Sep 27, 2017
Mandatory Fee Arbitration for
Sep 27, 2017
By Scott Lueders
Earlier this year, an interesting question arose on the ACFLS listserve: Is an attorney who has acted as a mediator in a family law matter subject to the mandatory fee arbitration provisions of the Business and Professions Code? This article will discuss the applicable statutes and rules and provide an analysis of this question.
The Statutory Process
The statutes governing mandatory fee arbitration (MFA) between attorneys and clients are found in Business and Professions Code sections 6200 et seq. Referring to the State Bar of California, section 6200 provides that the Bar’s Board of Trustees shall establish, maintain, and administer a system and procedure for the arbitration of disputes concerning fees, costs, or both, charged for professional services by members of the State Bar. That section also provides that the board of trustees shall adopt rules to allow arbitration of attorney fee disputes to proceed under arbitration programs sponsored by local bar associations in this state. Many county bar associations, although not all, have created and administer an MFA program. MFA under section 6200 et seq. is voluntary for a client and mandatory for an attorney if commenced by a client.
The following principles of MFA are generally well-known: An attorney must serve the client with a notice of the client’s right to arbitration either before a collection lawsuit is filed, or along with service of the summons in the lawsuit. The client’s failure to request MFA within 30 days after service of the notice waives the client’s right to MFA. To invoke the right, the client files a request for arbitration with the appropriate MFA program. Any court action or proceeding is then stayed during the arbitration process. In the arbitration proceeding, a client may not seek affirmative relief against the attorney for damages based upon alleged malpractice or professional misconduct. (Business and Professions Code section 6201.)
The attorney may file an arbitration statement in response to the client’s request for arbitration. The MFA program then appoints an attorney from its panel to act as the arbitrator or, in cases involving a larger amount in dispute, a panel of two attorney arbitrators and one non-attorney arbitrator. The attorney and the client can request binding or non-binding arbitration. Both must request binding arbitration for the award to be binding. An arbitration hearing is conducted at which any relevant evidence may be received, and the usual rules of evidence in court proceedings are relaxed if not ignored altogether. Following the hearing, the arbitrator or panel issues the award that includes the determination of the amount in dispute as well as the reasons for the decision. Even if the parties to the arbitration have not agreed in writing to be bound by the award, the arbitration award becomes binding upon the passage of 30 days after service of the award, unless a party has, within the 30 days, sought a trial after arbitration. (Business and Professions Code section 6203.) If the parties agreed to binding arbitration, or if neither party requested a trial within 30 days after the award in a non-binding case, either party may petition the appropriate court to confirm the award as a court judgment. (Business and Professions Code section 6204.)
The State Bar Rules
The State Bar has adopted rules of procedure for MFA when it hears a dispute either because the local bar association has no MFA program or when the dispute has been removed to the State Bar due to a conflict. Local bar association MFA programs adopt their own set of rules of procedure, and most closely follow the State Bar’s rules, but are not identical in all instances. Under the State Bar rules, “client” is defined as “the person who directly or through an authorized representative obtains an attorney’s legal services.” A client has a right to arbitration of a dispute regarding attorney’s fees charged for legal services. (State Bar MFA Rule 3.501.) It is interesting to note that Rule 3.501 also provides that, where the existence of an attorney-client relationship is in dispute, the parties may stipulate to submit that issue for determination by the MFA program. Apparently, the program cannot determine such a dispute in the absence of a stipulation, and would then have to determine if it has jurisdiction over the fee dispute. The rules give no further guidance as to whether jurisdiction should be accepted or not in that instance.
Marin County’s Rules
In comparing the State Bar’s rules with those of a local bar association MFA program, Marin County’s MFA rules define “client” in a somewhat different way than the State Bar rule: “A person who . . . consults, retains or secures legal services or advice from an attorney in the attorney’s professional capacity.” (MCBA MFA Rule 1.04.) In discussing what disputes are covered under its MFA program, Marin County’s rules list “disputes concerning fees, costs, or both charged for professional services by an attorney” (MCBA MFA Rule 4.0), which mirrors the language of Business and Professions Code section 6200. Marin’s rules also permit the parties to stipulate to submit a dispute about the existence of an attorney-client relationship to its program for determination, but it further states that in the absence of such a stipulation, the program “otherwise lacks jurisdiction to determine that issue”. (MCBA MFA Rule 10.1.) Query: In Marin County, if the existence of an attorney-client relationship is in dispute and the parties do not stipulate to submit that dispute to the program, must the program then reject the MFA request?
Is There a Client or an Attorney-Client Relationship?
Returning to the initial question raised in this article, on the surface, there does not appear to be a clear answer as to whether MFA applies to an attorney-mediator. Under the Business and Professions Code, one might argue that section 6200 applies to attorney-mediators because the dispute involves “fees charged for professional services by members of the State Bar." The attorney-mediator is certainly a member of the State Bar, and presumably the parties chose him or her for that reason. Just as clearly, the fees the attorney-mediator has charged are for his or her professional services rendered to the mediating parties. The definition of “client” in both the State Bar rules as well as Marin’s supports this conclusion. The parties are obtaining the attorney’s legal services in his or her professional capacity (as a mediator). The reference to “legal services” appears elsewhere in the statutes and rules as well. Perhaps the inquiry ends there?
What is troubling, however, is the provisions concerning disputes about the existence of an “attorney-client relationship." Neither of the parties in the family law mediation are the attorney-mediator’s “client” in our usual use of that term. The attorney-mediator does not represent either party, and typical fee agreements to retain the mediator state just that. Regardless of whether the parties to the MFA stipulate to have the program determine the existence of an attorney-client relationship, does the program accept the request for arbitration? That of course simply begs the original question.
The analysis is similar but not necessarily identical under Marin County’s MFA rules. Looking at its definition of “Client," the family law party has “secured legal services” from the attorney-mediator in the attorney-mediator’s “professional capacity." That would seem to subject the attorney-mediator to MFA, but then there is that same troublesome language in Marin’s rules about the existence of an attorney-client relationship. Marin’s rule goes further in that it seemingly provides that if there is a dispute about the existence of an attorney-client relationship and the parties do not stipulate to have the program rule on that dispute, then the program is compelled to reject the request for MFA.
This author believes that these apparently conflicting and somewhat confusing rules and statutes can be harmonized. The purpose of the MFA statutes is to provide the public with an expedient and simplified forum within which to resolve a fee dispute with a member of the State Bar, rather than compel those parties to endure the cost, delay, and complicated procedure of litigation in the court system. Many parties to MFA, both clients and attorneys, forego representation by counsel and present their cases themselves. Clients benefit from MFA because they don’t have to resolve the dispute on the attorney’s own turf, i.e. the courtroom.
The State Bar rules of procedure and those of many county MFA programs define “client” as a person who obtains legal services from an attorney. Similarly, Business and Professions Code section 6200 provides that MFA applies to disputes over fees charged by an attorney for the attorney’s professional services. Applying those definitions to the word “client” in the rules about determination of the existence of an attorney-client relationship broadens the concept of that phrase. In other words, the existence of an attorney-client relationship under the rules depends on whether the client obtained legal, or in the words of the B & P statute, professional services from the attorney-mediator. Clearly, the family law parties chose the attorney-mediator to provide professional services to them, in the form of mediation of their family law dispute and all that that entails, including explanation of the applicable laws, assistance with negotiation of an agreement, and drafting of judicial council forms and settlement documents.
The conclusion that this author derives from the foregoing analysis is that an attorney acting as a mediator for parties in a family law matter is providing legal or professional services to those parties, bringing those parties within the definition of “client” as defined in the MFA rules of procedure. The attorney-mediator is therefore subject to a mandatory fee arbitration proceeding, which is mandatory if initiated by one (or both) of the family law parties, and voluntary for one (or both) parties if initiated by the attorney-mediator. Even if there is some remaining doubt about this conclusion, a party may still file a request for arbitration with the appropriate MFA program. The worst that can happen is that the program rejects the request, and the parties may then still seek their remedies in the court system.
 Association of Certified Family Law Specialists.
 These rules are available on the State Bar website, as are the applicable Business
and Professions Code sections.
 This situation has not arisen during the three years that the author has acted as
chairperson of the Marin County Bar Association’s Client Relations Committee, which
oversees and administers its MFA program.
 Of course, MFA also provides an attorney who chooses to initiate MFA proceedings
with the same benefits.
Scott Lueders is a certified family law specialist practicing primarily in Marin County. He is a Fellow of the American Academy of Matrimonial Lawyers. Scott currently serves as the Chair of the MCBA Client Relations Committee, which oversees mandatory fee arbitration proceedings in Marin County.