MCLE Article: Law Firm Growth Mandatory Fee Arbitration: The Overlooked Solution to Legal Fee Disputes
By Patrick M. Maloney and Gregory M. Smith
Patrick M. Maloney is the founder of The Maloney Firm, APC, a boutique business litigation firm located in El Segundo, California. Gregory M. Smith joined The Maloney Firm three years ago, after stints with law firms in Santa Barbara and Downtown Los Angeles. Mr. Maloney and Mr. Smith are business litigators who regularly represent attorneys and clients in legal fee disputes and related matters involving legal malpractice and breaches of fiduciary duty. Both Mr. Maloney and Mr. Smith are fee arbitrators and Mr. Maloney has served on the California State Bar Committee for Mandatory Fee Arbitration. Mr. Maloney may be reached at firstname.lastname@example.org; Mr. Smith may be reached at email@example.com.
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The California Legislature enacted the Mandatory Fee Arbitration Act ("MFAA"), California Business Professions Code sections 6200-6206, to be an efficient means for resolution of disputes between lawyers and clients over legal fees.1 Arbitrations under the MFAA proceed under a different set of rules than traditional, contractual arbitration.2 Typically administered by local bar associations, MFAA arbitrations are simple, informal, and limited in scope. Because the Legislature recognized the imbalance in bargaining power that attorneys hold in resolving fee disputes with clients, arbitration under the MFAA endeavors to put clients on equal footing with their former attorneys.3 Traditional rules of evidence do not apply, and either party may opt out of the resulting award by seeking a trial de novo. For these and other reasons, MFAA arbitration "favors the client."4 Because an MFAA award initially is non-binding, many attorneys do not give MFAA arbitration the respect it deserves. But the MFAA can provide substantial benefits to lawyers who take the process seriously, including faster collection of unpaid fees, and the avoidance of pesky malpractice claims.