Judicial Reports: Fee Fight Flim Flam

Fee Fight Flim Flam
Judicial Reports by Dirk Olin - September 24, 2008
dirkolin@judicialstudies.com

You would think the Attorney-Client Fee Dispute Resolution Program would bend over backward to protect the client. According to at least one judge, you would be wrong. Imagine that you bought a car, and the dealer signed a warranty promising your money back if a serious defect was found. A few weeks later, your transmission locks up. You ask the dealer for your money back. But he refuses to honor the document, because he says he had given you an improperly printed warranty. How could that be your fault? You’d go to the Better Business Bureau, right? Well, check out this revisionist doozy by a local attorney against his client.

THE DOOZY IN QUESTION

Paul H. Altman, a father involved in a dispute with his former girlfriend over visitation rights to their son, had a falling out with his lawyer, Richard L. Gold of Morelli & Gold, LLP. They disagreed about legal fees. The retainer agreement prepared by Gold in anticipation of such a possibility declared that Altman had "an absolute right to have those disputed fees resolved through arbitration which will be binding upon both our firm and yourself." They went to arbitration. The arbitrators ruled in Altman's favor, ordering the lawyer to waive some $20,000 at issue and further requiring him to refund an additional $5,000. But then the lawyer sought a whole new trial of the fee dispute. He said he had not waived his right to a trial, because the retainer agreement that he had drafted had not incorporated a pre-printed form that he claimed the New York State Court System required.

Rough translation: "That 'binding' arbitration I promised you was actually 'non-binding.' I get a do-over." On its face, this sounds manifestly unfair and a threat to legal consumers everywhere. On the other hand, readers of Dickens or Kafka know full well that black-letter law can be an unforgiving master. So perhaps it should not have shocked the conscience in July when Manhattan Supreme Court Justice Carol Robinson Edmead ruled that the lawyer was right in the decision, Morelli & Gold, LLP v Altman. Edmead found that the attorney was not bound by the “binding” arbitration, because the retainer agreement did not contain "the express waiver language required by [Part] 137.2(c)." That was a reference to the rules governing New York’s Attorney-Client Fee Dispute Resolution Program. Justice Edmead concluded that Gold's entirely new lawsuit could proceed. (Altman, who lives in Florida, would now have to buy more plane tickets and spend more money to rebuild his case to present in a New York courtroom.) The key part of Edmead's ruling turned on her interpretation of one sentence in the statute that addresses consent in advance for the arbitration to be binding (with no further new trial permited): “Such consent shall be in writing in a form prescribed by the Board of Governors.” What does “in a form” mean? Pointing to the law Altman argued that “in a form” meant “in a manner,” as opposed to a pre-composed document. But, ignoring that contention in her decision, Edmead agreed with Gold that the phrase referred to a specific piece of paper, or at least the "express waiver wording" contained in that specific piece of paper, kept on file by the court system. There’s your Dickens moment — Altman done in by a technicality.

ON BEYOND DICKENS

But wait. The fee dispute program is overseen by a board of governors that is the official authority on guidelines interpreting the statute. Those guidelines explain that this special language is only required to be in place to ensure that the waiver is “valid on the part of the client.” In other words, the provision was made to protect a client — as opposed to a lawyer — from unwittingly surrendering a right. By that logic, since the special language wasn’t used, the client should be the only one who has the right to decide if he or she wants a new trial. The attorney should have to live with the wording of his own retainer. Bemused by all of this, we called the chairman of the fee dispute oversight board, Guy Mangano, a former Presiding Justice in the New York Court System. Did he think that a client was required to use a specific, pre-printed form to prevent a lawyer from slipping out of an arbitration? Mangano hemmed and hawed, but did not give a definitive answer. He declined to comment on the Altman case, per se, which is understandable since it’s on appeal. But he acknowledged his awareness of Altman’s argument about what the statute meant. “We’re looking into this,” he said. “It’s been referred to the legal issues committee. If it’s something that needs to be corrected, it will be corrected. If it’s not, it won’t.” But if the chairman of the oversight board can’t say for sure what the statute means, how is a client supposed to know that he can’t trust the plain wording of the retainer agreement presented to him by an attorney? Granting clients the right to take fee disputes to mandatory arbitration was one of a series of reforms recommended in 1995 by a commission appointed by Chief Judge Judith S. Kaye. Its purpose: to restore "public confidence in the entire legal system" — which, she said, had become "seriously eroded." If lawyers can rely on their own errors to force clients to draft their own consumer protections, that erosion of public confidence will turn into a mudslide.