Learning to settle those fee disputes

by JEANNE M. CARROLL

No matter how clear a fee agreement may be, a dispute over its terms may arise. The dispute may take the form of dissatisfaction with the amount of the bill. The expense of that dispute can expand exponentially depending upon how the initial concern is handled.

The options for dealing with a dispute are numbered. An informal resolution is the preferred option.

Assuming good communication between the attorney and client, the client's concerns can often be addressed, the reasons for the fees/expenses explained, and, if necessary, a compromise position reached.

Other options

Absent an informal resolution, however, note should be made of the following:

Arbitration. Business & Professions Code §6201 provides for the arbitration of fee disputes. Arbitration is voluntary for the client and mandatory for the attorney. The attorney must advise the client of the right to arbitrate and proceed to arbitrate the matter if the client so desires.

Fee complaints. An attorney may be unhappy enough with the failure of a client to pay fees to consider a lawsuit. The attorney should consider as well that fee complaints invariably give rise to legal malpractice actions.

An attorney may not file a complaint for fees in any jurisdiction of this state unless he/she has provided the client with notice of the right to arbitrate at least 30 days before filing the complaint for fees. That rule applies even as to small claims matters filed by the attorney. Failure to provide the notice will result in the dismissal of the fee complaint. However, the more prudent rule is: do not file a complaint for fees.

Trust accounts and withdrawal of fees. If a dispute over fees develops and the attorney is holding money in trust for the client, a portion of which represents attorney's fees, the attorney may not withdraw that portion of the funds representing his/her fee. The dispute must be resolved first. Fees cannot be withdrawn from trust without client consent. (See Rules of Professional Conduct, rule 4100(A).)

Possessory vs. charging liens. An attorney faced with a client who refuses to pay a bill may decide to withdraw from the case. Regardless of the reasons for the withdrawal, counsel must heed the rule that the file belongs to the client. The file must be delivered to the client without regard to whether or not fees have been fully satisfied. (Rules Prof. Conduct, rule 3700(D); Academy of California Optometrists v. Superior Court (1975) 51 Cal.App.3d 999, 124 Cal.Rptr. 668.) The client should receive the original file and the attorney should make a copy of the entire file before delivering it to the client, costs of which should be borne by the attorney.

In the event that an attorney decides to withdraw from a case, he/she should do so with care. Careful attention must be paid to Rule of Professional Conduct 3700, which sets out the duties of an attorney upon terminating employment.

Refunding fees

In addition to returning papers and property of the client, the attorney also is required to promptly refund any part of a fee paid in advance that has not been earned.

This requirement brings into question whether or not money paid in advance is refundable. Hopefully, the fee agreement addresses this situation.

An attorney may have a lien on the recovery in those cases where the attorney has substituted out of a case. The filing of a notice of lien in the case is appropriate. Nonetheless, an independent action is required to establish the amount of the lien. (Hansen v. Jacobsen (1986) 186 Cal.App.3d 350, 238 Cal.Rptr. 580.)

Facing claims

Statistics are such that the majority of attorneys now practicing in California will be subject to a claim arising out of their professional services at some time during their career.

A carefully worded fee agreement will go a long way towards providing definition of the rights and responsibilities of the attorney and the client and an understanding of what the relationship entails.

Moreover, a judicious and prudent manner in handling disputes can minimize the problem and the potential costs associated with it.

Jeanne M. Carroll is an attorney with Diepenbrock & Costa, a Sacramento insurance defense firm. Her practice includes professional liability defense.