Mandatory Fee Arbitration: Two New Committee On Mandatory Fee Arbitration Advisories

     The Committee on Mandatory Fee Arbitration of the State Bar of California has two new Advisories on Mandatory Fee Arbitration (MFA) brought under the Business & Professions Code.  Advisory 2016-01, replacing Advisory 2011-02, is about the application of the Statute of Limitations for MFAs.  Advisory No. 2016-02, replacing Advisory 2003-01, is an analysis of bill padding and other billing issues.  The Advisories are dated March 25, 2016.

1.  Opinions Change:  Statute of Limitations for Fee Arbitrations.

     In a previous Advisory, the Committee “opined that the one-year statute of limitations in CCP Section 340.6 for wrongful acts or omissions by an attorney, other than for actual fraud, did not apply to fee arbitration under Bus. & Prof. Code Section 6200.”  That conclusion was based on the special nature of MFA, which focuses on legal fees.  The MFA arbitrators cannot award damages for legal malpractice or professional misconduct in MFA. 

     The new Advisory reaches a different conclusion:  MFA cannot be commenced if a civil action requesting the same relief would be barred by an applicable statute of limitations set forth in the Code of Civil Procedure, and that includes Section 340.6, and recent case law, applying the one-year statute to disputes involving the propriety of the attorney’s legal services.  Therefore, the Committee concludes that if the dispute over fees involves the propriety of the attorney’s legal services, the statute of limitations does apply.  But there are many exceptions under Section 340.6, and Section 340.6 will not apply to claims where an attorney converted a client’s funds or defrauded the client.  My advice about the Advisory:  read it.

2.  Over-Billing.

     The new Advisory focuses on over-billing; other Advisories have more generally focuses on determining the reasonableness of attorney’s fees.  I refer advisedly to “over-billing” rather than “bill padding”, because over-billing can result from billing procedures that involve no intentional effort to pad bills. 

      The Advisory, which does provide an analysis of potential bill padding and other issues, proposes that arbitrators do at least the following four things:

• Evaluate the process by which the fee bill was prepared and the specificity of the time entries;
• Evaluate the staffing used on the matter;
• Evaluate the work performed against the time billed, and
• Look for certain patterns in the descriptions of the work performed, including time entries.

     This Advisory provides many useful tips for investigating whether a bill is inflated, and is useful reading not just for persons involved in MFA, but for anyone who wants to probe deeper into the propriety of a legal bill.