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California's Mandatory Fee Arbitration Act

Monday, October, 17, 2011

Mandatory Fee Arbitration developed in California as a response to the perceived unfairness of existing remedies in cases where the attorney-client relationship had irretrievably broken down because of disputes regarding the nature and amount of legal bills.  When used in this context, fee arbitration refers to a type of legal arbitration, not to arbitration concerning credit card charges or other types of fees. 


The perceived unfairness rested in the fact that prior to the use of arbitration to resolve such disputes; a plaintiff's remedy was to hire a lawyer to sue the previous lawyer in relation to his fees.  This process, of course, generated a second attorney-client relationship complete with fees attached.  It could cost more to sue than the amount the client had been overcharged in the first place, and there was nothing to stop the second lawyer from assessing fees that the client felt were also unfair.


The Mandatory Fee Arbitration Act


To resolve the problem, California enacted the Mandatory Fee Arbitration Act as part of a revision to the California Business and Professional Code.  The purpose of the act was to provide individuals and businesses with an affordable way to resolve a dispute over legal fees.  Cases are heard before a panel of arbitration attorneys following procedures set up by the State Bar.