The Journal of The DuPage County Bar Association

Back Issues > Vol. 26 (2013-14)

Fee Disputes: Every Lawyer’s Nightmare
by Jay M. Reese and Ammanual Y. Luba

Many attorneys consider themselves to be advocates for the peoples’ good, defenders of the rights and liberties of individual citizens, with staunch resolve and in the exercise of their intellectual faculties and legal acumen; some find themselves blindsided by, at least in their minds, unfair complaints from disgruntled clients.

Said clients are typically dissatisfied with the attorney’s performance and therefore challenge the attorney’s worthiness to be paid for the most sincere efforts expended on the client’s behalf. Further, these same clients are usually unhappy with the amount of the practitioners fees, the apparent effort expended, or with the result of the case and threaten to take action against the attorney including sullying his or her reputation by contacting the ARDC. What can the lawyer do?

Background. There are few guidelines which can guide attorneys in fee disputes. A preliminary step in any fee dispute is to determine whether the parties had a retainer agreement in place and, if so, whether it covers the dispute. A clear and well-written retainer agreement can prevent misunderstandings, set out the rights and responsibilities of each party, and therefore may prevent a dispute from even being initiated in the first place. A possible resolution may be for the lawyer to cancel any disputed billings. This action might in the long run be more efficient and cost-effective for counsel, pre-empting any dispute.

Counsel may be willing to follow this course for several reasons, including the fear of losing future business and goodwill from a valued client, the existence of a valid claim by the client, or simply to avoid the contentiousness and animosity that these disputes tend to create.

However, in circumstances when the attorney considers the client’s demand unfair, and the client is not a continued source of business, a fee dispute will result.

It is usually at this juncture that the fee dispute transitions from an informal inquiry by the client to an adversarial situation, with a request for review of all charges and payments. It is important for the attorney to make sure not to react negatively to the client’s request and provide any documentation requested.

When the attorney and client cannot reach an agreement or settlement, the question becomes what is the best method to resolve the dispute taking into account client’s expectations and the attorney’s expectations while preserving the resources of the judicial system.

ARDC Complaint. Assuming the client is unsatisfied with the attorney’s explanation of billing, the client may lodge a complaint with the ARDC. An ARDC complaint will subject an attorney to an investigation and a disciplinary inquiry which will appear on her ARDC record even if the attorney is not disciplined. “The Rules of Professional Conduct recognize that the practice of law is a public trust and lawyers are the trustees of the judicial system.” In re Smith, 168 Ill. 2d 269, 295, 659 N.E.2d 896 (1995).  “The objective of a disciplinary inquiry is not punishment. Instead, the purpose is to determine whether an individual should be permitted to engage in the practice of law.” Smith, 168 Ill. 2d at 287. “In determining the appropriate sanction for an attorney’s misconduct, the purpose of the disciplinary system and the facts surrounding the misconduct must be considered”. In re Chernois, 114 Ill. 2d 527, 502 N.E.2d 722. If the attorney is found to have violated his fiduciary duty with respect to preserving the client’s fee or property, he can face a wide variety of sanctions ranging in severity from censure to suspension, and for the most egregious misconduct, disbarment. By the time this process is underway the chances for an amicable result fall by the wayside.

Small Claims Court. It may not always be the client who seeks to dispute or recover a fee from her attorney. Sometimes it may be the client who has defrauded the attorney or refused to pay for services that an attorney provided and which benefited the client. In this case the attorney will usually not have a professional disciplinary board to resort to (unless the client also happens to be an attorney) and thus may resort to utilizing the small claims court. Clearly the choice of filing in small claims courts, or the Law Division for a fee dispute in excess of $50,000 carries with it all the corresponding issues of contentious litigation. In the court of public opinion this type of action can reflect poorly on both the attorney and the judicial system. Using the power of the court system against a client can lead to feelings of betrayal and bitterness which are often heightened by the personal nature of attorney-client relationship. Furthermore, most professional liability insurance policy applications specifically request information of Complaints against the attorney as well as law suits by clients or by the attorney to collect fees, which may affect insurance coverage or raise the cost of the premium. Further, many carriers now specifically exclude from coverage any malpractice claims which are filed in response to a suit seeking to recover attorneys fees.

ADR: Arbitration/Mediation. In the authors’ experience, private mandatory arbitration or mediation, can best achieve the goal of preserving the resources and efficiency of the court system and the parties involved in the dispute, while also preserving the right to fair and impartial dispute resolution expected by the public. Arbitration gives the parties the ability to craft custom binding settlement agreements which provide the added advantage of confidentiality and closure. Especially in cases where there may be a factual dispute or a strict “he said; she said” type dispute, arbitration can accommodate the interests of both parties without dragging the details of the dispute into the public light and most likely to the disadvantage of both the attorney and the client. Oftentimes these types of accusations may be enough to distort the reputation of the Attorney which is fundamental to ability to practice effectively. Preservation of the Attorney’s reputation and goodwill in the community is a priceless benefit in and of itself. As the investor Warren Buffet wisely noted, “[a] good reputation takes 20 years to build, and 5 minutes to ruin.” Clearly, considering the pros and cons of the various methods of dispute resolution the Authors recommend including a mandatory arbitration and or Mediation provision in any retainer agreement.

ARBITRATION: 710 ILCS 5/1 — Validity of Arbitration Agreement. (1) A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable save upon such grounds as exist for the revocation of any contract, except that any agreement between a patient and a hospital or health care provider to submit to binding arbitration a claim for damages arising out of (1) injuries alleged to have been received by a patient, or (2) death of a patient, due to hospital or health care provider negligence or other wrongful act, but not including intentional torts, is also subject to the Health Care Arbitration Act.

DuPage County Bar Association [DCBA] Fee Dispute Arbitration Procedure. The Du Page County Bar Association, through its Professional Responsibility Committee, offers a Fee Dispute Resolution program for attorneys and their clients over disputes pertaining to attorneys’ fees. Either the attorney or the client may access the program for such issues as non-payment of fees or for claims pertaining to inappropriate charges or fees. Fee disputes heard through this program are disagreements over fees paid, charged, or claimed for legal services rendered by an attorney licensed to practice in the State of Illinois and practicing in Du Page County where there exists an expressed or implied contract establishing an attorneyclient relationship. This definition specifically excludes those disputes where the Court has jurisdiction to fix the fee because a suit has been filed or where there is a pending petition for fees. Also the committee will defer any dispute while there is an ARDC complaint pending.

To start the process, an individual may file a complaint for fee dispute resolution. This complaint must be in writing and must be submitted on the complaint form provided by the program. The complaint form consists of approximately 20 questions requesting information on why the attorney was hired, whether there was a Fee Agreement, and requesting the specifics of the complaint pertaining to fees. The complaint is then forwarded to the Chairperson of the Professional Responsibility Committee. The Chairperson appoints one member of the committee to investigate the complaint to obtain the specifics of the case. The investigator contacts the person who brought the complaint. The investigator then speaks to the respondent, asking him or her to the other side of the dispute. The investigator then makes an attempt to resolve the issue before it moves to formal arbitration. If the case does not resolve through the investigator’s efforts, the case is scheduled for an arbitration hearing. The Chairperson of the Professional Responsibility Committee appoints the investigator and two other attorneys from the Committee to serve on a three-person arbitration panel. Both parties have an opportunity to present their cases and introduce evidence, including opening and closing statements, testimony of parties and witnesses and cross examination of witnesses. At the arbitration hearing, strict rules of evidence do not apply.

The arbitration panel issues a written award within one week after the hearing. This award is a brief statement, merely indicating which party should pay what amount to the other party, if anything. The award is delivered in person or sent to each party. The committee and the arbitrators are required to maintain confidentiality regarding all fee dispute cases, except as otherwise required by law. The arbitration process under this program is voluntary for both parties. The parties are required to sign an agreement to arbitrate, which includes an agreement that the decision by the arbitration panel will be binding on both parties. The ability to appeal or in any way have the arbitrators’ award reviewed is only through those few exceptions under the Arbitration Act, which include clerical error, fraud, or duress, rather than claims pertaining to the merits of the case.

In the event a party does not appear for the arbitration hearing, reasonable notice having been given, the hearing proceeds ex parte and the panel makes an award after taking the evidence and hearing the arguments on behalf of the attending party. The party who fails to attend the hearing may move for reconsideration of the award on the basis of his/her failure to appear, in which case the panel may reconsider its award only upon a showing of good cause on the part of the party who did not attend the arbitration hearing.

Conclusion. The efficient operation of our judicial system relies as much on the intangible trust placed upon it from the public at large as it does on the skill and knowledge of its clerks, officers, attorneys, and judges. This article does not seek to survey the best strategies for “winning” a fee dispute but proposes that by their very nature fee disputes are harmful to all parties involved. Rather the Authors seek to put forth the best method for the judicial system to accommodate the valid concerns of clients concerning the fiduciary duties owed to them by every practicing attorney, while also protecting the reputation of both the legal system and its practitioners from needless harm. It has been said that when both parties are disappointed the Judge has made a good decision. Arbitration accommodates the likely reality that neither party is completely right or wrong, and makes sure that the controversy is resolved as amicably as possible, with the hope that neither party will experience disappointment.

Lastly, it is wise to heed the advice of Abraham Lincoln: “Discourage litigation. Persuade your neighbor to compromise when you can. Point out to them that the nominal winner is really a loser in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will be business still.”  

Jay Reese is a 1975 J.D. Graduate of the University of Illinois College of Law and a 1971 graduate with Honors from the University of Illinois at Chicago Circle, After employment as an ALJ – Illinois Commerce Commission, Assistant Public Defender-Cook County, Illinois, Assistant Illinois Attorney General-Consumer Fraud and Protection Div. and Counselor to the Commissioners of the Illinois Industrial Commission he entered private practice as a general practitioner with two neighborhood “full service” law offices with a concentration in Bankruptcy and criminal defense for 34 years. 

Ammanual Luba is an Associate at the offices of Jay M. Reese in Addison Illinois. He was first licensed to practice law in July of 2012.

DCBA Brief