Mandatory Fee Arbitration Update

By Anahid Agemian
June 2019

With the elimination of the California State Bar Committee on Mandatory Fee Arbitration, which periodically issued Arbitration Advisories to assist fee dispute arbitrators with the law as it applied to the Mandatory Fee Arbitration Act (found in California Business & Professions Code §§ 6200 etc.,) it is unknown whether any further advisories will be drafted and published in the future.  As such, The Attorney Client Mediation and Arbitration Services, “ACMAS,” of the Los Angeles County Bar Association, “LACBA,” will be addressing issues of interest to our panel arbitrators through periodic articles which might be useful.  (As we move forward, if there are topics which you would like covered, please contact ACMAS staff.)

During past ACMAS fee arbitrator trainings we have told participants that the one-year statute of limitations on attorney malpractice does not apply to attorney-client fee disputes.  (California Code of Civil Procedure §340.6.)  In fact, Arbitration Advisory 2001-02 (superseded) specifically identified the various statutes which did apply.  After the ruling in Lee v. Hanley (2015) 61 Cal.4th 1225, it is no longer so clear.  (For a more in-depth analysis Arbitration Advisory 2016-0.1, State Bar website, is a great resource.)

In a nutshell, the case held that if a client seeks fee dispute arbitration after one-year from the cessation of the attorney’s services, and no statutory exception applies, the client is barred from asserting claims which “necessarily depend on proof that the attorney violated a professional obligation.”  Such claims include a refund of fees or a determination that any fees being sought by the attorney need not be paid by the client.

 While it is possible that a statute of limitations bar may be discovered by ACMAS staff prior to assignment of a fee dispute to an arbitrator, it is possible that if there is such an issue at the hearing you as the arbitrator will be called upon to resolve the issue. The reason is that the determination as to whether a statute of limitations defense is viable will likely require evidence of something more than the passage of time.  Should you as an arbitrator find that there was tolling or fraud involved, which resulted in the client’s “tardy” exercise of mandatory fee arbitration, the one-year statute of limitations will not apply. 

Extensive evidence may not be required, though, when the statute of limitations bar, even if it is offered as a defense by an attorney in a fee dispute depends on the circumstances existing at the time the claims are asserted.  Those instances are found in situations where the attorney has filed, or has notified the client that a lawsuit will be filed, against the client for fees. In that case, a client’s right to seek fee dispute arbitration and avoid fees or even have fees and/or costs paid to the attorney returned, is revived.  Denial of the statute of limitations defense is then warranted and you may proceed with the hearing in the same way as if no such defense was raised.

Contact ACMAS: (213) 896-654, lacba.org/ACMAS.