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Court Case Demonstrates Limits of Fee Arbitration

Wednesday, July, 20, 2011

Fee arbitration is generally employed when a lawyer's client seeks to dispute the amount he or she has been charged in legal fees.  The First District Court of Appeals has ruled that when fee arbitration is disputed and two lawyers represent one another against the same client, they are not entitled to collect fees for their work on the court appeal.   

Fee Arbitration Award Overturned

The northern California case involved two lawyers who represented one another when suing a former client who had used both of their services.  Legal precedent already prohibits the collection of fees when lawyers are representing themselves.

Client Michael Horejsi had refused to pay his bills to both lawyers.  He lost in fee arbitration and appealed the decision in court.  Horejsi lost there as well, but during his appeal the two lawyers represented one another and then asked for additional damages to compensate them for legal work on the appeal.  The court ruled against that and was upheld by the court of appeals, which regarded the lawyers' action as an attempt to evade the law against collecting fees for self-representation.

Arbitration panels also frequently decide disputes between investors and stock brokerages.  Investment arbitration, such as fee arbitration, can only be appealed to a court of law in extraordinary circumstances.