Not everyone pays their lawyer. Collection of legal fees can differ from other types of commercial debt collection. Before pursuing collection, the law firm must be clear about the service rendered. Were the legal services rendered in an individual capacity and therefore be considered a consumer claim protected by the Fair Debt Collection Practices Act (FDCPA)? Or, were the services rendered in a commercial context and can be treated as a commercial debt collection claim?
Regardless, the Appellate Division in New York State requires a lawyer to offer the non-paying client an “Offer to Arbitrate” the fee dispute when certain criteria are met. These include:
- The date the debt was incurred,
- The amount of the debt,
- The type of legal service rendered.
If the law firm is required to Offer to Arbitrate, they must send the offer to the non-paying client, the non-paying client may:
- Elect to arbitrate,
- Not respond, Or
- Respond advising that they do not elect to arbitrate.
If the client elects arbitration, the parties proceed to arbitration. Any decision would need to be confirmed by special proceeding.
In cases where there is no response and/or arbitration is not elected, the practitioner law firm may proceed as set forth in the fee dispute provision of the retainer letter.
If the client did not sign or ratify an engagement letter or other document which set forth the way fee disputes were to be handled, the creditor law firm may proceed with litigation. The action would be brought to recover a sum certain for breach of contract and perhaps plead alternate causes of action (quasi contract, unjust enrichment and account stated).
For more information and/or specific requirements for mandatory arbitration, click here.
