Volume 14, Issue 2

Winter 2003

Senior Lawyer News

 

Virginia State Bar Fee Dispute Resolution Program

On February 11, 2003, Anthony F. Troy, Chair of the 13th Circuit Committee for the Resolution of Fee Disputes (13th CCRFD) discussed with the Board of Governors of the Senior Lawyers Conference (SLC) the Virginia State Bar Fee Dispute Resolution Program (FDRP), and he solicited the participation of the members of the SLC in supporting the program. The Board of Governors of the SLC agreed to encourage SLC members to support the program and to volunteer as panel members.

The FDRP provides voluntary, binding arbitration to attorneys and clients involved in a dispute over fees and costs paid, charged, or claimed for legal services rendered by a member of the Virginia State Bar.

The binding arbitration, which must be agreed to in advance by both parties, is provided by unpaid volunteers who are panel members of the Circuit Committees for the Resolution of Fee Disputes (CCRFD). Panel members are both lawyers and non-lawyers.

CCRFD's have been established in the following jurisdictions:

1. Informal Nature of Proceedings

Consistent with the goal of encouraging clients to utilize the fee dispute resolution program, arbitration hearings are informal in nature. They are conducted without strict observance of either the Rules of Civil Procedure or the Rules of Evidence.

2. Application of the Virginia Arbitration Code

Except as modified by the Fee Dispute Resolution Program Rules, the Uniform Arbitration Act, Va. Code Sections 8.01-581.01-.16 (Supp. 1994) governs fee arbitration proceedings.

3. Jurisdiction

Circuit Committees for the Resolution of Fee Disputes ("CCRFDs") are empowered to resolve disputes over fees or costs paid, charged, or claimed for legal services rendered by a member of the Virginia State Bar when the parties to the dispute agree to arbitrate, either by written contract or request for arbitration signed by all parties, unless:

a) a claim relating to the legal fees or costs has been filed in a court and is still pending;
b) the fee dispute has already been decided by a court;
c) the case involves conduct in violation of the Virginia State Bar disciplinary rules; or
d) the dispute is overly complex or exhibits protracted hearing characteristics.

When, in the course of processing a fee dispute complaint, conduct that violates the Virginia State Bar disciplinary rules is discovered, the case must be referred to the Virginia State Bar (VSB). If the VSB professional regulation department or a VSB district committee subsequently concludes that there is no ethical impropriety, the matter should be referred back to the CCRFD for resolution of the fee dispute.

4. Venue

Venue lies in the circuit where the attorney maintains a principal office, where the attorney performed a substantial amount of the legal services, or where the parties otherwise agree. If the parties cannot agree on venue, then there is no mutual assent to an arbitration proceeding and the file is closed.

5. Case Administration

a. Circuit Committee Chair. The CCRFD chair administers the arbitration process. This includes initiating and supervising case filing, attempting conciliation or mediation, assembling arbitration panels, assigning cases to panels, and ensuring that panels timely and properly arbitrate their assigned cases. The chair also responds to party requests submitted before the panel or sole arbitrator is appointed and after the arbitrator award is issued.

b. Panel Chair or Sole Arbitrator. The panel chair or sole arbitrator is responsible for arranging a time and place for the hearing, issuing hearing subpoenas, ruling on motions for continuances, and considering and disposing generally of any other motion, application or request that may arise after his or her appointment. The panel chair also may require certain prehearing disclosures from the parties such as a more directed statement of the facts, pre-hearing production of completed billing and time records by the attorney, a listing of witnesses, and depositions to perpetuate testimony.

6. Commencement of the Arbitration Process

a. Generally. Upon inquiry from either an attorney or a client (who becomes the "Petitioner"), the CCRFD chair provides that party with the Fee Dispute Resolution Program Rules, the Guidelines for Arbitrators and Participants, and the agreement to arbitrate form. When the Petitioner returns the completed agreement to arbitrate form and the $10.00 administrative fee the chair contacts the other party (the "Respondent") and provides the same documents to the Respondent. Upon receipt of the completed consent form and the $10.00 administrative fee from the Respondent, the chair proceeds to appoint the arbitrator or arbitrators.

b. Effect of Formal Commencement of Process. As soon as the chair receives arbitration agreement forms fully executed by both parties and administrative fees from both parties, the arbitration process is formally commenced. If one party attempts to withdraw from the program at this point, the agreement may be enforced in a court proceeding to compel arbitration.

7. Pre-hearing Settlement Efforts

During the process of filing a case with the FDRP, the chair will inform the parties about the possibility of using conciliation or mediation to resolve their disputes. The FDRP encourages such informal methods of dispute resolution.

a. Conciliation. If the chair determines that conciliation of the dispute is possible, or the parties request such assistance, he or she may undertake such efforts at any time during the handling of the case. If the conciliation results in an agreement, the file is closed. If the conciliation does not result in an agreement, the chair may refer the parties to mediation or proceed to schedule the case for arbitration.

b. Mediation. If the parties are interested in mediating the dispute, the chair will make available to the parties a list of mediators in their circuit who are certified to receive court referrals under guidelines promulgated by the Judicial Council of Virginia. If the case is concluded with a mediation agreement, the file is closed. If the case is not concluded with a mediation agreement, the chair may proceed to schedule the case for arbitration.

8. Agreement to Arbitrate

Each party must provide a concise statement of his or her position in the matter, including the amount claimed or in controversy, in the agreement to arbitrate. Parties are encouraged to include with this initial submission the written contract or agreement for legal services, if any, and all other documents that may have a bearing on the dispute.

9. Respondent's Refusal to Participate

If the Respondent declines to participate, the CCRFD chair notifies the Petitioner, arranges for the refund of the administrative fee paid by the Petitioner and closes the file. The CCRFD chair will normally close a file if the Respondent is silent for 15 days. This deadline may be extended or modified by the chair, however, and the file should not be closed without some effort by the chair to contact the Respondent by telephone and/or in writing.

10. Discovery

Prehearing depositions shall be allowed only for the perpetuation of testimony. No other prehearing discovery is permitted. Applications for authorized depositions may be made to the panel chair or sole arbitrator.

11. Selection of Arbitrators

a. Single Arbitrator. If the amount in controversy is $1,500 or less, the case is usually referred to a sole lawyer arbitrator, but the sole arbitrator can be a non-lawyer. Upon a request by either party, the CCRFD chair may appoint a three-arbitrator panel.

b. Arbitration Panel. For matters in excess of $1,500, the CCRFD chair assembles a three-person panel from the members of the Circuit Committee, and designates one of them as chair of the panel for that particular proceeding. All three-arbitrator panels shall consist of at least one lawyer and at least one non-lawyer. Whenever possible, the CCRFD chair should select at least one arbitrator who has experience in the substantive area of the law involved in the arbitration.

c. Objections to Arbitrator Selection. Parties to the arbitration process shall be provided with the name of arbitrators at the earliest possible time so that they can exercise their right to object to an arbitrator at the outset of a proceeding. Removal of an arbitrator is within the discretion of the CCRFD chair for good cause shown. Once a hearing is convened, objections to an arbitrator are waived.

12. Scheduling

The arbitration hearing must be scheduled within 45 days of the receipt of the assignment by the panel chair or sole arbitrator. The panel chair or sole arbitrator has the duty and responsibility to coordinate with the parties and other arbitrators prior to noticing the hearing. A hearing may be scheduled on notice of at least ten (10) business days. Postponement shall only be granted upon good cause shown within the discretion of the panel chair. Parties are expected to cooperate in good faith in the scheduling of hearings; there is a strong presumption against continuances.

13. Notice of Hearing

Notice of hearing must be served on parties personally or by registered or certified mail at the address stated on the consent form.

14. Waiver of Evidentiary Hearing

An evidentiary hearing may be waived by consent of all parties. If the hearing is waived, the parties submit their contentions in writing, along with any exhibits, to the arbitrator(s). The arbitrator or arbitration panel then has ten (10) business days from receipt of the parties' submissions to render an award.

15. Absence of Party or Arbitrator

a. Party. The fee arbitration hearing may proceed in the absence of a party who fails, after notice, to attend or to obtain a continuance or postponement from either the panel chair or sole arbitrator. An award may not be entered by default, however. Record evidence is required to support the award regardless of the non-attendance of any party or parties at the hearing.

b. Arbitrator. If one or more arbitrators are not present at the designated time and place, a panel hearing may proceed only with the express consent of the parties to fewer than three members. If any panel member is unable to serve at any other time while the arbitration is pending, but prior to the rendition of an award, the CCRFD chair is entitled to appoint a substitute panel member. This substitute arbitrator thereafter will review the record, to the extent one exists. If the proceedings were not recorded, the substitute arbitrator's review must consist of an examination of the evidence already admitted and an oral summary of the proceedings by the panel chair followed by argument of the parties.

16. Presentation of Evidence

The panel chair or sole arbitrator shall swear all parties and witnesses before hearing their testimony. The arbitrators may request opening statements and prescribe the order of proof. All parties have the right to the full presentation of any evidence they deem pertinent to the resolution of the dispute. Any party may secure the attendance of witnesses or production of records by the issuance of arbitration subpoenas. Parties are expected to provide copies of all documents and correspondence they wish the arbitrators to consider.

17. Closing of Hearing

At the conclusion of the hearing the arbitrator(s) are procedurally required to inquire of all parties whether they have any further evidence to submit in whatever form. The hearing can be closed only when both sides have responded negatively. The arbitrator(s) will deliberate in private after the closing of the hearing.

18. Right to Counsel

Any party has an absolute right to representation by counsel at any arbitration hearing.

19. The Record

Any party has the right to secure the services of a stenographer to record the hearing proceedings; however, the costs must be borne by the party who makes the arrangements for the reporter. Furthermore, the parties may stipulate to recording any proceedings by tape recorder or other electronic means. The transcript must be prepared and delivered on an expedited basis since the arbitrators only have ten (10) business days to prepare the written award. The arbitrators' copy of any transcript is open to inspection by all parties.

20. Arbitration Award

a. Deadline. The panel or sole arbitrator must render a written ruling within ten (10) business days after the close of the hearing, or the submission of documents in cases where the evidentiary hearing is waived. The CCRFD chair may extend this deadline for cause. The parties also may jointly agree to an extension.

b. Form and Content. The arbitration decision is expressed in a written award, signed by all the arbitrators. The award shall include a brief explanation of the basis of the decision. In the case of a panel, the majority vote constitutes the enforceable award. Unless the consent to arbitration provides otherwise, the arbitrators are empowered to grant any lawful relief in the award, including specific performance.

c. Reopening hearing after award is signed. A hearing may not be reopened after an award is signed except upon consent of all parties, together with the concurrence of either the panel chair or sole arbitrator.

d. Setting aside, modifying or correcting award. The only grounds for setting aside, modifying or correcting an arbitration award are those embodied in Va. Code Sections 8.01-581.010-11 (Supp. 1994).

21. Confidentiality

All records, documents, files, proceedings and hearings pertaining to fee arbitration are available to parties and their counsel, upon inquiry.

22. Costs

a. Generally. Each party shall bear his or her own arbitration costs and expenses unless otherwise assessed in the arbitration award.

b. Attorneys' Fees. The determination of the entitlement to and amount of attorneys' fees incurred in connection with the arbitration is the sole province of the circuit court upon application for confirmation of the arbitration award.

23. Post-Award Assistance

If an attorney fails or refuses to comply with an award by the CCRFD, the CCRFD chair shall make every effort to find volunteer legal representation for the client including pro bono legal services to enforce and collect the award in any court of competent jurisdiction.

This provision is not intended to preclude any such volunteer attorney from pursuing from the non-complying attorney costs of collection, including reasonable attorney fees, permitted by law.

Fee Dispute Resolution Program
Guidelines for Arbitrators and Participants

1. Factors Considered In Determining Award

    The arbitrators may consider all pertinent factors, including the intention and understanding of the parties at the time the representation was undertaken. The factors to be considered are the following:

a. The time and labor required, the novelty, complexity and difficulty of the questions involved, and the skill required for proper legal representation;

b. The likelihood that the acceptance of the engagement would preclude other employment by the lawyer;

c. The customary fee or rate charged in the community;

d. The monetary or other stakes involved in the matter;

e. The time constraints of the representation;

f. The nature and length of the professional relationship with the client;

g. The experience, reputation, diligence and ability of the lawyer, as well as the skill, expertise or efficiency of effort reflected in the actual services rendered;

h. Whether the fee agreement was fixed or contingent;

i. Whether the lawyer provide an adequate explanation to the client of the fee arrangement at the outset of the representation.

j. Whether the fee arrangement was in writing;

k. The promptness of the billing;

l. The experience of the client in obtaining legal services;

m. The extent to which estimates of the total fee were given, and if an estimate was given, how closely did the final bill relate to the estimate;

n. The extent to which the lawyer and others in the lawyer's office have documented their time spent on the matter; and

o. The results obtained by the lawyer. An advantage to the fee dispute resolution program is that an award can be rendered without any actual expert testimony supporting the reasonableness or unreasonableness of the fee. Fee arbitration hearings routinely proceed without expert witnesses. Of course, there is no prohibition against using an expert witness if a party believes it would be helpful to the presentation of the case.

2. Preparation and Documentation
    There is no substitute for adequate preparation to ensure an effective fee arbitration presentation. Arbitrators may be volunteers, but they are committed to a diligent and conscientious fact finding process. All arbitrators go through a screening process prior to their appointment by the President of the Virginia State Bar. Because of their demonstrated commitment most arbitrators are receptive to prehearing briefs or factual summaries, particularly if the panel Chairperson has not required any prehearing disclosures. An excellent arbitration aid is a hearing notebook distributed to each arbitrator assigned to the dispute. A notebook may not be warranted in a routine case, but its assistance value increases as the stakes of an arbitration rise or as the factual scenario becomes more complicated. Such a notebook should contain the principal documentary evidence a party wants considered at the hearing. Helpful items to include in a notebook are the documentation reflecting the fee agreement, representative work product, a chronology of the attorney-client relationship, billing rates for the attorneys involved, and summaries of the time devoted to the engagement. Either party may want to call the arbitrators' attention to pertinent correspondence or other forms of communications between the attorney and client if they are important to the professional relationship. If the engagement resulted in a large volume of work product, then a summary or annotated index of the work should be considered for prehearing submission to arbitrators. It is axiomatic that a copy of any hearing notebook or similar prehearing submission should be provided to the other party to the arbitration at the same time it is provided to the arbitrators, if not sooner. The exchange of such materials several days in advance of the hearing is encouraged as a means of expediting the hearing. The Chairperson of the panel may require such an exchange.
    Because of the emphasis of most arbitrators on the lodestar method of computing reasonable fees, the most critical documents for the arbitrators are the attorney's time and billing records. The attorney who has a written fee agreement, who has generated and maintained fully itemized time and billing records, and who had a demonstrated practice of reviewing the invoices and remitting them regularly, goes into arbitration with a strong presumption that the fee charged is reasonable. Still, an analysis of the time and billing records by the arbitrators can be greatly facilitated by foresight and careful organization. An effective arbitration presentation by either party organizes and uses these records to demonstrate particular points. Summaries and compilations from these records are invaluable to the arbitrators. For example, an attorney may justify a large number of hours over a time line that shows a number of crucial depositions were taken and defended that month. Similarly, a client may demonstrate excessiveness by tabulating the total hours spent by junior attorneys on a case and further breaking the hours down by type of service rendered (i.e., legal research or conferences with other attorneys) to show inefficient duplication of effort. A well conceived arbitration presentation organized along these lines is very effective.
    A brief explanation of the arbitrators' customary analytical process may be helpful to a practitioner's determination of the mode and order of proof at the hearing. The arbitrators' first task is to determine the existence and terms of a fee agreement. When there is a reasonably clear written agreement, the arbitrators will generally be unreceptive to a contested effort by either side to vary the written terms or to prove inconsistent side agreements or understandings. In the face of a written fee agreement, arbitrators are traditionally loath to credence such contentions as "the initial retainer was a flat fee," "the attorney promised that fees would not exceed a set amount," and "the client agreed to pay a bonus for a successful result." Sometimes, there may be an ambiguity whether the client agreed or understood that the attorney would charge for time in providing emotional support, consolation or other non-legal assistance. This type of problem is usually encountered in domestic relations cases. In these not infrequent situations, the arbitrators are expected to examine whether the attorney always intended to charge for that time and whether the client understood, or reasonably should have understood, that such time would be billed. Absent a clear written contract, arbitrators prefer to resolve preliminary questions concerning the scope of the engagement or agreement on an objective basis. Thus, the arbitrators will tend to place heavy reliance on documentary evidence and the parties' course of performance in making their determination. The arbitrators have the authority, however, to determine all terms of an express oral contract.
    After establishing the terms of the contact, the next task of the arbitrators is to evaluate the performance by the attorney. A finding of substantial performance of the representation or engagement will result in award of the contractual fees. If the attorney has not substantially performed the contemplated representation, the arbitrators will make the fee determination based as much as possible on the agreed terms in the agreement and the degree of services rendered.
    So, too, the arbitrators are empowered to act even without an express written or oral fee agreement. The arbitrators may determine whether fees are due pursuant to an implied contract if there was any suggestion or implicit understanding as to legal representation, regardless of lack of certainty on the point. In those cases, the arbitrators weigh the testimony and evidence and find what services were necessarily contemplated by the parties and place a reasonable value on those services. This determination is based on the extent of the services actually rendered and the fair value of the representation.

3. Protocol
    There are two major protocol points that should be strictly observed in all arbitration hearings. First, the parties should bear in mind at all times that the arbitrators are volunteering a considerable amount of time and expertise in order to fairly and ably resolve the dispute. They should be accorded every courtesy and consideration for their effort. Out of respect for the arbitrators' donation of their time, parties to an arbitration should strive to confine their presentations to those facts necessary to establish entitlement or disentitlement to fees. Petty bickering and personal acrimony do not advance the merits of any party's arbitration case. An overly contentious party is also more likely to be counterproductive than effective during the arbitration.
    The second point of protocol involves respect for the fee dispute resolution program and its underlying purposes. The fee dispute resolution program establishes a uniform system for fee arbitration to provide a realistic alternative for clients to receive a fair review of their complaints about legal fees. This important goal is severely undermined when an attorney involved in an arbitration proceeding expresses obvious familiarity and collegiality with respect to an attorney arbitrator. Even the use of a first name can be enough to sabotage a client's confidence in the fairness and impartiality of the arbitration. This behavior is totally unacceptable at an arbitration hearing. The relations between attorney parties and attorney arbitrators instead, must be as formal and dignified as circumstances permit. The effectiveness of the fee dispute resolution program depends on abiding by this hearing protocol. A properly administered hearing should result in an attorney who is satisfied with the fairness of the proceeding and who is, therefore, likely to view the fee dispute resolution program as a legitimate means for resolving fee disputes. More fundamental, a properly administered hearing should result in a client who is also satisfied with the fairness of the system and the timeliness of the resolution of the dispute.

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