Comments on Proposed Amendment of 22 Nycrr Part 137 to Exclude Fee Disputes Involving Disbarred, Suspended and Resigned Attorneys and Attorneys Under Investigation

May 11, 2012


Mr. James W. McConnell


State of New York

Unified Court System

25 Beaver St

New York, NY 10004


Re: Comments on Proposed Amendment of 22 NYCRR Part 137 to Exclude Fee Disputes Involving Disbarred, Suspended and Resigned Attorneys and Attorneys under Investigation


Dear Mr. McConnell:


Part 137 jurisdiction currently does not extend to claims “involving substantial legal questions, including professional malpractice or misconduct.” Sec. 137.1 (b)(3). The proposed amendment would also take disputes out of the Fee Dispute Resolution Program “where the attorney has been disbarred or suspended from the practice of law or has resigned from the practice of law while under investigation for professional misconduct” (proposed Sec 137.1 (b)(9)) and “where the attorney is the subject of an investigation or prosecution for professional misconduct.” (Id., (b)(l0).) Thus, under the proposed new exclusions, it would not matter whether the fee dispute arose out of the circumstances that put the attorney’s practice of law in jeopardy. Instead, the benefits of fee dispute arbitration would be denied altogether to two classes of claimants– attorneys and, more importantly, the clients of attorneys who have been disciplined or are facing potential discipline.


We strongly disagree with the proposed amendments to the extent they would prevent these clients from arbitrating their fee disputes. Denying such clients the benefits of the Fee Dispute Resolution Program is inconsistent with the policy considerations underlying Part 137 and N.Y. Jud. Law § 90(10). A central purpose of the Part 137 Program is to provide an “informal and expeditious resolution of fee disputes through arbitration and mediation.” Year after year under the Program, we have seen that it is primarily clients, not attorneys, who choose to resolve their disputes in the arbitration-mediation program. In 2010, for example, approximately 95% of all fee disputes handled in our program (covering New York and Bronx Counties) were begun by clients. Many clients take advantage of fee arbitration specifically because it is an inexpensive alternative to litigation, especially for clients with limited financial resources. We see no important reason why clients should lose their opportunity to use a convenient, less expensive, speedier forum because of their attorney’s misconduct, or suspected misconduct, in some other matter or for some other client. That result would merely compound the adverse impact of attorney misconduct and transfer it to other clients.


We have additional concerns regarding proposed (b)(l0), involving attorneys under investigation or prosecution. First, Program Administrators would have no easy way of knowing whether an attorney is the subject of such an investigation or prosecution unless the attorney chooses to reveal that fact. Compounding the difficulty, under current standards, information regarding a pending ethics investigation or prosecution is held in strictest confidentiality by the State’s disciplinary committees and is not subject to public disclosure. It is doubtful whether such information could be shared with Part 137 Program Administrators, and it seems inconceivable that such Administrators could disclose it to clients not involved in the investigation or prosecution. This would leave Administrators with the equally unpalatable option of denying jurisdiction for a reason that could not be named. In short, proposed (b)(10) could not be implemented without voluntary self-reporting by the attorney, followed by either the disclosure of confidential information to that attorney’s clients or a denial of jurisdiction without explanation.


Furthermore, the Memorandum from Counsel for the Chief Administrative Judge soliciting comments states that the proposed amendment “would establish that, in cases where an attorney is concurrently involved in a disciplinary investigation and a request for fee arbitration, the fee dispute should be held in abeyance until the disciplinary matter is concluded.” This point underscores our great concern regarding the adverse impact that the proposed amendment would have on the ability of clients to obtain a remedy. Unless the disciplinary investigation and the fee dispute arise out of the same legal work—in which case Part 137 would not apply under current rules—the client would likely be denied a remedy, even in court for an indefinite and potentially lengthy time. Often, the disciplinary process takes years to resolve. In many instances this delay would work a hardship on the client, certainly so in instances where a refund or peace of mind about an open legal bill is sought.


Counsel’s Memorandum indicates that a benefit of the proposed change would be a bright line to determine jurisdiction in situations where an attorney has been disbarred, suspended, caused to resign or is under investigation, and might also help avoid assertion of jurisdiction over claims excluded under (b)(3), involving “substantial legal questions, including professional malpractice or misconduct.” Our Committee Chair, our Administrators, and our Arbitrators already have considerable experience resolving the issue of whether jurisdiction over a particular dispute must be withdrawn by reason of the (b)(3) exclusion. While a bright line would be useful in resolving the (b)(3) issue, admittedly often an elusive one, the proposed amendments do not appear to address that issue except in the rare case where the engagement involved in the claim is also the engagement that led to the disciplinary sanction. Moreover, we have every confidence that our Arbitrators can determine on a case-by-case basis whether the disciplinary proceeding and the fee dispute involve related matters, and can handle disputes in which the disciplinary proceeding arises out of work on unrelated matters.


Because so few claims are initiated by attorneys under our program, we have no substantive comment on whether claims made by attorneys that fit within the proposed amendment should be denied the benefits of initiating Part 137 arbitrations. In that regard, any inconsistency or tension between Part 137 and the treatment of attorney compensation issues encompassed by Appellate Division Rules such as Sec.603.13 [b]— which to our understanding typically involve allocating fees between disqualified and new counsel— could be resolved by stripping disciplined attorneys of the right to initiate Part 137 proceedings.


Thank you for your consideration of these comments. We would welcome the opportunity to discuss them in person should that seem useful.




Stewart D. Aaron
James E. Daniels

Chair, Joint Fee Dispute Advisory Committee