Misc. 2d
392, 684 N.Y.S.2d 753 (City Ct. White Plains, 1998) (where client never signed
retainer agreement, attorney was not entitled to recover legal fees at all, and
had to refund fees previously collected); Brenda S. Levinson, Courts Put
Teeth Into Matrimonial Rules - Avoid Getting Bitten, unpublished report on
file with author, circa 2000 (relating experience as one of a panel of three
matrimonial fee arbitrators which held that in a case where the attorney had
failed to provide client with a signed written retainer agreement at the outset
of the representation, even though attorney did extensive work in an expedient
and commendable manner and the client agreed that the hours charged had been
expended on the client's behalf and the work stated to have been performed was
performed, the attorney was not entitled to collect any fee and had to refund
fees already collected).
[30] Markard v. Markard, 263 A.D.2d 470,
692 N.Y.S.2d 733 (2d Dep't 1999) (client discharged attorney after paying a
$10,000 retainer fee and though attorney agreed to refund the minimal unused
portion thereof, client sought return of entire fee paid claiming that a
provision in the retainer agreement waiving itemized billing contravened the
strict requirements of the matrimonial rules [N.Y. Comp. Codes R. & Regs.
22, § 1400.3 (2001)]; denial of request for refund of all of the retainer fee
upheld because discharge was by consent, not for just cause, and the cases
holding that the matrimonial rules preclude the collection of fees where the
retainer provisions are not complied with are distinguishable because they
concern attorneys seeking to compel clients to pay for services rendered but
not paid for and not for retainer fees already paid).
[31] Id. at 734.
[32] See infra note 62.
[33] See infra note 64.
[34]For a discussion of the client
discharge rule, see generally, Lester Brickman and Lawrence
Cunningham, Nonrefundable Retainers: Impermissible Under Fiduciary,
Statutory and Contract Law, 57 Fordham L. Rev. 149, 149 (1988) (hereinafter
Nonrefundable Retainers); Lester Brickman and Lawrence Cunningham, Nonrefundable
Retainers Revisited, 72 North Carolina L. Rev 1 (1993) (hereinafter Nonrefundable
Retainers Revisited).
[35] N.Y. Comp. Codes R. & Regs. 22,
§ 136.1.
[36] N.Y. 685, supra note 19.
[37] N.Y. Comp. Codes R. & Regs. 22,
§ 136.4(a). Disputes involving a sum less than $3,000 shall be submitted to one
attorney arbitrator. § 136.3(c). Disputes involving a sum of $3,000 or more
shall be submitted to a panel of three arbitrators, consisting of one attorney,
one layperson, and a third panel member, selected at random, who is either an
attorney or layperson. The chair shall be an attorney, who shall be selected by
the panel members if more than one attorney is on the panel. § 136.3(d).
[38] See infra Appendix D,
N.Y. Comp. Codes R. & Regs. 22, § 136.5(a). A client may also consent to an
attorney's request to submit the fee dispute to arbitration. Id. at
§136.5(d). Additionally, an attorney's refusal or failure to submit to the
arbitration process shall subject him to disciplinary action. Id. at §
136.10.
[39] Julien v. Machson, 245 A.D.2d 122,
666 N.Y.S.2d 147 (1st Dep't. 1997) (failure of counsel to provide client with
notice of right to arbitrate fee dispute as well as failure to meet other
requirements of the Matrimonial Rules precluded recovery of legal fees); L.H.
v. V.W., 171 Misc. 2d 120, 653 N.Y.S.2d 477 (Civ. Ct. Bronx County 1996)
(same); Lewis & Merritt, L.L.P. v. Smith, 170 Misc. 2d 192, 650 N.Y.S.2d
921 (Sup. Ct. 1996) (matrimonial client's silence and failure to object to
billings sent by attorney for services rendered could not be construed as
implied assent where it equally suggested lack of assent, and thus client was
entitled to dismissal of complaint in action to recover attorney's fee where he
was not given requisite notice of his right to arbitration under CLS Sup. Ct.
R. § 136.5); see also, infra note 82; Marshall v.
Chitayat, N.Y.L.J., Oct. 6, 2000, at 27, col. 6 (failure to notify client of
right to elect arbitration to resolve a fee dispute as well as failure to
comply with other provisions of the Matrimonial Rules including failure to file
an appropriate retainer agreement with the court, failure to provide client
with written itemized bills every 60 days, and once the retainer fee was
earned, every 30 days, warrants dismissal of action filed by attorney for fees,
with prejudice); Moraitis v. Moraitis, infra note 57
[40] Miller v. Corbett, 177 Misc. 2d 266,
676 N.Y.S.2d 770 (City Ct. Yonkers, 1998) ("[b]ecause of the salutary and
remedial nature of the fee arbitration rule, it must be interpreted
expansively," id. at 773); Paikin v. Tsirelman, 266 A.D.2d 136, 699
N.Y.S.2d 32 (1st Dep't 1999) (failure of client to object to fees billed by
matrimonial lawyer does not excuse lawyer from having to provide notice of the
right to arbitration before bringing suit for unpaid fees; to hold otherwise
would allow circumventing the notice and pleading requirements of N.Y. Comp.
Codes R. & Regs. 22, § 136.5 and would "effectively eviscerate the fee
arbitration rules governing domestic relations matters."). But see
Scordio v. Scordio, 270 A.D.2d 328, 705 N.Y.S.2d 58 (2d Dep't 2000) (discharged
attorney sought charging lien against wife and wife sought repayment of all
fees previously paid to that attorney; held, attorney entitled to quantum
meruit and because former client had not disputed the reasonableness of the
fees charged, the attorney was not required to send her a notice informing her
of her right to subject the fees to arbitration. "We decline to follow the
rule adopted by the Appellate Division, First Department, [in Paikin v.
Tsirelmen] which obligates an attorney to send such a notice even in the
absence of any fee disagreement with a client. . . ." id. at 59).
[41] See supra notes 21 and
26.
[42] K.E.C. v. C.A.C., 173 Misc. 2d 592,
661 N.Y.S.2d 715 (Sup. Ct. Kings County 1997).
[43] N.Y. Comp. Codes R. & Regs. 22,
§ 136.5(b).
[44] Id. at § 136.5(d).
[45] See generally 1
WARREN'S WEED N.Y. REAL PROPERTY "ATTORNEYS AT LAW" § 6 (1992).
[46] In re Weitling, 266 N.Y. 184,
194 N.E. 401 (1935) (attorney cannot be compelled to surrender papers in his
possession before payment or adequate provision for compensation); Artim v.
Artim, 109 A.D.2d. 811, 486 N.Y.S.2d 328 (2d Dep't 1985) (client must satisfy
or adequately secure lien before turnover of client papers will be ordered);
Tri-Ex Enters. v. Morgan Guaranty Trust Co., 583 F.Supp. 1116 (S.D.N.Y. 1984)
(retaining lien's purpose is to prevent client from refusing to pay charges
justly due); Petrillo v. Petrillo, 87 A.D.2d 607, 448 N.Y.S.2d 404 (2d Dep't
1985) (reversing order to deliver papers and ordering hearing to ensure that
payments received by attorney amount to value of legal services rendered). See
generally Note, Attorney's Retaining Lien Over Former Client's Papers,
65 Colum. L. Rev. 296 (1965).
[47] People v. Keeffe, 50 N.Y.2d 149, 428
N.Y.S.2d 446, 405 N.E.2d 1012 (1980) (at common law, a lien attached to the
judgment and the proceeds of the judgment); In re Estate of Gutchess, 90
A.D.2d 663, 456 N.Y.S.2d 949 (3d Dep't 1982); In re County of Nassau, 80
A.D.2d 613, 436 N.Y.S.2d 55 (2d Dep't 1981) (award fixing charging lien reduced
because original award included fees for services rendered in other
proceedings); Kaplan v. Reuss, 113 A.D.2d 184, 495 N.Y.S.2d 404 (2d Dep't 1985)
(where firm commenced action for client and client ultimately negotiated
settlement, firm had charging lien on proceeds of settlement), aff'd, 68
N.Y.2d 693, 506 N.Y.S.2d 304, 497 N.E.2d 671 (1986). The two liens are
distinct. White v. White, 107 Misc. 2d 551, 435 N.Y.S.2d 535 (Sup. Ct. Nassau
County 1981) (citing In re Heinsheimer, 214 N.Y. 361, 108 N.E. 636
(1915)). For example, an attorney who has instituted an action on behalf of a
plaintiff and who is discharged without cause may impose a common law retaining
lien on papers in the attorney's possession and a statutory charging lien on
the cause of action.
[48] N.Y. Jud. Law §§ 475, 475-a (2001).
Although the common law charging lien continues to exist, attorneys virtually
always rely on the expanded statutory charging lien. In re Sebring, 238
A.D.281, 264 N.Y.S. 379 (4th Dep't 1933) (acknowledging that the statutory lien
had virtually taken the place of the common law charging lien).
[49] Artim, 109 A.D.2d 811.
[50] Black letter law has generally
regarded the retaining lien as authorizing attorneys to retain client money to
compel payment of outstanding fees. See, e.g., People v. Keeffe,
50 N.Y.2d 149, 155, 428 N.Y.S.2d 446, 449, 405 N.E.2d 1012, 1015 (1980) (the
retaining lien entitles attorney to withhold all papers, securities or money
belonging to client until amount of fee is fixed and paid). But courts, in some
instances, have exhibited such reluctance to allow attorneys to assert
retaining liens when money is involved, that it has become the virtual
equivalent of all-encompassing exceptions to the general rule. Most notably,
funds taken for a special purpose or as trustee are not subject to the
attorney's retaining lien. See, e.g., Marsano v. State Bank of
Albany, 27 A.D.2d 411, 279 N.Y.S.2d 817 (3d Dep't 1967), appeal dismissed,
23 N.Y.2d 1018, 299 N.Y.S.2d 458, 247 N.E.2d 286 (1969). However, in at least
one contemporary case, the court, appearing somewhat disdainful of the client's
plea of hardship, has upheld an attorney's retaining lien on client funds. In
re Estate of Dinger, 118 Misc. 2d 781, 461 N.Y.S.2d 713 (Sur. Ct. Richmond
County 1983) (surrogate sustained attorney's retaining lien on $158,000 tax
certiorari check, representing only part of the refund payable to executrix).
[51] Bowling Green Savs. Bank v. Todd, 52
N.Y. 489 (1873); see also Chlost v. Chlost, 75 A.D.2d 527, 426
N.Y.S.2d 772 (1st Dep't 1980) (attorney had retaining lien on client files if
client owes any sum for services or disbursements); cf. supra note
50.
[52] Manfred & Sons, Inc. v.
Mortillaro, 69 A.D.2d 1019, 416 N.Y.S.2d 156 (4th Dep't 1979).
[53] Yaron v. Yaron, 58 A.D.2d 752, 396
N.Y.S.2d 225 (1st Dep't 1977) (ordering summary determination of lien and
conditioning turnover upon payment or posting of security). The lien secures
the balance due for all prior legal services rendered for which the attorney
has not yet been compensated, whether pertaining to the attached property or
not. First Nat'l Bank & Trust Co. v. Hyman Novic Realty Corp., 72 A.D.2d
858, 421 N.Y.S.2d 733 (3d Dep't 1979) (common-law retaining lien is lien for
entire balance of account). Thus, an attorney may withhold papers or money
unrelated to matters giving rise to the general balance due. Kaplan v. Reuss,
113 A.D.2d 184, 495 N.Y.S.2d 404 (2d Dep't 1985) (a retaining lien may be used
to satisfy any amount due the attorney for legal services rendered with respect
to any matter), aff'd, 68 N.Y.2d 693, 506 N.Y.S.2d 304, 497 N.E.2d 671
(1986).
[54] In re Makames, 238 A.D. 534,
537, 265 N.Y.S. 515, 519 (4th Dep't 1933) ("[w]here pressing necessity
exists" the court's "power to substitute adequate security for a
retaining lien is derived from the inherent right which the court has. . . to
compel an attorney to act fairly and to deal equitably with his client.")
New York courts have also compelled an attorney to turn over client property
with other security being substituted. Manfred & Sons, Inc. v. Mortillaro,
69 A.D.2d 1019, 416 N.Y.S.2d 156 (4th Dep't 1979) (affirming order to turn over
documents to client but remanding for purpose of fixing appropriate security).
[55] Katsaros v. Katsaros, 152 A.D.2d
539, 543 N.Y.S.2d 478 (2d Dep't 1989); Pekoe v. Pekoe, 101 A.D.2d 813, 475
N.Y.S.2d 144 (2d Dep't 1984) (in light of defendant's allegations of indigence,
it would be inequitable to permit attorney to retain file pending payment;
attorney may have hearing to determine compensation presently, but payment is
deferred until conclusion of action); Rosen v. Rosen, 97 A.D.2d 837, 468
N.Y.S.2d 723 (2d Dep't 1983) (granting former counsel a charging lien on any
proceeds to be received upon resolution of the action, based on substituted counsels'
needs of papers to prepare case for trial and uncontroverted allegations of
indigence); cf. Pileggi v. Pileggi, 127 A.D.2d 751, 512 N.Y.S2d 143 (2d
Dep't 1987) (reversing lower court's denial of a retaining lien where there
were allegations that incoming attorney had been paid retainer and client did
not submit an affidavit of indigence).
[56] N.Y. Comp. Codes R. & Regs. 22,
§ 1200.11(e) (2001).
[57] Moraitis v. Moraitis, 181 Misc. 2d
510, 694 N.Y.S.2d 588 (Sup. Ct. Nassau County 1999) (where spouse's attorney in
a matrimonial action withdraws with court's approval because of nonpayment of
fee and client's new attorney seeks the file, counsel may not invoke a common
law retaining lien if counsel has failed to provide client with written notice
of the right to arbitrate the fee; although the Matrimonial Rules do not
specifically abrogate an attorney's claim for a retaining or charging lien,
that result is called for by Model Code of Prof'l Responsibility DR2-106(E),
N.Y. Comp. Codes R. & Regs. 22, § 1200.11 (e) (2001)); see also
Philips v. Philips, 178 Misc. 2d 159, 678 N.Y.S.2d 244 (Sup. Ct. Nassau County
1998); K.E.C. v. C.A.C., 173 Misc. 2d 592, 661 N.Y.S.2d 715 (Sup. Ct. Kings
County 1997) (discharged attorney denied a charging lien because of his failure
to comply with the matrimonial rules).
[58] Mehler v. Mehler, N.Y.L.J., Mar. 8,
1999, at 28, col. 5; Stellato v. Stellato, N.Y.L.J., Jan. 30 1996, at 29, col.
4 (noncompliance with Part 1400 of the Matrimonial Rules does not abrogate
counsel's common-law retaining lien; though the original Matrimonial Rules
contained a provision abrogating the retaining lien in matrimonial matters,
following a comment period, the proposed provision was withdrawn and not
included in the final version of Part 1400. Against this background, there is
no basis for concluding that Part 1400 as adopted abrogated the retaining lien
by implication). See also, Scordio v. Scordio, 270 A.D.2d 328,
705 N.Y.S.2d 58 (2d Dep't 2000).
[59] The Statement of Clients Rights and
Responsibilities provides that the written retainer agreement "must
specify under what circumstances . . . [the] attorney [can withdraw] for
nonpayment of legal fees. If an action or proceeding is pending, the Court may
give your attorney a "charging lien," which entitles your attorney to
payment for services already rendered at the end of the case out of the
proceeds of the final order on judgment." Appendix B. As drafted, however,
it is unclear how the provision allowing for a charging lien meshes with the
right to seek arbitration. Moreover, it has been suggested that since the
charging lien has been created by statute, supra note 48, then it may
not be abrogated by court rule. See Joel R. Brandes, Fee Dispute
Arbitration, N.Y.L.J., July 25, 2000, at 3, col. 3.
[60] It is conceivable, even following
the Mehler and Stellato courts' rulings, that the client's right to such
arbitration under the Matrimonial Rules can still be preserved. Thus, if the
client pays the fee of the discharged attorney in order to obtain his files,
the client can then seek arbitration with regard to the fee paid. See
text, supra accompanying notes 40-42. However, this seems an arduous
route and inconsistent with the intent of the Matrimonial Rules.
[61] N.Y. Comp. Codes R. & Regs. 22,
§1200.11(c)(2)(i) (2001); Weinstein v. Barnett, 219 A.D.2d 77, 640 N.Y. S.2d
103 (1st Dep't 1996). "It should be noted that prior to the codification
of N.Y. Comp. Codes R. & Regs. 22, §1400 (2001) et. seq., bar associations
viewed it as ethically improper for an attorney to enter into any form of
contingent fee arrangement in any aspect of a matrimonial matter, except where
the representation was to collect alimony or child support payments already due
and owing the party." Daniel Buoniconti, Deborah B. Kahn & Stephanie
E. Kupferman, Legal Malpractice: Techniques to Avoid Liability Escaping
Ethical Enigmas and Fleeing Family Law Foibles: Malpractice Avoidance for the
Matrimonial Practitioner, 608 Prac. L. Inst. 633 (1999). As N.Y. Comp.
Codes R. & Regs. 22, §1200.11(c)(2)(i) [DR2-106 (c)(2)(i)] is drafted, the
exception for past due alimony or child support does not appear preserved. It
is likely, however, that courts will still continue to allow the exception for
the same reason that the exception was created.
[62] N.Y. Comp. Codes R. & Regs. 22,
§1200.11(c)(2)(ii) (2001); In re Cooperman, 83 N.Y.2d 465, 611 N.Y.S.2d 465,
633 N.E.2d 1069 (1994) (holding that nonrefundable fee retainer agreement
is a per se violation of public policy and an attorney's obligations under the
Code of Professional Responsibility and that an attorney must refund unearned
fees upon his or her discharge). See generally, Nonrefundable
Retainers, supra note 34; Nonrefundable Retainers Revisited, supra
note 34. However, § 1400.4 allows an attorney to enter into a "minimum
fee" arrangement with a client that provides for the payment of a specific
amount below which the fee will not fall based upon the handling of the case to
its conclusion. For a minimum fee to be valid, however, the work contracted for
must have been completed. If the lawyer is terminated before completion, then
any minimum fee set in the contract is unenforceable because otherwise it would
amount to a nonrefundable retainer and the attorney is instead entitled to the
reasonable value of her services. See Letter from Lester Brickman and
Lawrence A. Cunningham to Michael Colodner, Office of Court Administration,
Sept. 8, 1993, and accompanying Memorandum of same date, commending the
Proposed Matrimonial Rules' prohibition of nonrefundable retainers but pointing
out that allowing the use of a "minimum fee" defined as "a
specific amount the client agrees to pay counsel if the latter is able to
obtain a settlement in substantial accord with specified terms within a
specified time period" [Report, supra note 9, at 18, note 39],
would have the effect of "gut[t]ing] the nonrefundable retainer
prohibition." Letter, id. at 2. In response thereto, the proposed
rules were changed to define a minimum fee as a fee "that provides for the
payment of a specific amount below which the fee will not fall based upon
handling of the case to its conclusion." N.Y. Comp. Codes R. & Regs.
22, § 1400.4 (2001).
[63] For a discussion of "without
cause," see Lester Brickman, Setting The Fee When The Client
Discharges a Contingent Fee Attorney, 41 Emory L. Rev. 367, 393-97 (1992).
[64] Martin v. Camp, 161 A.D. 610, 146
N.Y.S. 1041, 1914 N.Y. App. Div. LEXIS 5456 (1914). See infra
Parts V and VI, for further discussion of quantum meruit.
[65] N.Y. Comp. Codes R. & Regs. 22,
§ 1400.5 (2001); Id. at § 1200.11.
[66] See infra Part III.B.
[67] N.Y. Comp. Codes R. & Regs. 22,
§ 136.6 (b).
[68] Id.
[69] Id. at §136.6(a).
[70] Id. at §136.6(b).
[71] Id.
[72] Jacobson v. Sassower, 66 N.Y.2d 991,
993, 499 N.Y.S.2d 381, 489 N.E.2d 1283 (1985).
[73] Id. at 993, quoting from Smitas
v. Rickett, 102 A.D.2d 928, 929, 477, N.Y.S.2d 752 (1984).
[74] "By preponderance of evidence
is meant that the superior weight of evidence upon the issues involved, which,
while not enough to wholly free the mind from a reasonable doubt, is yet
sufficient to incline a reasonable and impartial mind to one side of the issue,
rather than to the other." Black's Law Dictionary 1201 (7th ed. 1999).
[75] N.Y. Comp. Codes R. & Regs. 22,
§136.6(b).
[76] Id.
[77] See Matter of McNamee,
Lochner, Titus & Williams, 700 N.Y.S.2d 525, 527 n.1 (3d Dep't 1999).
[78] See supra Part II.
[79] See Rosenman, 93
A.D.2d 745 (1983); Glazer v. Falberg, 85 A.D.2d 502 (1st Dep't 1981).
[80] Shaw v. Manufacturers Hanover Trust,
68 N.Y.2d 172 (1986); see also Jacobson v. Sassower, 66 N.Y.2d
991, 993, 499 N.Y.S.2d 381, 489 N.E.2d 1283 (1985) ("courts pay particular
attention to fee arrangements between attorneys and their clients.").
[81] See Rosenman Colin Freund Lewis
& Cohen v. Neuman, 93 A.D.2d 745 (1st Dep't 1983). In this case, where the
matrimonial lawyer sought summary judgment in an action for almost $9000, the
balance due of attorney fees after almost $12,000 had previously been paid, on
the basis of an account stated and for work, labor, and services. The client
had meager income, and claimed that he had not agreed to pay $40 per hour for
paralegal charges, and complained that the law firm's expenses were in the
runaway stage. The court recognized an exception to the account stated rule,
finding that the fee arrangement between plaintiff and defendant required
special scrutiny; hence summary judgment would be denied. Levitz Trossman
Mayerson & Zorn v. Davis, N.Y.L.J., Nov. 30, 1992, at 27, col. 7 (Civil Ct.
N.Y.). See generally Barney Butler, Recovering Fees from a Client: Clients'
Defenses to Account Stated Actions, 25 J. Legal Prof. 27 (2001).
[82] Lewis & Merritt v. Smith, 170
Misc. 2d 192, 650 N.Y.S.2d 921 (Sup. Ct. Nassau County. 1996).
[P]laintiff
[attorney] would have this court interpret the common-law principles of account
stated to mean that a matrimonial client's failure to affirmatively object to
any of the invoices is the equivalent of an implied agreement as to the amounts
contained therein. To do so in this court's opinion would effectively
emasculate the fee arbitration rules governing domestic relations matters. In
matrimonial actions attorneys are obligated to send invoices to their clients
at least once every 60 days (N.Y. Comp. Codes R. & Regs. 22, § 1400. 3
(2001)). A client would have to repeatedly voice objection to each invoice when
sent, or risk losing the opportunity to arbitrate the charges set forth in the
invoice. It is impractical, and undesirable, to expect that to occur as it
would undermine and chill the attorney/client relationship in an area of
practice inherently fraught with tension and stress.
The
enactment of the 60-day billing and matrimonial fee arbitration rules clearly
was remedial in nature. This court finds that the rules have impacted upon the
common-law principle of an account stated where, as here, that principle is
utilized to imply agreement on billings in a matrimonial matter so as to defeat
application of N.Y. Comp. Codes R. & Regs. 22, § 136.5. [Client's]. . .
mere silence and failure to object to the billings cannot be construed as an
implied assent when it equally suggests lack of assent. It is the determination
of this court that silence and failure to object is sufficient to trigger
application of section 136.5 requiring plaintiff to serve a notice of
matrimonial client's right to arbitration and further requiring plaintiff to
allege having done so as part of its complaint.) Id. at 194. See also Paikin v.
Tsirelman, 266 A.D.2d 136, 699 N.Y.S.2d 32 (1st Dep't 1999) ("Plaintiff's
claim that. . . [his failures to provide his client within 30 days written
notice of his right to arbitrate any fee dispute, and to allege in his
complaint that the client received such notice] were never triggered because of
his client's failure to object to his billings and that, therefore, he is
entitled to recover on the basis of an account stated is without merit. As
found by the court in Lewis. . . . to interpret the common-law principles of an
account stated, so as to find that a matrimonial client's failure to
affirmatively object to his or her attorney's billings may provide a basis for
circumventing the notice and pleading requirements of N.Y. Comp. Codes R. &
Regs. 22, § 136.5, would effectively eviscerate the fee arbitration rules
governing domestic relations matters."). Id.
[83] Lewis & Merritt v. Smith, 170
Misc. 2d 192, 650 N.Y.S.2d 921 (Sup. Ct. Nassau County 1996); Paikin v.
Tsirelman, 266 A.D.2d 136, 699 N.Y.S.2d 32 (1st Dep't 1999).
[84] See Matter of McNamee,
Lochne, Titus & Williams, 235 A.D.2d 17, 18, 663 N.Y.S.2d 356, 357 (3d
Dep't 1997).
[85] See Matter of McNamee,
Lochne, Titus & Williams, 700 N.Y.S.2d 525 (3d Dep't 1999).
[86] While the Rules apply to fee
disputes up to $100,000, N.Y. Comp. Codes R. & Regs. 22, § 136.4 (a), there
is some suggestion that the bulk of the fees being arbitrated are in the lower
end of that range. See Report, supra note 14, at 53
(recommending that the monetary threshold for use of three member arbitration
panels be raised from $3,000 to $5,000 or $7,500 in order to reduce depletion
of the pool of volunteer attorney arbitrators). See also,
Jonathan Lippman (Chief Administrative Judge of the New York State Unified
Court System), Welcome Fee Dispute Arbitration Program, N.Y.L.J., Jan.
22, 2001 ("the typical fee dispute ranges between $3,000 and
$5,000").
[87] N.Y. Comp. Codes R. & Regs. 22,
§ 136.9.
[88] Model Code of Prof'l Responsibility
DR 1-103(a) provides: "A lawyer possessing knowledge, (1) not protected as
a confidence or secret, or (2) not gained in the lawyer's capacity as a member
of a bona fide lawyer assistance or similar program or committee, of a
violation of section 1200.3 of this Part that raises a substantial question as
to another lawyer's honesty, trustworthiness or fitness as a lawyer shall
report such knowledge to a tribunal or other authority empowered to investigate
or act upon such violation."
[89] This may be one of the few occasions
in which New York's Model Code of Prof'l Responsibility DR 1-103(a) has any
applicability. In virtually all other circumstances in which a lawyer
representing a client learns information about another lawyer that invokes DR
1-103(a), there is no duty to report such conduct. This toothlessness is
intended, and was accomplished, by the amendment of DR 1-103(a), which added
the words, "not protected as a confidence or secret." Most information
that a lawyer acquires about another lawyer that comes within the ambit of DR
1-103(a) is protected as confidence or secret. Even in jurisdictions that have
not added New York's amendment, there is little or no enforcement of this
ethics rule. See Charles W. Wolfram, Modern Legal Ethics 683 (1986)
("probably no other professional requirement is as widely ignored by
lawyers subject to it" as the duty to report).
[90] Cf. § 136.4 (b).
[91] See supra note 15; see
also James Peterson, Fee Arbitration: An Effective Alternative to
Litigation, The Wis. Law. 67 (8), 16, 58 (Aug. 1994) ("Reliable
statistics about the outcomes of fee arbitration are impossible to gather,
because many programs don't keep records of outcomes – or don't release the
information if they do. Some programs, particularly newer ones such as
Louisiana's, are so modestly funded that they can't afford to maintain
extensive records. But often, outcome statistics aren't released because
releasing them is a no-win proposition. If the record shows that clients usually
win fee reductions, it may have a chilling effect on attorney participation in
the program. If attorneys usually win, then clients may become disillusioned.
So most programs take Wisconsin's approach and don't keep a tally of the
outcomes.").
[92] See supra notes 14-15. In Los
Angeles's semi-compulsory program, clients won 67% of the time. In Washington
D.C.'s program that tries to find for one party or another rather than set a
reasonable fee, attorney's fees were found to be justified 58% of the time. Peterson,
supra note 91.
[93] There seems to be little if any
value that can be learned about the fee arbitration process by looking at the
actual results of arbitrations in existing programs: Many bar programs, indeed,
choose not to disseminate or even to compile information concerning the
frequency or the extent of client victories in arbitration. The available
figures hardly demonstrate the existence of any systematic bias in favor of
either clients or attorneys. One quite common criticism of arbitration focuses,
not on the risks of favoritism towards one party or the other, but on the
supposed tendency of arbitrators to engage in compromise – "splitting the
baby" rather than straining for a principled decision "on the
merits." However, the results from existing programs are necessarily
inconclusive on this point: It would, for example, be a meaningless exercise to
look at the amounts or the percentages by which nominally disputed fees are
reduced in arbitration; officials of bar arbitration programs often note that
clients will for tactical purposes typically place the attorney's entire fee in
"controversy," even though some of the fee was clearly earned and
only a portion could plausibly be claimed to be "excessive." Rau,
ADR, infra note 157, at 2057-58.
[94] As a notable practitioner has
observed:
It
must be remembered that even the most successful resolution in matrimonial
litigation results in
the
destruction of a marriage. The typical matrimonial litigant is now doing battle
with someone
that
they previously loved, subject to a loss of their privacy in the proceedings
and discovery
process,
seeing their children far less than they feel is proper, paying more than they
feel they can
afford,
receiving less than they believe they can live on and subject to the myriad
slings and
arrows
which are the lot of a marriage in dissolution. . . . Often the emotional scars
are not healed
by
settlement or judgment; they linger, and oft times become redirected at others,
including
family,
children, and, of course, the attorney. Indeed a form of transference often
occurs between
the
professional and the client similar to the experience of psychotherapy, with
the client visiting
feelings
on the attorney in substitution for the spouse, or a parent. Accordingly, even
the best
result
leaves a litigant unhappy and dissatisfied; those feelings often are redirected
against the
attorney.
Letter
from Jay R. Butterman to the author, December 25, 2000 (on file with the
author) (hereinafter Letter).
[95] See James Kochalka, Coping
With Client Expectations in Divorce, Fla. B.J., February 1998, at 55.
Kochalka describes a five-stage model developed to understand the range of
emotions a client may travel through during divorce: the client who does not
take seriously the fact of divorce, the client who vacillates about divorce,
the angry client, the depressed client, and finally, the client who is
rationally prepared to deal with divorce. The clients in the angry phase
"are often their own worst enemies since they will often demand actions
that simply shed more heat than light on the settlement of the case. It is
especially important for the attorney to assess satisfaction of these clients
on a regular basis as a way to help clarify misconceptions and to allow the
client to vent frustrations about the predictably less-than-satisfactory
outcome that is at hand."
[96] Former Justice Kristin Glen, now
dean of the CUNY Law School, uses the terms "titled spouse" and
"nontitled spouse" to express the same distinction. See Match
v. Match, 146 Misc. 2d 986; 553 N.Y.S.2d 626 (Sup. Ct. N.Y. County 1990),
reversed, 168 A.D.2d and 226, 562 N.Y.S.2d 115 (1st Dep't 1990).
[97] It was the practice of the New York
matrimonial bar to obtain a retainer payment that was denominated as
"non-refundable" and which was therefore forfeited if the client
decided not to go forward with the divorce. In the early 1990's, some leading
matrimonial practitioners required a $10,000 retainer payment. While attorneys
can still require that the client pay a fee in advance for services to be
rendered before agreeing to represent the client, no part of the fee that is
not earned by actual service can now be nonrefundable. See supra
text accompanying notes 62-64.
[98] I am indebted to Jay Butterman for
pointing out the significance of this financial arrangement. See Letter,
supra note 94.
[99] Under the Matrimonial Rules, the
lawyer must provide a written, itemized bill on a regular basis but at least
every 60 days. Retainer Agreement, ¶9, (Appendix A); Statement of Clients
Rights and Responsibilities, (Appendix B). The New York Supreme Court of New
York County has held that "[a]s a matter of public policy, a client's
right to bimonthly billing is nonwaivable in matrimonial matters." Gordon
Marshall, P.C. v. Chitayat, N.Y.L.J., Apr. 6, 2001, at 18, col. 5.
[100] Despite the existence of Domestic
Relations Law section 237 and its provision for interim fees, both Judges and
practitioners know that in most cases a matrimonial lawyer taking on
representation of a non-titled spouse with limited or no resources is buying an
"account receivable" which may be discounted, collected late, or
never collected at all. The disincentive for engaging in such representation is
great, and non-titled spouses frequently find it almost impossible to obtain
counsel without a very substantial retainer. The situation is even further
exacerbated where the titled spouse has made it known that the case will be
vigorously litigated. The potential consequences for the non-titled spouse are
obvious and well known. Match v. Match, 146 Misc. 2d 986, 553 N.Y.S.2d 626
(Sup. Ct. N.Y. County 1990), rev'd on other grounds, 168 A.D.2d 226, 562
N.Y.S.2d 115 (1st Dep't 1990).
[101] This is the "account
stated," which is discussed in Effect of Account Stated. See supra
Part III.C.
[102] In re Cooperman, 83 N.Y.2d 465,
611 N.Y.S.2d 465, 633 N.E.2d 1069, 1072 (1994) (citations omitted). See
also Cohen v. Ryan, 34 A.D.2d 789, 790, 311 N.Y.S.2d 644 (2d Dep't 1970).
[103] Moncharsh v. Heily & Blase, 832
P.2d 899, 909 (1992) ("Arbitrators, unless specifically required to act in
conformity with rules of law, may base their decision upon broad principles of
justice and equity, and in doing so may expressly or impliedly reject a claim
that a party might successfully have asserted in a judicial action. [Citations
omitted.] As early as 1852, this court recognized that, ‘arbitrators are not
bound to award on principles of dry law, but may decide on principles of equity
and good conscience, and make their award ex aequo et bono [according to what
is just and good].'").
[104] McKenzie Constr. Inc. v. Maynard,
758 F.2d 97, 101 (3d Cir. 1985).
[105] See infra Part
VII.A-C.
[106] N.Y. Comp. Codes R. & Regs. 22,
§ 1200.11(b) (2001); Model Code of Prof'l Responsibility DR 2-106 (A).
[107] See Douglas R. Richmond, The
New Law Firm Economy, Billable Hours, and Professional Responsibility, 29
HOFSTRA L. REV. 207, 213 (2000).
[108] N.Y. Comp. Codes R. & Regs. 22,
§ 1200.11 (2001)); Model Code of Prof'l Responsibility DR 2-106 (B). As noted,
matrimonial attorneys may not charge contingent fees. See supra
text accompanying note 61.
[109] The definition of
"excessive" and the factors listed for determining the reasonableness
of a fee presented above are set forth in the Code of Professional
Responsibility and are therefore determinative of whether an ethical violation
has occurred. The arbitrator may consider these factors as well as others in
determining whether, as a matter of fairness and equity, the lawyer's fee is
excessive. While the standard of proof (preponderance of the evidence) that the
attorney must meet to prove that his fee is reasonable is the same articulated
standard as that which applies to disciplinary proceedings, in reality, the
disciplinary standard is a more rigorous one. Thus, determination by an arbitrator
that a claimed fee is excessive is not the equivalent of a determination that
there has been an ethical violation.
[110] Matter of Freeman, 311 N.E.2d 480,
484 (1974) (citations omitted).
[111] Cf. Stern v. Stern, N.Y.L.J.
(Sup. Ct. Nassau County) (where $32,000 had been paid to attorney by the
client's mother, $14,450 was paid by client to experts, and the attorney sought
an additional $17,000 in legal fees, and the total value of the marital
property was $174,450, the amount remaining owed would be reduced by almost 60%
to $7,000. "We must recognize that an attorney, especially one of
recognized expertise at the matrimonial bar, has the greater ability to
evaluate the intangibles, considered [sic] property, under the state's
equitable distribution law and the greater knowledge of the law likely to
effect [sic] the competing claims of the parties. This standing requires
positive and definitive advice by counsel as to the probable outcome of the
proceedings and the cost of attaining satisfactory results. The client on the
other hand is very often affected by the emotional impact caused by the very
nature of these proceedings, which diminishes judgment, and all too often
unleashes wrath. It is these circumstances that give rise to the attorney's
fiduciary duty; and this is especially so when the client's resources are
either in short supply, or funded by a collateral source when there is no
accountability.
In
the present perspective it has become clear that The Firm's reliance on the
retainer agreement with its client who had few resources and little expectation
of acquiring more from the matrimonial estate, was not a realistic expectancy.
The reliance was rather on a collateral source of funding by a third party from
which The Firm became a beneficiary and to which it had no accountability.
Under these circumstances, the retainer agreement between The Firm and the
plaintiff will not be enforced according to its terms."). Id.
[112] Id.
[113] See In re Richard C. Blowers,
In re George W. Blowers & Son, Inc 00-10495, 00-10494, U.S.
Bankruptcy Ct, N.D.N.Y. (2000).
[114] Match v. Match, 553 N.Y.S.2d at 631,
rev'd on other grounds. Id.; See also Mulligan v.
Mulligan, 425 N.E.2d 890 (1981), aff'd. 79 A.D.2d 721, 434 N.Y.S.2d 737
(3d Dep't 1980); Rados v. Rados, 133 A.D.2d 536, 519 N.Y.S.2d 906 (4th Dep't
1987) (award of counsel fees justified in matrimonial action in view of
defendant's obstructionist and dilatory tactics), Schussler v. Schussler, 109
A.D.2d 875, 487 N.Y.S.2d 67 (2d Dep't 1985).
[115] Match v. Match, 168 A.D.2d 226, 562
N.Y.S.2d 115 (1st Dep't 1990), reversing 146 Misc. 2d 986, 553 N.Y.S.2d 626, at
631-32 (Sup. Ct. N.Y. County 1990) (referee's determination that attorney's
time records were in a deplorable state may not be overcome by allowing the
attorney to utilize opposing counsel's time records in order to assist in
determining whether the attorney's fee was reasonable); Flanagan v. Flanagan,
175 Misc. 2d 160, 668 N.Y.S.2d 302 (Sup. Ct. NY County 1997) (failure to keep
sufficiently detailed billing records is a basis for denying fees sought). See
also Douglas R. Richmond, The New Law Firm Economy, Billable Hours, and
Professional Responsibility, 29 HOFSTRA L. REV. 207, 230 (2000)
("Absent contrary agreement with the client, a proper time entry should
include the date the services were rendered, the identity of the billing
attorney, a detailed description of the services rendered and the time actually
expended."); In re Green, 11 P.3d 1078, 1088-1089 (Colo. 2000)
(holding that either the fee charged was excessive as a matter of law because
of inefficiency on the part of the attorney, or it was "so vague that it
fail[ed] reasonably to identify the nature of the services performed.").
[116] Wheeler v. Scott, 777 P.2d 394 (Ok.
1989) ("If a lawyer takes on a case in an area in which he or she is
totally unfamiliar or inexperienced, the client should not have to pay for
every minute charged . . . a reasonable attorney's fee in a given case does not
necessarily result from simple multiplication of the hours spent times a fixed
hourly rate."). Id. at 396 (citation omitted).
[117] Id. at 398 ("Here, it is
obvious that much of the time expended was unnecessary by any reasonable
standard."). See also In re Green, 11 P.3d 1078, 1088
(Colo. 2000) (where the court found that an entry for faxing and
"reviewing" a twelve page decision, which the attorney represented as
having taken six hours, and for which he charged $990 was unreasonable as a
matter of law. The Court explained that "the determination of what fees
are reasonable involves more than simply multiplying the number of hours spent
on a given case times a specific rate. An attorney must use judgment and
discretion in rendering a bill.").
[118] Flanagan v. Flanagan, 175 Misc. 2d
160, 668 N.Y.S.2d 302 (Sup. Ct. NY County 1997) (time improperly spent on a
frivolous motion should be excluded from any fee awarded).
[119] Wheeler v. Scott, 777 P.2d 394 (Ok.
1984) ("while the court should consider all the guidelines [re determining
whether a fee is reasonable], it must also contemplate the benefit to the client
as a result of the services."). Id. at 398.
[120] See Copeland v. Marshall, 205
U.S. App. D.C. 390, 641 F.2d 880, 891 (D.C. Cir. 1980) ("no compensation
is due for nonproductive time."). Wheeler v. Scott, 777 P.2d 394, 396 (Ok.
1984) (the "intricacy and difficulty of the questions involved and not
necessarily the amount of manual legal work exhibited by the numbers of papers
in the file of the case must control.").
[121] See In re Raytech,
1999 U.S. Dist. LEXIS 18949 (D.Conn. 1999) (vacating an award of full hourly
attorney fees for nonproductive travel time and remanding for a finding of fact
of whether it is customary in the relevant market to be fully compensated for
nonproductive travel time). See also Bee v. Greaves, 910 F.2d
686, 690 (10th Cir. 1990).
[122] Smith v. Freeman, 921 F.2d 1120,
1122 (10th Cir. 1990).
[123] ABA Comm'n. on Ethics and Prof'l
Responsibility, Formal Op. 93-379 (1993).
[124] In cases involving substantial
discovery, the non-monied spouse's counsel's hours almost inevitably exceed
those of the monied spouse, since there is enormous work involved in
identifying assets by the non-monied spouse's attorney which would not be
expended by the monied spouse's counsel." See Letter, supra
note 94.
[125] Hensley v. Eckerhart, 461 U.S. 424,
434, 76 L. Ed. 2d 40, 103 Sup. Ct. 1933 (1983).
[126] Stern, supra note 111; In
re Keiser, 263 A.D.2d 609, 694 N.Y.S.2d 189, 190 (3d Dep't 1999)
(respondent's $22,000 fee in this "fairly simple" matrimonial action
was clearly excessive where the "subject divorce raised no compelling
legal issues ... parties' marriage was of short duration (less than three
years) and produced no children; ... [there were] no custody, visitation or
child support issues ... neither spouse was claiming spousal maintenance ...
[and there was] virtually no marital property to be distributed.").
Theroux v. Theroux, 145 A.D.2d 625, 536 N.Y.S.2d 151, 154 (2d Dep't 1988)
(quantum meruit award of less than the amount sought by the attorney was
appropriate "particularly in view of the results obtained, the time required,
the work performed, the simplicity of the case, and the limited financial
resources of the matrimonial litigants.").
[127] Matter of McNamee, Lochner, Titus
& Williams and Killeen, 235 A.D.2d 17, 663 N.Y.S.2d 356, 358 (3d Dep't
1997).
[128] Id. at 357-58 ("by
signing the retainer agreement, respondent agreed to pay an hourly fee for
legal services rendered on her behalf . . . . This obligation to pay was not
conditioned on nor linked to the progress, outcome, or result of the
matrimonial proceedings.").
[129] ABA Comm'n on Ethics and Prof'l
Responsibility, Formal Op. 93-379 (1993).
[130] Coughlin v. SeRine, 507 N.E.2d 505,
509 (Ill. App. Ct. 1987) ("An attorney obviously owes his client a duty
not to overcharge. . . ."). See also Rodriguez v. Horton,
622 P.2d. 261, 265 (N.M. Ct. App. 1982). But Cf. Davis v.
Findley, 422 S.E.2d 859 (Ga. 1992) (a claim that the attorney charged excessive
fees in violation of the code of ethics is not sufficient, standing alone, to
sustain a claim for legal malpractice).
[131] See infra Part
VII.A-B.
[132] See In re Jacobs, 188
A.D.2d 228, 229, 594 N.Y.S.2d 794 (N.Y. App. Div. 2d Dep't 1993) (pre-Part 136)
(held that the respondent has charged a client a clearly excessive fee, in
violation of DR 2-106 of the Code of Professional Responsibility, in a
matrimonial matter where the attorney charged $12,000 worth of legal services,
at a rate of $150 per hour, (80 hours), but "actually performed no more
than 34 ½ hours of legal services ... therefore, entitling him to no more than
$5,175 pursuant to the retainer agreement.").
[133] See Perez v. Perez, 154
A.D.2d 359, 545 N.Y.S.2d 836 (2d Dep't 1989); Wald v. Wald, 170 A.D.2d 669, 567
N.Y.S.2d 89 (2d Dep't 1991); Jacobson v. Sassower, 107 A.D.2d 603, 483 N.Y.S.2d
711 (1st Dep't 1985) aff'd 489 N.E.2d 1283. The factors to be taken into
account in determining the reasonable value of the services are set forth in
the text at note 106.
[134] A peculiar artifact of New York law
is that it precludes reimbursement of expenses incurred for investigative
services, In re Lessig, 1 N.Y.S.2d 566 (N.Y. Sur. Ct. 1937), because
these services are "as much a necessary part of the duties which the
attorney agreed to perform as are the typewriting of pleadings." Id.
at 568. Investigative costs are only properly reimbursable when the
investigator delivers subpoenas. Levy v. State, 420 N.Y.S.2d 154 (N.Y.Ct. Cl.
1979).
[135] ABA Comm'n On Ethics & Prof'l
Responsibility, Formal Op. 93-379 (1993).
[136] Small firms sometimes rent office
space in a suite sharing arrangement where the landlord provides copying
services and bills the attorney for usage. While these charges reflect a profit
component for the landlord and are therefore likely to be higher than those
incurred by firms that control their own copying facilities, if the list of
charges are set forth in the retainer agreement, the charges are proper.
[137] For example, the treatment of fee
markups for contract lawyers (lawyers who are not permanently employed by the
billing lawyer or law firm) is binary. If the contract lawyer's fees are billed
as an expense (something not included in the legal fee), then the client must
be billed the actual cost of the contract lawyer to the billing lawyer, unless
there is an agreement with the client that provides differently. However, if
the contract lawyer's fees are billed as part of the legal fee, then the
billing lawyer may mark up the fees subject only to the general constraint on
legal fees: the sum of the fee and the mark-up must be reasonable. See
ABA Comm'n On Ethics & Prof'l Responsibility, Formal Op. 00-420 (2000).
[138] See, e.g., Evergreen
Pipeline Construction Co. v. Merritt Meridan Construction Corp., 95 F.3d 153
(2d Cir. 1996); Leftwich v. Harris-Stowe State College, 702 F.2d 686, 695 (8th
Cir. 1983); Standley v. Chilhowee R-IV School Dist., 5 F.3d 319, 325 (8th Cir.
1993); Ortega v. City of Kansas City, 659 F.Supp. 1201, 1218 (D. Kan. 1987)
(all three cited in In Re-Media Vision, 913 F.Supp. 1362 at 1370 (N.D.
Ca. 1995) (granting computerized legal expense in full)); Auburn Police Union
v. Tierney, 756 F.Supp. 610 (D. Me. 1991); Weinberger v. Great Northern Nekoosa
Corp., 801 F.Supp. 804, 827 (D. Me. 1992).
[139] Cairns v. Franklin Mint, 115 F.Supp.
2d 1185 (C.D. Cal. 2000).
Plaintiffs
contend that defendants cannot recover Westlaw fees. Courts are split over
whether computer research fees are recoverable. See In re Media
Vision Technology Securities Litigation, 913 F. Supp. 1362, 1370 (N.D. Cal.
1996). The Ninth Circuit has not weighed in on the debate. See id.
Some courts take the view that computerized legal research is a component that
must be included in an attorney's hourly rate as overhead. See id.
(citing Leftwich v. Harris-Stowe State College, 702 F.2d 686, 695 (8th Cir.
1983)). Others view computer research fees as attorneys' fees because the computer
research reduces the number of hours spent researching. The added cost of
computerized research is normally matched with a corresponding reduction in the
amount of time an attorney must spend researching. Therefore, we see no
difference between a situation where an attorney researches manually and bills
only the time spent and a situation where the attorney does the research on a
computer and bills for both the time and the computer fee. Haroco, Inc. v.
American Nat'l Bank and Trust Co. of Chicago, 38 F.3d 1429, 1440-41 (7th Cir.
1994).
The
court agrees with the Seventh Circuit's view and finds that, in general,
attorney research time is greatly reduced by the use of computer research.
However, Westlaw charges are not an exact substitute for an attorney's hourly
rate. Moreover, some part of Westlaw's charges must be considered overhead, if
for no other reason than the fact that law firms do not charge clients for law
books. Accordingly, to reflect these considerations, the court finds that the
computer research fees must be reduced by 25 percent.
Id. at 1189 (footnote omitted).
[140] See Berchin v. General
Dynamics Corp., 1996 U.S. Dist. LEXIS 11777 (S.D.N.Y. Aug. 14, 1996).
[141] A.B.A. Comm. on Ethics and Prof'l
Resp., Formal Op. 93-379 (1993).
[142] Id.
[143] See In re Green, 11
P.3d 1078, 1088 (Colo. 2000) ("[T]here are multiple entries reflecting the
faxing of documents to the client and opposing counsel, entries for calls made
to the court of appeals clerk's office, the delivery of documents to opposing
counsel,....and charging an attorney's hourly rate for clerical services that
are generally performed by a non-lawyer, and thus for which an attorney's
professional skill and knowledge add no value to the service, is unreasonable
as a matter of law.").
[144] Martin v. Camp, 161 A.D. 610, 146
N.Y.S. 1041 (1914).
[145] Teichner v. W & J Holsteins, 64
N.Y.2d 977, 979, 489 N.Y.S.2d 36, 478 N.E.2d 177 (1985).
[146] Ventola v. Ventola, 112 A.D.2d 291,
491 N.Y.S.2d 736, 738 (2d Dep't 1985). The extension of the quantum meruit rule
from the terminated contingency fee contract to the hourly rate contract
misapplies Martin v. Camp, and is unsustainable on grounds of policy or logic. See
Lester Brickman, Setting The Fee When The Client Discharges A Contingency
Fee Attorney, 41 Emory l. Rev. 367 (1992).
[147] See supra Part V.
[148] See Finkelstein v. Kins, 124
A.D.2d 92, 511 N.Y.S.2d 285, 286 (1st Dep't 1987) (where the attorney is
discharged without cause, the retainer agreement is relevant in determining the
fee to which the attorney is entitled but it is not dispositive); Wald v. Wald,
170 A.D.2d 669, 567 N.Y.S.2d 89 (2d Dep't 1991).
[149] Brickman, supra note 146, at
393-397.
[150] To help avoid potential malpractice
claims, attorneys should seek to educate the client on divorce procedures. See
Kochalka, supra note 95. "Clients often will complain that
"nothing is happening" with their case, with the implication that
their attorney is negligent. This criticism often is the result of not
understanding the process. ... Expectations regarding fee arrangements, despite
retainers and retainer agreements, are still sometimes unclear, with the lack
of client understanding resulting in potential administrative and malpractice
complaints."
[151] R. Mallen & J. Smith, Legal
Malpractice § 1.1 (4th ed. 1996) (an attorney's negligence will naturally
"reduce the value of the services, and consequently the amount of
compensation to be awarded.").
[152] See Koppelman v. Liddle, 246
A.D.2d 365, 668 N.Y.S.2d 29 (1st Dep't 1998) (as a general rule, when a client
does not prevail in an action with counsel for the value of professional
services, a subsequent action for malpractice is barred); Altamore v. Friedman,
193 A.D.2d 240, 245, 602 N.Y.S.2d 894, 897 (App. Div. 1993)(citations
omitted)("The question of whether to accord preclusive effect to a prior
determination depends generally on a number of factors that we shall consider,
including the identity of issues, the fullness and fairness of the parties'
opportunity to litigate the issue at bar, the realities of the arbitral proceedings,
including the incentive to proceed to arbitration, and actual scope of the
arbitration, as well as the presence and participation of counsel, the
foreseeability of future litigation, the extent to which a matter was
necessarily or implicitly decided in the arbitral forum (even if not actually
litigated), the likelihood of inconsistent results, and the opportunity to
present evidence and cross-examine witnesses." There are contrary
decisions in other states. See, e.g., Weisman v. Schiller,
Ducanto & Fleck, 733 N.E.2d 818 (Ill. App. Ct. 2000) (even though the
client raised malpractice as an affirmative defense in a fee petition hearing,
she was not later barred from bringing an action for damages arising from that
malpractice because the fee petition proceeding does not afford the client an
opportunity to recover damages in excess of the fees sought and extinguishes
her right to a trial by jury.).
[153] Altamore, 193 A.D.2d at 245-46, 602
N.Y.S.2d at 897; Iannochino v. Rodolakis, 242 F.3d 36, 47 (1st Cir. 2001)
(holding a subsequent malpractice suit was barred by res judicata from a fee
claim arising in bankruptcy proceedings; the court explained, "[a]
bankruptcy court therefore makes an implied ‘finding of quality and value' in
the professional services provided to the [clients] during the bankruptcy.
Likewise, the [clients'] malpractice claim entails the same concern, as their
allegations of malpractice arise from the defendants' legal advice relating to
the bankruptcy." [Citations omitted]). See also Siegel v.
Werner & Zaroff, P.C., 704 N.Y.S.2d 570 (App. Div. 2000) (client, who
discharged her original attorneys, was barred from bringing a malpractice suit
to extinguish the charging lien against her personal injury judgment because in
dividing the judgment between the original attorneys and the subsequent
attorneys, the court had impliedly decided the issue of malpractice).
[154] Altamore, 193 A.D.2d at 247, 602
N.Y.S.2d at 898.
[155] Id. (citations omitted); cf.
Simao v. Green & Seifter, 213 A.D.2d 1018, 625 N.Y.S2d 975 (4th Dep't 1995)
(the entry of a judgment in favor of attorney against the client in a prior
action to recover fees for legal services bars a malpractice action regarding
those same legal services).
[156] The jurisdictional scope of the
domestic relations fee arbitration program is unclear. Under Part 136,
theAdministrative Judge has discretion to "decline to accept or continue
to arbitrate a dispute in which substantial legal questions are raised in
addition to the basic fee dispute." N.Y. Comp. Codes R. & Regs. 22, §
136.4(b) (emphasis added). Elsewhere, the rules provide that the "burden
of proof shall be on the attorney to prove the reasonableness of the fee by a
preponderance of the evidence." See id. at § 136.6(b). Part 136
does not set forth any standards or guidance for ascertaining what is a
substantial legal question or assessing the reasonableness of attorney's fees.
Arbitrators
in the program are instructed during training that they are to disregard
quality of representation issues in assessing the reasonableness of the fee.
However, it is extremely difficult in practice to achieve a clear dichotomy
between pure fee disputes, such as "bill padding," and fee disputes
that involve claims of attorney incompetence, neglect, delay, including charges
that the fee was simply excessive in view of the result obtained. Statistical
data compiled as part of this study reveals that in 70% of arbitrations the
attorney's fee was reduced, a possible indication that arbitrators are in fact
considering the quality of representation when making their awards. Some
arbitrators who responded to our survey stated that the clients were operating
under the misapprehension that fee arbitration is a forum for evaluating
attorney competence and ethical standards, but other arbitrators subscribe to
another school of thought: "I don't measure hours [times] rate alone,
while I note that some arbitrators do. The dispute is often something other
than the actual hours expended, but rather why the hours were spent and what
was accomplished or arguably attempted." The more typical observation from
arbitrators was that "[t]he client did not understand that the proceeding
was limited to the fee dispute. He wanted a ruling on the ‘quality' of
representation he received and a reduction of the fee based on his perception
that the attorney should have done more or better for him. It must be made
clear to the client what the proceeding can and cannot accomplish."
Indeed, the written commentary from clients demonstrates that the jurisdictional
scope of the fee arbitration scope is unclear: "I felt my attorney had
been negligent, incompetent and unethical but those issues were not addressed.
I was told the arbitrators were not there to determine if [my attorney] ‘did
the work competently,' just that ‘she did the work.' Incredible! Horrible
process, would not recommend it to anyone!" Clients should receive enough
information to permit them to make an informed decision on whether to resolve
their fee dispute through arbitration or the judicial process. The court system
can assist clients in making informed decisions, without offering legal advice,
by simply disclosing that arbitrators are not necessarily required to consider
allegations of attorney incompetence, neglect, or misconduct. It is suggested
that an expanded fee arbitration brochure, designed specifically for
distribution to clients, include such a disclaimer as well as discussion of the
program's jurisdiction and the types of disputes that are both proper and
improper for fee arbitration. Unless the court system informs clients at the
outset of the program's inability to hear certain types of fee disputes, the
danger exists that clients will opt for fee arbitration when they would be
better served by judicial proceedings wherein they could rely on their ability
to invoke the protections afforded by applicable ethical rules and fiduciary
law.
As
to what constitutes a substantial legal question, the court system should
consider whether to adopt a more definitive policy concerning the program's
jurisdictional scope. At the present time, the critical determination whether
to accept or continue to arbitrate a fee dispute is made by the Administrative
Judges on a district by district basis and by the arbitrators during the
arbitration hearing when such issues arise. As a result, there is no guarantee
of statewide consistency. Other jurisdictions have recognized that fee disputes
take on a multiplicity of variations and that it is difficult to arbitrate
"pure" fee disputes only, while still addressing the needs and
expectations of clients as consumers. The California arbitration statute, for
instance, provides that arbitrators must consider claims of malpractice, but
only as they relate to the value of services received, and New Jersey authorizes
arbitrators to consider the quality of legal services when judging the
reasonableness of the fee. Report, supra
note 14, at 27-30 (footnote omitted).
[157] See, e.g., Alan S.
Rau, Resolving Disputes Over Attorneys' Fees: The Role of ADR, 46 SMU L.
Rev. 2005, 2049 (1993) (hereinafter Rau, ADR) (it would be
"unrealistic to treat a client's decision to seek fee relief in
arbitration as somehow amounting to a ‘waiver' or ‘abandonment' of the right to
bring a malpractice action – and abusive to subject even an informed client,
acting in full understanding of the consequences, to an irrevocable choice
between the advantages of fee arbitration and the ability to press a
malpractice claim.").
[158] N.Y. Comp. Codes R. & Regs. 22,
§ 136.4 (b) ("The Administrative Judge may decline to accept or continue
to arbitrate a dispute is which substantial legal questions are raised in
addition to the basic fee dispute. . .").
[159] 2 R. Mallen & J. Smith, Legal
Malpractice § 14.1 at 229 (4th ed. 1995).
[160] L. Brickman and L. Cunningham, Nonrefundable
Retainers Revisited, supra note 34, at 6 n. 21 (1993); see also
In re Cooperman, 83 N.Y.2d 465, 472, 611 N.Y.S.2d 465, 467, 633 N.E.2d 1069,
1071 (1994) ("The duty to deal fairly, honestly and with undivided
loyalty superimposes onto the attorney-client relationship a set of special and
unique duties, including maintaining confidentiality, avoiding conflicts of
interest, operating competently, safeguarding client property and honoring the
client's interests over the lawyer's.").
[161] 1 G. Hazard, Jr. & W. Hodes, The
Law of Lawyering: A Handbook on the Model Rules of Prof'l Conduct § 1.5: 108
(2d ed. Supp. 1998); see also Hendry v. Pelland, 73 F.3d 397, 401
(D.C. Cir. 1996); Burrow v. Arce, 997 S.W.2d 229, 240 (Tex. 1999).
[162] Restatment (Third) Of The Law
Governing Lawyers § 49 (Proposed Final Draft 1996).
[163] See generally L. Brickman,
Attorney-Client Fee Arbitration: A Dissenting View, 1990 Utah L. Rev. 277
(1990); see also Rau, supra note 157.
[164] The Restatement (Third) of the Law
Governing Lawyers § 49 (Proposed Final Draft, 1996) provides that to subject
the attorney to fee forfeiture, the lawyer's conduct must be both a
"clear" and a "serious" violation of a duty. A clear
violation is described as conduct that "a reasonable lawyer, knowing the
relevant facts and law reasonably accessible to the lawyer, would have known
[to be] wrongful." The Restatement further provides:
[in]
determining whether and to what extent forfeiture is appropriate, relevant
considerations
include
the gravity and timing of the violation, its willfulness, its effect on the
value of the
lawyer's
work for the client, and the adequacy of other remedies.
Id.
[165] These are set forth in Part 1200 of
N.Y. Comp. Codes R. & Regs. 22, §1200 (2001).
[166] For an analysis of the interrelatedness
of fiduciary obligation and ethical rules, see Lester Brickman, Contingent
Fees Without Contingencies: Hamlet Without The Prince of Denmark?, 37 Ucla
L. Rev. 29, 44-45 note 65 (1989).
[167] N.Y. Comp. Codes R. & Regs. 22,
§ 691.6.
[168] Condren v. Grace, 783 F. Supp. 178,
185-86 (S.D.N.Y. 1992).
[169] N.Y. Jud. Law § 90 (2) (McKinney
1983).
[170] Each Appellate Division of the New
York Supreme Court has enacted rules creating Departmental Disciplinary
Committees that investigate and prosecute complaints of professional
misconduct. See, e.g., N.Y. Comp. Codes R. & Regs. 22, §
603.4, 691.4 (these are the rules of the First and Second Appellate Divisions,
respectively). See also D. Appel, Attorney Disbarment
Proceedings and The Standard of Proof, 24 Hofstra L. Rev. 275 (1995).
[171] C. Wolfram, Modern Legal Ethics §
9.6, at 555. See also Rau, ADR, supra note 157, at
2043-44.
For
example, many disputes between attorneys and clients nominally arise because a
client is demanding the return of a fee paid. On this basis, a grievance
committee saddled with an excessive caseload may be eager to shunt the dispute
to the Bar's fee arbitration committee as a fee dispute – even though it may
also appear that the representation of the client had been less than devoted
because of a conflict of interest, that the attorney is refusing to account for
trust funds that he is holding on the client's behalf, that the attorney had
promised services that he did not in fact perform, or that his past conduct
reveals many similar instances of client overreaching or billing abuse. In a
significant category of cases, then, a contractual dispute over the fee may be
only the tip of the iceberg, with other issues of vital public concern lurking
just beneath the surface. There are a number of related points here: The
resolution of "fee disputes" by arbitration may fail to address the
public interest in law enforcement, by failing even to address related issues
of professional misconduct. When individual disputes are resolved at different times
by different panels of arbitrators, recurrent patterns of abuse may not
be detected or sanctioned. And if the diversion of fee disputes to alternative
processes allows attorneys to avoid costs (such as adverse publicity and the
stigma of disciplinary proceedings) that they would otherwise incur in an
official forum, the resulting level of deterrence of misconduct may well be
inadequate.
Any
scheme for the mandatory arbitration of fee disputes should then at the very
least be part of an overall system – a system in which the resolution of a
particular attorney-client dispute is connected with the disciplinary process
through which professional conduct is scrutinized for ethical violations.
"Loops" between the two can be designed to ensure that the law
enforcement functions served by attorney discipline are not swept under the rug
in the drive toward private settlement. Id.
[172] Wheeler v. Scott, 777 P. 2d 394
(Okla. 1989) ("the proper determination of reasonable attorney fees
requires a balancing and thorough consideration of the . . . [reasonable fee]
factors. . . . Setting attorney fees would be a simple matter if numbers could
be inserted mechanically into a universally valid formula. Unfortunately, this
is not the case."). Id. at 398.
[173] See supra note 14. In
order to be able to assess the operation of the program, it is essential that
the kinds of analyses contained in the Report, including the actual
results of fee arbitrations, be undertaken on a regular basis. The process
would be facilitated by the development of a uniform reporting form that fee
arbitrators would be asked to fill out that would include such information as
the attorney's hourly rate, the amount of time billed, the total fee, the
amount in dispute, the result of the arbitration, the percentage denial of the
fee (if any), the reason(s) for the denial (with a list of ten or so reasons
and a check-off box for each reason), perhaps an allocation by percentage of
the amount of any fee denied among the reasons set out for denial, whether the
arbitrant is the monied or non-monied spouse (or whether both are monied), the
amount of marital assets, and whether there was any issue of malpractice raised
or breach of fiduciary obligation.
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