Title: A. Fred Miller v. Purvis
Citation: 921 P.2d 610
Docket Number: S-6679
State: Alaska
Issuer: Alaska Supreme Court
Date: July 26, 1996

921 P.2d 610 (1996) A. FRED MILLER, ATTORNEYS AT LAW, P.C., Appellant, v. Mary Jane PURVIS, Appellee. No. S-6679. Supreme Court of Alaska. July 26, 1996. *611 Kevin Morley, A. Fred Miller, P.C., Ketchikan, for Appellant. Ronald P. Hemby, Law Office of Ronald P. Hemby, Ketchikan, for Appellee. Before RABINOWITZ, MATTHEWS, COMPTON and EASTAUGH, JJ. MATTHEWS, Justice. A. Fred Miller, a professional corporation (Miller), represented Mary Jane Purvis in a divorce case and charged her $34,914.50 in fees, $1,017.61 for expenses, $4,596.97 in interest, and $1,624.97 in sales tax. Purvis invoked the mandatory fee arbitration provisions of Alaska Bar Rules 34-42. Prior to the hearing, Purvis had paid Miller $17,017.01 and Miller had reduced its fee by $6,200; Miller claimed that Purvis still owed $24,924.64. The arbitration panel concluded that "a reasonable fee payment would have been $8,500 and that [Miller] should be required to repay [Purvis] the amount of $8,500." Miller filed a petition in the superior court to vacate the panel's award. After briefing by the parties and the Alaska Bar Association, the superior court denied Miller's petition, and entered judgment on the award which, with interest, costs and attorney's fees, totaled $9,887.00. Miller appeals from this judgment, contending that the limits which Alaska Bar Rule 40(u) imposes on appeals from fee arbitration panels constitute a denial of due process. We affirm for the reasons stated below. Mandatory attorney fee arbitration has been a feature of the Alaska legal landscape since 1974. Supreme Court Order #176 (February 26, 1974). The rules were proposed by a committee of the Alaska Bar Association and approved by the members of the bar acting in convention and through the Board of Governors with a request that this court adopt them.[1] Under the fee arbitration *612 rules,[2] a client having a fee dispute with an attorney has a right to have the dispute resolved by arbitration. Alaska Bar Rule 34(b). An attorney does not have a reciprocal right. The arbitrators are standing members of "area fee dispute resolution divisions." Alaska Bar Rule 37(a). If the dispute is in excess of $2,000 it will be decided by an arbitration panel consisting of not less than two attorney members and one public member of the area division. Alaska Bar Rule 37(c). The members are subject to peremptory challenge, Rule 37(h), challenges for cause, Rule 37(g), and must be disinterested, Rule 37(f). The parties are entitled to be represented by counsel though they need not be so represented. Rule 40(f)(1). They have a right to present and examine witnesses and documentary evidence and to cross-examine opposing witnesses. Rule 40(f)(2), (3). Compulsory process to compel the attendance of witnesses and prehearing discovery is available. Rule 40(f)(8), (9). The parties may have the hearing recorded on tape. Rule 40(f)(11). Telephonic evidence may be presented, as may evidence in affidavit form. Rule 40(j), (k). The arbitration hearing need not be conducted according to technical rules of evidence; any relevant evidence will be admitted. Rule 40(n). The proceedings are confidential. Rule 40(r). The arbitration panel is to make its award in writing and the award is to be accompanied by findings on essential questions. Rule 40(q). Rule 40(u) provides that either party may appeal the decision of an arbitration panel to the superior court on the grounds specified in Alaska's Uniform Arbitration Act, AS 09.43.120-.180. Under this act a reviewing court has limited authority to vacate an award. Grounds for vacating an award are, so far as relevant to fee dispute arbitration, AS 09.43.120(a)(1)-(4). In addition, the reviewing court is authorized to modify or correct an arbitration panel's award on the following grounds: AS 09.43.130(a)(1)-(3). Summarized, Miller's argument is as follows. Fee arbitrations are mandatory for attorneys. Mandatory arbitration is constitutional only when there is judicial review on the merits, that is, awards should be reviewable for clearly erroneous findings of fact and arbitrary and capricious application of the law. Since fee arbitration is not reviewable on the merits it is unconstitutional. In response, Purvis does not take issue with Miller's premise that mandatory arbitration generally should be accompanied by a right to appellate review on the merits. Instead, Purvis contends that the court's power and duty to regulate the legal profession and the attorney/client relationship justifies an attenuated standard of review. *613 In support of the general proposition that mandatory arbitration is unconstitutional in the absence of judicial review for factual and legal errors, Miller relies primarily on Bayscene Resident Negotiators v. Bayscene Mobilehome Park, 15 Cal. App. 4th 119, 18 Cal. Rptr. 2d 626 (1993). In that case the California Court of Appeal struck down on due process grounds a city ordinance which required binding arbitration for mobilehome park rent disputes. The court stressed that the primary failing of the ordinance was that it failed to provide for judicial review of the evidence; instead, the issues on appeal were "essentially limited to fraud, corruption, or other misconduct of a party or the arbitrator." Id. 18 Cal. Rptr. 2d at 636. The court reviewed the law applicable to mandatory arbitration as follows: Id. 18 Cal. Rptr. 2d at 634-35 (alterations in original). In addition Miller relies on a dictum in State v. Public Safety Employees Ass'n, 798 P.2d 1281, 1287 (Alaska 1990), where we indicated in the context of compulsory "interest" arbitration that a heightened standard of judicial review might be constitutionally required:[3] Id. at 1287-88. In support of her contention that the court's power and duty to regulate the legal profession and the attorney/client relationship justify limited judicial review, Purvis relies primarily on cases from New Jersey and Maine, states which have mandatory attorney's *615 fee arbitration systems similar to Alaska. The leading New Jersey case is In re LiVolsi, 85 N.J. 576, 428 A.2d 1268 (1981). The New Jersey fee arbitration system challenged in LiVolsi provided for no right to appeal the decisions of arbitration committees. An aggrieved lawyer, joined by the New Jersey state bar association as amicus, unsuccessfully raised a variety of constitutional challenges to the fee arbitration system, including violation of federal and state due process because of the unappealability of arbitration committee determinations. Id. 428 A.2d at 1270. Although the court addressed each claim separately, it began with a statement of its authority to promulgate the rule which was applicable to all claims: LiVolsi, 428 A.2d at 1272-73. The court went on to note that under the due process clause of the Fourteenth Amendment to the United States Constitution states are not required to provide litigants with a right to appeal. Id. at 1276. Concerning the state due process argument, the court adverted to an interest arbitration case, Division 540 v. Mercer County Improvement Authority, 76 N.J. 245, 386 A.2d 1290 (1978), where the court had stated, "Because it is compulsory, principles of fairness, perhaps even due process, require that judicial review *616 be available to ensure that the award is not arbitrary or capricious and that the arbitrator has not abused the power and authority delegated to him." LiVolsi, 428 A.2d at 1279. The court held that this statement was not applicable to attorney fee arbitration: Id. The LiVolsi court went on to state the general policy justification for mandatory attorney fee arbitration: Id. 428 A.2d at 1279-80. Finally, the court specifically addressed the policy behind denying appeals on the merits: Id. at 1281-82. The Maine case relied on by Purvis is Anderson v. Elliott, 555 A.2d 1042(Me.), cert. denied, 493 U.S. 978, 110 S. Ct. 504, 107 L. Ed. 2d 507 (1989). The challenge in Anderson was that the fee arbitration system was unconstitutional under the Maine constitution as a "compulsory arbitration law that does not provide a right to review the arbitrator's award through a jury trial de novo." Id. at 1044. The Supreme Judicial Court of Maine upheld the rule based on the court's power to regulate the bar; it expressed the need for the rule as follows: Id. at 1049. We are in substantial agreement with the language quoted above from the New Jersey and Maine courts.[4],[5] "The crux of due *618 process is an opportunity to be heard and the right to adequately represent one's interests." Keyes v. Humana Hospital, 750 P.2d 343, 353 (Alaska 1988). The fee arbitration rules readily satisfy these minima.[6] Due process is a flexible concept and may require additional protections. In determining the reach of due process in a particular setting we have employed the approach expressed in Mathews v. Eldridge, 424 U.S. 319, 335, 96 S. Ct. 893, 903, 47 L. Ed. 2d 18 (1976): Smith v. State, Dep't of Corrections, 872 P.2d 1218, 1222 (Alaska 1994); Matter of K.L.J., 813 P.2d 276, 279 (Alaska 1991). Both the attorney and the former client have an interest in fair, expedient and inexpensive adjudication. Appellate review of an arbitration panel's decision in order to determine either clear error of fact or law would reduce the risk of an unjust decision by an arbitration panel. On the other hand the same considerations which underlie the limits on appealability under the arbitration act apply to those limits in the context of attorney fee arbitration. They are that review on the merits tends to cause delay, necessitates greater judicial involvement, is more apt to require the employment of counsel, and thus cause greater expense, and is more apt to result in the need for additional hearings and in this way too will contribute to added delay and expense. In addition to these generic considerations there are factors which are unique to attorney fee arbitration. These are the need for public confidence in the lawyer/client relationship, the difficulty which clients of limited income may have in procuring an attorney to represent them against another attorney, and the vulnerability of clients when litigating against their former lawyers. Also to be considered is the fact that Alaska has had mandatory fee arbitration since 1974. The system has apparently worked well. There have been some 400 cases disposed of by fee arbitration panels during the last decade and the process seems to be working as it was designed to work. In view of these factors and circumstances we are not convinced that, for purposes of the Mathews v. Eldridge approach, the benefits to be gained from appellate review on the merits necessarily outweigh the detriments which such review would entail. The burden is on the party who challenges a statute or rule on constitutional grounds to demonstrate unconstitutionality, for there is a presumption of constitutionality which attaches to such enactments. Bonjour v. Bonjour, 592 P.2d 1233, 1237 (Alaska 1979); McCracken v. State, 518 P.2d 85, 89 (Alaska 1974). That burden has not been discharged in this case. AFFIRMED. MOORE, C.J., not participating. RABINOWITZ, Justice, dissenting. I dissent from the court's holding that Miller has failed to demonstrate that Alaska Bar Rule 40(u) violates due process under Alaska's Constitution. More particularly, I *619 agree with Miller's argument that mandatory fee arbitrations are constitutional only when there is judicial review on the merits that is, that awards should be reviewable for clearly erroneous findings of fact and arbitrary and capricious applications of the law. As noted in State v. Public Safety Employees Ass'n, 798 P.2d 1281, 1287 (Alaska 1990): In the case at bar I would hold, as a matter of constitutional law, that the arbitrator's or panel's findings of fact are reviewable under a clearly erroneous standard. In my opinion none of the reasons advanced by the court for rejecting Miller's constitutional argument are persuasive. The mere fact that a fee arbitration system, which denies due process, has worked well some 400 cases having been disposed of during the last decade does not prove that the system is constitutionally sound. The pre-DeLisio[1] system of court appointed counsel for indigent criminal defendants worked well for many, many years. At present parties to mandatory attorney fee arbitrations can seek review of an arbitrator's or fee arbitration panel's award on seven separate grounds: AS 09.43.120(a)(1)-(4); AS 09.43.130(a)(1)-(3). Given the fact that seven discrete grounds are subject to review I am not persuaded that additionally according the parties to mandatory fee arbitration proceedings the right to appellate review of findings of fact will lead to significantly greater delays, expense, or judicial involvement, or will have the effect of eroding the public's confidence in lawyer-client relationships or in the judicial system. In my view fundamental fairness mandates that findings of fact filed by arbitrators or panels in mandatory fee arbitrations should be reviewable on the merits. Alaska Bar Rule 40(q) highlights the importance of the arbitrator's or panel's findings. This rule requires that the decision of the arbitrator or panel will include "the findings of the arbitrator or panel on all issues and questions submitted which are necessary to resolve the dispute." Alaska Bar R. 40(q)(3).[2] In conclusion I would hold that the attenuated standard of review provided for under Alaska Bar Rule 40(u) violates due process *620 under Alaska's Constitution.[3] [1] Resolution No. 3 of the Alaska Bar Association acting in convention on June 16, 1973, provides: WHEREAS, the Alaska Bar Association presently has no mechanism for determining fee disputes between attorneys and their clients; WHEREAS, the Alaska Bar Association has a responsibility to the public to provide a means for the arbitration of fee disputes without the time and expense of litigation in the court system; WHEREAS, attorneys desire to avoid litigation with clients over fees; and WHEREAS, a rule providing for mandatory arbitration of fee disputes would be of mutual benefit to both attorneys and clients for a prompt resolution of such differences. THEREFORE BE IT RESOLVED that the Alaska Bar Association hereby recommends that the presently proposed attorney fee review committee rules be approved by the Bar Association and forwarded to the Supreme Court with the recommendation that the Court adopt these rules. APPROVED by the Anchorage Bar Association on June 11, 1973. Done at Fairbanks, Alaska, this 16th day of June, 1973. [2] All citations are to the current Alaska Bar Rules. [3] Interest arbitration is a type of arbitration where the arbitrator establishes new contract terms rather than deciding how disputes arising under existing contracts should be resolved. [4] But see DeLisio v. Alaska Superior Court, 740 P.2d 437 (Alaska 1987) (state constitution's "takings clause" prohibits appointment of private attorney to represent indigent criminal defendant without reasonable compensation). [5] We have no occasion to question Miller's premise that generally appellate review on the merits from mandatory arbitration proceedings is required. See K &amp; L Distributors, Inc. v. Murkowski, 486 P.2d 351, 357-58 (Alaska 1971) (supreme court will review administrative adjudication "to ascertain whether the applicable rules of law and procedure were observed" and, as to fact determinations, "to find whether the administrative decision has passed beyond the lowest limit of the permitted zone of reasonableness to become capricious, arbitrary or confiscatory" even though a statute prohibits judicial review). [6] See supra, pp. 611-613. [1] DeLisio v. Alaska Superior Court, 740 P.2d 437 (Alaska 1987). In DeLisio this court rejected a long tradition of compulsory representation of indigent defendants without full compensation. [2] If necessary this court can devise inexpensive and streamlined procedures in order to expedite review of fee arbitration appeals that place in question the arbitrator's or panel's findings of fact. [3] To the extent necessary I would overrule Breeze v. Sims, 778 P.2d 215 (Alaska 1989).