Legal Malpractice & Fee Dispute Arbitration

Macro GavelWhen clients are faced with a demand for attorney’s fees, they might choose to arbitrate the fee dispute aspect of the case.  In many cases, clients think that it is in their best interests to argue against the fee in arbitration.  When a client is especially unhappy with an outcome with regard to fees, and believes that malpractice has occurred, they often turn to fee arbitration with the hopes that it will help reduce or eliminate the fee.  This is a bad idea, but many clients are not aware of the reasons why this is such a poor decision.

When an arbitrator allows any dollar fee to remain in place, this explicitly removes any credence to the argument that legal malpractice has occurred.  As a result, no future legal malpractice case can be brought on the matter.  Collateral estoppel, also known as “issue preclusion”, keeps a party from coming back to re-litigate an issue that was previously decided.  In situations where that client had a fair opportunity to litigate the issue, it cannot come back up again.

The party who wants to invoke collateral estoppel has to demonstrate that the issue was decided in the earlier action and the party who opposes the use of collateral estoppel has to show that there was not a fair and full opportunity to contest the previous determination.

In a successful case, defendants will need to meet the burden of showing that the issue of malpractice was decided in the previous case during the arbitration of the fee dispute.  This burden of proof should show that fees will be contested on the same grounds of malpractice allegations that were brought up in the prior case.  When an arbitrator decides to allow any fee, even a fee of $1, this makes a legal determination that malpractice did not occur.

Many clients going into fee arbitration with the hopes of reducing their fee fail to see the implications of the action.  While they assume that heading into fee arbitration is one way to cut down on their responsibility for legal fees, they often miss the point that the arbitrator, in allowing any fee, is also taking away their opportunity to pursue this issue in the future.  In essence, an arbitrator who allows even a portion of the legal fee is blocking the claim on legal malpractice in the present and the future.

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