Court Opinion

ID: 888343
Source: CourtListenerOpinion
Date Created: 2013-06-05 05:00:23.821161+00
Date Added: 2024-06-11T15:12:24.662157
License: Public Domain

August 19 2008
offices.
       IT IS FURTHER ORDERED that Petitioners shall have 30 days following the close of
the public comment period in which to respond to any comments received. Copies of this
Order will be sent to the State Bar of Montana, John C. Shulte, President and the Fee
Arbitration Committee, Jim Lewis, Chair.
       DATED this \qkday     of August, 2008.

                                           1"             Justices
July 10 2008
describes the history of the Rules on Arbitration of Fee Disputes. The fourth

section is a summary of the major changes sought by this Petition.

n.     PROCEDURAL HISTORY LEADING TO REQUEST FOR
       RULE CHANGES

       The current Rules on Arbitration of Fee Disputes were last amended

by this Court in July 1998. Since that time the Fee Arbitration Committee of

the State Bar of Montana has met to monitor the effectiveness of the Fee

Arbitration process, propose new rules and revise existing rules. The

proposed changes were recommended by the Fee Arbitration Committee in

response to issues arising from the decade's arbitration proceedings, as well

as changes needed for consistency in language and grammar.

       The attached revisions were presented by the Fee Arbitration

Committee to the State Bar Board of Trustees at their regular meeting on

April 4,2008. The State Bar Board of Trustees approved the revisions. The

next step in the process is this petition to the Court for amendment approval.

111.   COURT'S AUTEIORITY TO AlMEND RULES

       The Court has the exclusive authority to establish rules governing the

arbitration of fee disputes. Article VII, Section 2(3) of the 1972 Montana

Constitution gave the Supreme Court the authority to make rules governing

the conduct of the members of the State Bar.

PETITION AND MEMORANDUM IN SUPPORT OF THE REVISION OF THE                       2
RULES ON FEE ARBITRATION
      The Supreme Court and the State Bar of Montana have enjoyed a

history of cooperation and innovation in the development and

implementation of rules and programs that carry out the purposes of the

organization. Those purposes are described in the Court's Order unifying

the Bar:

      The purposes of the Unified Bar of Montana shall be to aid the courts
      in maintaining and improving the administration of justice; to foster
      and maintain on the part of those engaged in the practice of law high
      standards of integrity, learning, competence, public service, and
      conduct; to safeguard proper professional interests of members of the
      bar; to encourage the formation, maintenance and activities of local
      bar associations; to provide a forum for the discussion of and effective
      action concerning subjects pertaining to the practice of law, the
      science and jurisprudence and law reform and relations of the bar to
      the public; and to ensure that the responsibilities of the legal
      profession to the public are more effectively discharged.

      In In re Petition of the State Bar of Montana for a Dues Increase, 7 20,

53 P.3d at 857 the Court stated "the State Bar of Montana must continue to

address the Court's and the legal profession's responsibilities to the public

through such programs as Lawyers Helping Lawyers, Lawyers Fund for

Client Protection; and arbitration of fee disputes."

IV. HISTORY OF THE RULES ON ARBITRATION OF FEE
      DISPUTES

      The Fee Arbitration Committee is a Standing Committee of the State

Bar of Montana. The committee is comprised of attorney, judicial and lay

members from across the state. The objectives of the committee are to:
PETITION AND MEMORANDUM IN SUPPORT OF THE REVISION OF THE                       3
RULES ON FEE ARBITRATION
      1. Review rules and recommend changes.
      2. Encourage Bar support through participation in the program and as
         panel members.
      3. Monitor program for continued improvement.

      After the July 1998 amendments were adopted, the committee met to

receive feedback on arbitrations conducted regarding fee disputes between

clients and attorneys, and to propose changes to the rules as a result of that

feedback. The committee met on the following dates: April 2,2001;

October 19,200 1; January 28,2002; November 2 1,2003; March 12,2004;

October 2,2007 and January 2008. Proposed changes were submitted to the

State Bar Board of Trustees on April 4,2008 and were approved.

V.    SUMMARY OF REQUESTED RULE CHANGES

Set forth below is a summary of the major changes sought by this

Petition.

      Rule I - Purpose.

      The committee unanimously agreed that this program should not be

used to settle attorneylattorney fee disputes, but that arbitration is meant to

settle disputes between clients and attorneys. Language was added to Rule

1.1 to clarifL this distinction.

      The committee recommended adding language to Rule 1.3(c) to

preclude petitions being filed for fee disputes on matters that are currently in

process with courts or administrative panels. There have been instances
PETITION AND MEMORANDUM IN SUPPORT OF THE REVISION OF THE                         4
RULES ON FEE ARBITRATION
when a petition for fee arbitration was filed while the matter was in

litigation, and where the fee issue was within a court's jurisdiction. The

addition of Rule 1.3(c) prevents these petitions from being filed, deferring to

the court's jurisdiction.

       The committee proposed new Rule 1.5 which prevents an attorney

from filing a lawsuit over fees after a client has initiated resolution through

the fee arbitration process. There have been instances when an attorney filed

a formal lawsuit after the client sought resolution through arbitration. The

addition of Rule 1.5 ensures that clients may seek resolution of fee disputes

by the less formal arbitration process before being subject to a full court

proceeding.

      Rule II - Administrative Matters - Setting Up Panels.
            I
      Changes to Rule 3.1 are proposed which allow either party to

participate in a fee arbitration hearing by telephone conference call (at their

own expense) if the physical location of the hearing is one hundred (100) or

more miles away. Current rules provide for telephone conference calls only

if both parties agree to the telephone conference. Additional changes to

Rule 3.1 deal with appointments of fee arbitration panelists by the State Bar,

keeping in mind the goal of seating panelists of attorneys and lay persons

from throughout the state of Montana.

PETITION AND MEMORANDUM I SUPPORT OF THE REVISION OF THE
                         N                                                        5
RULES ON FEE ARBITRATION
      Rule V - Initiation of Proceedings.

      The committee recommended the addition of Rule 5.7 which outlines

procedures for obtaining a binding arbitration decision. Both parties must

agree to binding arbitration for it to take place. If binding arbitration is not

selected, each party will have thirty (30) days from the date the decision is

mailed to file suit before the decision will bind each party. The committee

notes that there are many questions from participants on this point, and new

Rule 5.7 should clarifj the procedures on how to obtain binding arbitration.

      Rule VI - Selection of Arbitrators.

      Rules 6.2 and 6.3 have been revised to clari@ how each party may

strike an arbitrator fi-om the list provided by the State Bar. Currently under

Rule 6.2, the State Bar mails each party a numbered list of names, addresses

and occupations of seven (7) members of the panel who are eligible to

arbitrate the dispute. The members on the panel are assigned consecutive

numbers, alternating between attorney and lay members. The list also

contains two ( 2 ) choices, "Hearing Requested" or "Hearing Waived".

      Proposed Rule 6.2 deletes descriptions of how the list is formed. It

still provides for a numbered list of eligible arbitrators to be mailed to each

party from the State Bar, and retains the two ( 2 ) choices of "Hearing

Requested" and "Hearing Waived".

PETITION AND MEMORANDUM I SUPPORT OF THE REVISION OF THE
                         N                                                         6
RULES ON FEE ARBITRATION
        Current Rule 6.3 mandated that within 10 (ten) days of receipt of the

list each party eliminate one attorney and one layperson, and return the

document to the State Bar. The final panel would then be selected from the

non-eliminated members on the list, and be composed of the three (3)

remaining panelists with the lowest assigned numbers, guaranteeing one

attorney and one lay member on the panel.

        Proposed Rule 6.3 would allow the parties to eliminate a list member,

but does not mandate the elimination of any names. It also outlines

procedures for eliminating more than two (2) persons from the list.

        Proposed changes to Rule 6.6 detail how alternate arbitrators will be

selected in the event a panelist is struck from the list.

        Rule 6.7 is deleted for redundancy.

        Rule VII - Arbitration Hearing.

        Proposed changes within Rule 7 clarifL procedural issues regularly

confronted by the arbiters. Proposed Rule 7.2 identifies venue, allows

participation by phone and extends the notice of hearing date to be issued

twenty (20) days before the date of hearing, rather than the current ten (1 0)

days.

        Proposed new Rule 7.3 requires the parties to distribute documents

and witness lists no less than ten (10) days before the date of hearing. It also

PETITION AND MEMORANDUM IN SUPPORT OF THE REVISION OF THE                        7
RULES ON FEE ARBITRATION
provides that documents not timely submitted shall be excluded absent a

showing of good cause as determined by the Chair.

      Rule VIII - Arbitration Decision.

      Existing Rule 8.1 addresses the timeframes in which decisions will be

rendered, how outcomes will be relayed to the parties and procedures to be

followed in the event the arbitration panel is unable to reach a decision.

      Proposed Rule 8.1 incorporates the entire text of Montana Rule of

Professional Conduct 1.5 on fees, providing the relevant factors to the

arbitrator's determination.

      Rule IX - Confidentially and Immunity.

      The committee recommends that Rule 9.1 be revised to permit

coordination of efforts with Montana Supreme Court's Office of

Disciplinary Counsel, to prevent unnecessary duplication of efforts. The

Rule remains unchanged in asserting that arbitrations are confidential and

closed to the public unless ordered otherwise by a Court or another authority

with the appropriate jurisdiction.

V . CONCLUSION
 I
      The petitioners believe that amendments to the rules are

necessary to make the rules clearer and more useful to both clients and

attorneys. The Board of Trustees of the State Bar of Montana and the Fee

PETITION AND MEMORANDUM IN SUPPORT OF THE REVISION OF THE                    8
RULES ON FEE ARBITRATION
Arbitration Committee request the Court adopt the proposed changes to the

Rules on Arbitration of Fee Disputes.

      Petitioners request that the Court provide a period of comment before

taking action on this petition. We request that the Court direct publication of

this petition and the proposed rule changes in The Montana Lawyer and on

the State Bar's website and solicit comments and a response from the Bar

nle1120eush;p anb pubiic b e i u ~ tiu~~sidciing rcyucsr fur anicl~cirrlen~.
                                    .         the

Petitioners request that they be given the opportunity to respond to the

comments from the public and the bar. After the comment period has

passed, the Petitioners request that the Court adopt the proposed changes to

the Rules on Arbitration of Fee Disputes.

      Respectfully submitted this    3        day of June, 2008.

STATE BAR OF MONTANA                     FEE ARBITRATION COMMITTEE

                                                                        (--

                                              Jim Lewis, Chair

PETITION AND MEMORANDUM IN SUPPORT OF THE REVISION OF THE                      9
RULES ON FEE ARBITRATION
EXHIBIT "A"
                               STATE BAR OF MONTANA

                     RULES ON ARBlTRATlON OF FEE DlSPUTES

                  PROPOSED REVISIONS - 2004-2008 (Draft-1/25/08)
                     Approved by Board of Trustees -April 4,2008

I.    PURPOSE

      1.1 It is the policy of the Supreme Court of Montana to encourage the informal
resolution of fee disputes between attomeys who practice law in Montana and their
clients. In the event such informal resolution cannot be achieved, the Supreme Court of
Montana hereby establishes through adoption of these rules, a program and procedures
for the arbitration of disputes concerning any and all fees and/or costs paid, charged, or
claimed for professional services by attorneys. These rules do not apply to disputes
between attomeys with respect to sharing of fees.

Comment: The subcommittee unanimously agreed that this program should not be used
t o settle attorneylattorney fee disputes, as in fee-splitting cases.

     1.2 In lieu of these remedies for arbitration of fee disputes, the parties may wish
to pursue binding arbitration under the provisions of the Uniform Arbitration Act,
Sections 27-5-111 through 27-5-324, MCA. To do so, the parties must enter into a
binding arbitration agreement as required under applicable state or federal law.

      1.3 The following disputes are exempt from the operation of these rules:

            (a) disputes which are subject to a valid arbitration agreement under
      applicable state or federal law; and

          (b) disputes which are the subject of litigation filed prior to actual receipt of
     the Petition by the State Bar of Montana. An attorney's lien shall not exempt the
     -r
      .                                               II   '   '   I,

          [c) disputes recarding fees pending or determined by a court or
administrative panel, including but not limited to bankruptcy, worker's compensation
and probate cases.

Comment: W e have processed Petitions only t o learn from the attorney the matter i s i n
bankruptcy, a worker's compensation or probate case, wherein the fees will be or have
already been reviewed and approved by a court. A court of law has jurisdiction over
these cases. The goal of adding (c) is t o preclude those cases from being filed i n the first
place.

     1.4 Nothing in these rules is intended to interfere with or supersede the powers
and authority of the Commission on Practice or applicable statutes of limitation.
      1.5 Once a Petition for Arbitration is filed with the State Bar, a lawsuit cannot be
prosecuted by any party, until this - process has been completed bv the issuance of a
written decision, dismissal or withdrawal.

 Comment: The intent of the 1998 revision was t o preclude an attorneyfiom being able
 t o file a lawsuit after a client filed a Petition. While that was the intent, no where in
the rules was that clearly stated.. Consequently, we have attorneys who "ignore" the
filing of the Petition for Arbitration by filing suit for collection of the fees. In some of
those cases, both processes have proceeded simu2taneously. In one instance the Court
dismissed the court action citing these Rules. Adding 1.5 allows the petitioner t o go
through this process first, with the goal of less formal resolution, without having t o go
t o court.

11.   DEFINITIONS

     "&my&' "Attomey" means a person admitted to the practice of law in Montana,
or any other person who appears, participates or otherwise engages in the practice of
law in Montana, regardless of the status of his or her license. In these rules, the term
"Attomey" includes an attorney's assignee.

Comment: These proposed rules consistently replace "lawyer" with "attorney".

     "Board" means the three (3) persons chosen from a judicial district panel or
statewide panel to act as arbitrators in a particular dispute and will consist of at least
one attomey and one lay member.

      "Client" means a person or entity who directly or through an authorized
representative consults, retains or secures legal service or advice from an attomey in the
attorney's professional capacity

     "Panel" means & w e h + X + - w t h e entire list of attomeys and lay
persons who make up the fee arbitration "panel" for each judicial district.

      "Statewide Panel" means all attorneys and lay persons currently serving on each
judicial district panel who have actually acted as an arbitrator under these rules or the
preceding "Rules on Voluntary Arbitration of Fee Disputes".

111. ADMINISTRATIVE MATTERS - SETTING UP PANELS

      3.1 The State Bar shall administer this program through its Executive Director.
The State Bar will appoint                                                         members
to the arbitration panel in each various judicial districts composed
of attomeys and lay persons who reside in the district. The State Bar may seek the
advice and recommendation of the local bar president in making the appointments. The
initial term of appointment shall be three (3) years and such appointment may be
renewed for a successive term or terms. I cases where there are an insufficient number
                                            n
of attorneys and/or lav persons for a panel, the matter will be reviewed by a panel in a
judicial district chosen bv the State Bar, based on availabilitv of panelists. In such cases,
either party may participate by telephone conference call at their own expense if
requested if the location of the hearing requires them to travel 100 miles or more.
     A

Comment: W e have some districts where no panel exists. W e have been referring those
cases t o the closest district w e have available, but in some cases this means a party
may have t o travel a great distance for the hearing. W e don't have the resources t o pay
the arbitrators t o travel and since they are already donating their time, w e don't feel
w e should require them t o travel as well. Current rules only allow telephone
participation if BOTH parties agree.

      3.2 The term of any panel member which ends for any reason while an
arbitration is pending before an arbitration board of which he or she is a member shall
be extended until such arbitration is concluded, but such extension shall not interfere
with the State Bar's power to appoint a successor to the judicial district panel.

     3.3 The panel members in each judicial district shall be appointed from as broad
a spectrum of the practicing Bar and general public as possible.

      3.4 Each person appointed to a panel as provided in 3.1 shall also be a member
of the statewide fee arbitration panel once that person has actually served as an
arbitrator on a local board. Such statewide appointment shall be for the duration of
their term on the local panel. Members of the statewide panel may be called upon in the
event panelists are not available in a certain judicial district.

IV. AMOUNTS IN DISPUTE WHICH MAY BE ARBITRATED UNDER THESE
    RULES

      Any "disputed amount" (delete quotes) of $500.00 or more may be arbitrated. The
"disputed amount" (delete quotes) may include fees and costs paid, charged, or claimed
for professional services by attorneys. If only a portion of a fee and/or costs is disputed,
that portion must be at least $500.00.

V.       INITIATION OF PROCEEDINGS

       5.1 The forms required to initiate arbitration may be obtained from the State Bar
of Montana, P.O. Box 577, Helena, MT 59624, (406) 442-7660, or from the Bar's website:
www.montanabar.org. The petitioner shall file an oriRinal and one copy of eeqdek
the Petition and supporting documents and sign two (2) Arbitration Agreements and
file those documents with the State Bar. All documents may be filed electronicallv, by
fax (406)442-7763,or by U.S. Postal Service.

      5.2 Upon receipt of the duly executed documents from Petitioner, the State Bar
shall promptly forward, by certified mail, a copy of the Petition and an original and one
copy of the Arbitration Agreement to the opposing p a r t y 0 named in the Petition.

    5.3 Upon receipt of a copy of the signed Petition and Arbitration Agreement, the
Respondent has the following Qeptions:
                                           .       .
            (a)   participate in h     b       i       n   d    i   n    g arbitration a-t--&e

            (b)   participate                          in non-binding arbitration &&e&set,
      or
            (c)   not participate in the arbitration.

    5.4 If Qeptions (a) or (b) are @ chosen, the Respondent shall sign the Arbitration
Agreement and return it to the State Bar within twenty (20) days of receipt thereof.

      5.5 If the Respondent is the attorney and           chooses Qeption (c)   or fails
to return the signed agreement within the time specified above, the client will be
notified that arbitration will take place without the attorney's participation. If the
attomey chooses not to participate, h&&e the attomey will be sent a copy of the
written arbitration decision when it is rendered. The decision will become binding
unless action is taken by either party pursuant to Rule 8.4 herein.

Comment: Grammatical revisions and clarification that an attorney w h o either
chooses Option (c) does not return the signed agreement is barred from participating
in the process.

      5.6 If the Respondent is the client wke        chooses Qeption (c), or the client fails
to return the signed agreement within the time specified above, the State Bar will notify
the attomey of client's choice not to participate and the matter will be deemed closed for
purposes of arbitration, pursuant to these Rules.

Comment: Grammatical and t o make i t consistent w i t h 5.5.

                                                                               -
      5.7 Both parties must sim under Option (a) in order for binding; arbitration to
take place. If one par@ sims under Option (a) and the other sims under Option (b), the
arbitration will be nonbinding. Either party will have thirty (30) days from the date of
mailing; the decision to the parties to file suit if they wish to do so, before the arbitration
decision under Rule 8 becomes binding.

Comment: Clarification for clients as w e get questions about this all the time.

      5.78 No party may withdraw from these arbitration proceedings without written
consent of the opposing party once the Arbitration Agreement has been signed by both
parties and returned to the State Bar.

VI.                      SELECTION OF ARBITRATORS

      6.1  The panel having jurisdiction over a dispute shall be the panel appointed for
affp.   judicial district in which the attorney to the dispute maintains his or her
primary a law office, unless:

            (a)   the parties agree that the matter should be referred to a statewide panel
      or,
               (b) the State Bar determines there are an insufficient number of qualified
         arbitrators available in the appropriate judicial district, in which case the State Bar
         may appoint such additional arbitrators as may be required from an adjacent
         judicial district or from the statewide panel, or

               (c) the attorney does not maintain an office in Montana, in which case, the
         jurisdiction shall be the one in which the Client resides or has its primary office, or

               (d) if none of the above apply, the State Bar will determine which
         jurisdiction(s) the arbitrators will come from, taking into account availability of
         arbitrators and other considerations.

          6.2   The State Bar shall mail to each party a numbered list of
                                                        eligible arbitrators.

                                                            .   .   .
.   -                                                               The list will also
    contain two choices: "Hearing Requested" or "Hearing Waived" (see paragraphs 7.1
    and 7.2).
                                    . .
          6.3 Each party )
                                                                     . .
                                                                           -   1

    ef may eliminate one attorney and one lay person                          from the list and mav
                     -
    request a hearing. Eliminations and requests for a hearing must be made in writing and
    filed with the State Bar electronicallv, bv fax or by regular mail, within ten (10) days of
    receipt of the list.
                                                  S t a t e B e If either partv wishes to eliminate
    more than two (2) persons from the list, they must send a written request within ten (10)
    days of receipt of the list, stating the reasons for the request. The State Bar will rule on
    such request. No party may disqualify lw+&Aw&more than three (3) beas4 rrteffteers
    arbitrators in anv single dispute. (Last sentence w a s moved from 6.5 w i t h minor
    changes) The arbitration Board shall consist of the remaining three members having the
    lowest assigned numbers. Notice of the names of the Board members thus selected shall
    be given by the State Bar to the parties and to the selected arbitrators.

    Comment: The last proposed revision deleted a "numbered list. However, 1 believe
    this makes i t easier t o determine which people s e n e and lets the parties know that w e
    aren't just "randomly" choosingpeople as w a s suggested in the last revision.

         6.4    The State Bar will appoint a Chair.

         6.5 A Board member may decline to act as an arbitrator in a particular dispute
                                                              ..
    for good cause shown.
                                              (Last sentence moved t o 6.3, with minor
changes.)

      6.6   If a disqualified                   arbitrator is an attorney, the e+seme&
         alternate arbitrator shall be the attorney on the list sent to the parties with the
next lowest number. If the                   arbitrator disqualified is a lay person, the
              alternate shall be the lay person on the list sent to the parties with the next
lowest number. The State Bar shall immediately advise the parties of the name of the
                  alternate arbitrator to replace the disqualified             arbitrator. If
there are no e p h e m a 4 alternates is available from the initial list of proposed
arbitrators submitted to the parties, the State Bar will submit a new numbered list of
three (3) names of either all attorneys or all lay persons, whichever is to be replaced.
Within ten (10) days of receipt of the list, each party will cross off the name of one
person and return the list to the State Bar. The                   membx alternate will be
the person remaining on the list with the lowest number.

Comment: In an effort t o cut down on conflicts, it has been suggested we send the
ENTIXE list of possible arbitrators t o the parties at the outset. This gives a broader
pool t o pick from, hopefully reducing the need t o pick more names later, if the first list
doesn't work out. All disqualifications must be made at the outset, giving the parties
up t o three challenges. Current rule allows parties t o challenge after the initial board i s
chosen, creating inefficiencies and time delays.

Comment: 6.7 is redundant. These rules state throughout that documents are t o be filed
with the State Bar. Some documents may be returned i f not properly completed, but in
most cases, they are processed and filed per the rules.

VII. ARBITRATION HEARING

     7.1 If both parties agree to waive a hearing, the arbitrators shall decide the
dispute upon written statements of position, signed under oath or affirmation and
notarized ad&med, along with any supporting documents submitted by each party,
without personal attendance at an arbitration hearing.

      7.2 If a hearing is requested by either party, it shall be held in the judicial district
from which the board is chosen, within ninety (90) days after the final arbitration Board
has been selected, subject to postponement or continuance as provided in 7.4 5 The     .
Chair shall determine a convenient time and place for the hearing and cause written
notice to be mailed to the parties and other                      arbitrators not less than
twentv (20) ten+W&days before the hearing. Appearance by a party at a scheduled
hearing shall constitute waiver by said party of any deficiency with respect to the notice
of hearing. Either pa* or an arbitrator may appear by telephone, for ~ o o d           cause
shown, at the discretion of the State Bar.
      7.3 The parties shall submit copies of additional documents to be reviewed,
    -
along with a list of witnesses, to each arbitrator, and to the opposing par@ no less than
ten (10) days before the date of the hearing. Documents not timely submitted shall be
excluded absent a showing of -
                          - good cause as determined by the Chair.

Comment: New 7.3 will give arbitrators time t o review the documents before the
hearing, rather than having documents submitted at the time of the hearing. I t also
relieves State Bar stafi of having t o make four or more copies of documents that are
sometimes hundreds of pages if filed with the Petition.

      7.34 The Chair shall preside at the hearing. The chair shall be the judge of the
relevance of the evidence offered and shall rule on questions of procedure. The chair
shall exercise all powers relating to the conduct of the hearing, and conformity to
Federal or Montana Rules of Evidence shall not be required.

     7.4 5 The hearing may be postponed or continued from time to time by the chair.

      7.56 The parties to the arbitration are entitled to be heard, present evidence and
cross-examine the other p a w or witnesses appearing at the hearing. Any party to an
arbitration has the right to be represented by an attorney, at the party's own expense,
during all stages of the arbitration.

      7.4 2 The testimony of witnesses shall be given under oath or affirmation. The
chair shall administer such oaths.

     7.7 6 If any party to an arbitration who has been duly notified fails to appear at the
hearing, the Chair may either proceed with the hearing and determine the controversy
upon the evidence produced or reschedule the hearing for a later date.

      7.8 Either party may, at their expense, have the entire proceeding recorded by a
court reporter or by mechanical means. In such event, the other party shall be entitled
to a copy of the transcript or recording at their own expense.

VIII. ARBITRATION DECISION

     8.1 The arbitrators shall consider all relevant factors, including the Montana
Rules of Professional Conduct (with particular attention to Rule 1.5) in determining
whether the fees are iustified:

           "Rule 1.5 - Fees
                                                                         -
           [a) A lawyer shall not make an agreement for, charge or collect an
           unreasonable fee or an unreasonable amount for expenses. The factors to be
           considered in determining the reasonableness of a fee include the following:-
                 (1) the time and labor required, the novelty and difficulty of the
           questions involved and the skill requisite to perform the legal service
           properly;
                 (2) the likelihood, if apparent to the client, that the acceptance of the
           particular empl     ent will preclude other employment by the lawyer;
                 (3) the fee customarily charged in the locality for similar legal      -
           services;
                 (4) the amount involved and the results obtained;
                 (5) the time limitations imposed bv the client or by the
           circumstances;"
                 (6) the nature and lennth of the professional relationship with the
           client;
                 (7) the experience, reputation and ability of the l a w e r or lawyers
           performing the services; and
                 (8) whether the fee is fixed or contingent.
           (b)   The scope of the representation and the basis or rate of the fee and
           expenses for which the client will be responsible shall be communicated to
           the client in writing, before or within a reasonable time after commencing the
           representation, except when the lawver will charge a r e- a r l v represented
                                                                        d
           client on the same basis or rate. Any changes in the basis or rate of the fee or
           expenses shall also be communicated in writing. This paramaph does not
           apply in any matter in which it is reasonably foreseeable that total cost to a
           client, including attorney fees, will be $500 or less.
           (c) A fee mav be contingent on the outcome of the matter for which the
           service is rendered, except in a matter in which a contingent fee is prohibited
                      raph (d) or other law. A contingent fee apreement shall be in a
           writing si-ped by the client and shall state the method bv which the fee is to
           be determined, including the percentage or percentages that shall accrue to
           the lawyer in the event of settlement, trial or appeal; liti~ation   and other
           expenses to be deducted from the recoverv; and whether such expenses are
           to be deducted before or after the contingent fee is calculated. The
           agreement must clearly notify the client of any expenses for which the client
           will be liable whether or not the client is the prevailing pa
           conclusion of a contingent fee matter, the lawyer shall provide the client with
           a written statement stating the outcome of the matter and, if there is a
           recovery, showin? the remittance to the client and the method of its
           determination.
           /d) A lawver shall not enter into an arrangement for, charge or collect:
                 (1) anv fee in a domestic relations matter, the pavment or amount of
           which is contingent upon the securing of a divorce or upon the amount of
           maintenance or support or property settlement in lieu thereof; or
                 (2) a contingent fee for representing a defendant in a criminal case.
           /e) A division of a fee between lawyers who are not in the same firm mav
           be made only if:
                 (1) the division is in proportion to the services performed by each
           lawver or each lawyer assumes joint responsibility for the representation;
                 (2) the client agrees to the arranpement, including the share each
           lawver will receive, and the a~reement confirmed in writins and
                                                     is
                 (3) the total fee is reasonable.

     8.2 ate A written decision of the arbitrators shall be rendered
days after the matter has been submitted for decision. To enhance the efficiency of this
process, the arbitrators shall attempt to issue their ruling within twenty (20) days of the
hearing. The arbitration decision shall be made and signed by at least two (2) of the
arbitrators. It shall state the amount of fees and costs awarded, if any, the terms of
payment, if applicable, and to whom any payment shall be made.

     8.3 The Chair shall forward the decision to the State Bar of Montana, which shall

 --
mail a copy of the decision to each party to the arbitration.

       8.4 If at least two (2) of the arbitrators cannot agree on a decision, the matter
shall be submitted to a new arbitration board within thirty (30) days of the failure of at

-
least two (2) of the arbitrators to agree.
                                                       ..                            ..
      8.5

                   , t B e arbitration decision shall become binding
                   ,
                             . .
                                                                                thirty (30)
days from the date it is mailed to the parties, unless an action is filed im-x&m in a court
of- l
 .w
  a

IX.   CONFIDENTIALITY AND IMMUNITY

      9.1 All records, documents, files, proceedings and hearings pertaining to the
arbitration of any dispute under these rules shall be confidential, except as ordered bv a
Court or bv a disciplinaw authority with juridsdiction, or as necessary to enforce these
Rules, and will be closed to the public.

     9.2 Parties and witnesses shall have such immunity as is applicable in a civil
action in the jurisdiction. Committee members, arbitrators, panels and staff shall be
immune from suit for any conduct in the course and scope of their official duties.

X.    ENFORCEMENT

      If, within       60 days of the mailing of the Board's decision bv the State Bar to the
parties, an attorney against whom an arbitration decision is rendered has not filed an
action in accordance with Rule 8.5 and has failed to comply with the Board's decision,
the Supreme Court shall issue an order to show cause why the attorney should not be
suspended from the practice of law. If good cause is not shown, the Supreme Court
shall suspend the attorney from the practice of law.

     Nothing in this Rule allows parties who have b # hagreed to binding arbitration to
bring an action in a court of law.

      Upon compliance with the Board's decision, the attorney shall provide proof of
compliance to the Supreme Court. The Supreme Court may then issue an order of
reinstatement to the attorney.

XI.   DECISION ENTERED AS AN ORDER OF COURT

     If no action is filed in a court of law within thirty (30) days as referred to in 8.5
above, the arbitration decision may be entered and filed as an order of court pursuant to
the Uniform Arbitration Act, MCA 27-5-301, et seq.
EXHIBIT "B"
                              STATE BAR OF MONTANA

                     RULES O N ARBITRAl7ON OF FEE DISPUTES
                            Effective

I.    PURPOSE

      1.1 It is the policy of the Supreme Court of Montana to encourage the informal
resolution of fee disputes between attorneys who practice law in Montana and their
clients. In the event such informal resolution cannot be achieved, the Supreme Court of
Montana hereby establishes through adoption of these rules, a program and procedures
for the arbitration of disputes concerning any and all fees and/or costs paid, charged, or
claimed for professional services by attorneys. These rules do not apply to disputes
between attorneys with respect to sharing of fees.

     1.2 In lieu of these remedies for arbitration of fee disputes, the parties may wish
to pursue binding arbitration under the provisions of the Uniform Arbitration Act,
Sections 27-5-111 through 27-5-324, MCA. To do so, the parties must enter into a
binding arbitration agreement as required under applicable state or federal law.

      1.3 The following disputes are exempt from the operation of these rules:

           (a) disputes which are subject to a valid arbitration agreement under
      applicable state or federal law; and

           (b) disputes which are the subject of litigation filed prior to actual receipt of
      the Petition by the State Bar of Montana. An attorney's lien shall not exempt the
      dispute from these rules.

            (c) disputes regarding fees established by law, a court or administrative
panel, including but not limited to bankmptcy cases and worker's compensation cases.

     1.4 Nothing in these rules is intended to interfere with or supersede the powers
and authority of the Commission on Practice or applicable statutes of limitation.

      1.5 Once a Petition for Arbitration is filed with the State Bar, a lawsuit cannot be
commenced by any party, until this process has been completed by the issuance of a
written decision, dismissal or withdrawal.

11.   DEFINITIONS

     "Attorney" means a person admitted to the practice of law in Montana, or any
other person who appears, participates or otherwise engages in the practice of law in
Montana, regardless of the status of his or her license. In these rules, the term
"Attorney" includes an attorney's assignee.

     "Board" means the three (3) persons chosen from a judicial district panel or
statewide panel to act as arbitrators in a particular dispute and will consist of at least
one attorney and one lay member.
      "Client" means a person or entity who directly or through an authorized
representative consults, retains or secures legal service or advice from an attorney in the
attorney's professional capacity

      "Panel" means the entire list of attorneys and lay persons who make up the fee
arbitration "panel" for each judicial district.

      "Statewide Panel" means all attorneys and lay persons currently serving on each
judicial district panel who have actually acted as an arbitrator under these rules or the
preceding "Rules on Voluntary Arbitration of Fee Disputes".

111. ADMINISTRATIVE MATTERS - SETTING UP PANELS

      3.1 The State Bar shall administer this program through its Executive Director.
The State Bar will appoint members to the arbitration panel in various-judicial districts,
composed of an equal number of attorneys and lay persons who reside in the district.
The initial term of appointment shall be three (3) years and such appointment may be
renewed for a successive term or terms. In cases where there are an insufficient number
of attorneys and/or lay persons for a panel, the matter will be reviewed by a panel in a
judicial district chosen by the State Bar, based on availability of panelists. In such cases,
either party may participate by telephone conference call at their own expense if
requested if the location of the hearing requires them to travel 100 miles or more.

      3.2 The term of any board member which ends for any reason while an
arbitration is pending shall be extended until such arbitration is concluded, but such
extension shall not interfere with the State Bar's power to appoint a successor to the
judicial district panel.

     3.3 The panel members in each judicial district shall be appointed from as broad
a spectrum of the practicing Bar and general public as possible.

      3.4 Each person appointed to a panel as provided in 3.1 shall also be a member
of the statewide fee arbitration panel once that person has actually served as an
arbitrator on a local board. Such statewide appointment shall be for the duration of
their term on the local panel. Members of the statewide panel may be called upon in the
event panelists are not available in a certain judicial district.

IV. AMOUNTS IN DISPUTE WHICH MAY BE ARBITRATED UNDER THESE
    RULES

      Any disputed amount of $500.00 or more may be arbitrated. The disputed amount
may include fees and costs paid, charged, or claimed for professional services by
attorneys. If only a portion of a fee and/or costs is disputed, that portion must be at
least $500.00.
V.    INITIATION OF PROCEEDINGS

     5.1 The forms required to initiate arbitration may be obtained from the State Bar
of Montana, P.O. Box 577, Helena, MT 59624, (406) 442-7660, or from the Bar's website:
www.montanabar.org. The petitioner shall complete the Petition and sign two (2)
Arbitration Agreements and file those documents with the State Bar. All documents
may be filed electronically, by fax (406)442-7763,or by U.S. Postal Service. Supporting
documents are not to be filed with the Petition, but will be required prior to any hearing
or review. However, the parties will bear the burden of copying and mailing
supporting documents to the arbitrators and opposing party.

      5.2 Upon receipt of the duly executed documents from Petitioner, the State Bar
shall promptly forward, by certified mail, a copy of the Petition and an original and one
copy of the Arbitration Agreement to the opposing party(ies) named in the Petition.

    5.3 Upon receipt of a copy of the signed Petition and Arbitration Agreement, the
Respondent has the following Options:

           (a) participate in binding arbitration
           (b) participate in non-binding arbitration, or
           ( c ) not participate in the arbitration.

    5.4 If Options (a) or (b) are chosen, the Respondent shall sign the Arbitration
Agreement and return it to the State Bar within twenty (20) days of receipt thereof.

      5.5 If the Respondent is the attorney and chooses Option (c) or fails to return the
signed agreement within the time specified above, the client will be notified that
arbitration will take place without the attorney's participation. If the attomey chooses
not to participate, the attomey will be sent a copy of the written arbitration decision
when it is rendered. The decision will become binding unless action is taken by either
party pursuant to Rule 8.4 herein.

      5.6 If the Respondent is the client and chooses Option (c), or the client fails to
return the signed agreement within the time specified above, the State Bar will notify
the attomey of client's choice not to participate and the matter will be deemed closed for
purposes of arbitration, pursuant to these Rules.

      5.7 Both parties must sign under Option (a) in order for binding arbitration to
take place. If one party signs under Option (a) and the other signs under Option (b), the
arbitration will be nonbinding., Either party will have thirty (30) days from the date of
mailing the decision to the parties to file suit if they wish to do so, before the arbitration
decision under Rule 8 becomes binding.

      5.8 No party may withdraw from these arbitration proceedings without written
consent of the opposing party once the Arbitration Agreement has been signed by both
parties and returned to the State Bar.
VI.   SELECTION OF ARBITRATORS

      6.1 The panel having jurisdiction over a dispute shall be the panel appointed for
the judicial district in which the attorney to the dispute maintains his or her primary
law office, unless:

            (a)   the parties agree that the matter should be referred to a statewide panel
      or,

            (b) the State Bar determines there are an insufficient number of qualified
      arbitrators available in the appropriate judicial district, in which case the State Bar
      may appoint such additional arbitrators as may be required from an adjacent
      judicial district or from the statewide panel,

            (c) the attorney does not maintain an office in Montana, in which case, the
      jurisdiction shall be the one in which the Client resides or has its primary office, or

            (d) if none of the above apply, the State Bar will determine which
      jurisdiction(s) the arbitrators will come from, taking into account availability of
      arbitrators and other considerations.

     6.2 The State Bar shall mail to each party a numbered list of eligible arbitrators.
The list will also contain two choices: "Hearing Requested" or "Hearing Waived" (see
paragraphs 7.1 and 7.2).

      6.3 Each party may eliminate one attorney and one lay person from the list and
may request a hearing. Eliminations and requests for a hearing must be made in
writing and filed with the State Bar electronically, by fax or by regular mail, within ten
(10) days of receipt of the list. If either party wishes to eliminate more than two (2)
persons from the list, they must send a written request within ten (10) days of receipt of
the list, stating the reasons for the request. The State Bar will rule on such request. No
party may disqualify more than three (3) arbitrators in any single dispute. The
arbitration Board shall consist of the remaining three members having the lowest
assigned numbers. Notice of the names of the Board members thus selected shall be
given by the State Bar to the parties and to the selected arbitrators.

      6.4   The State Bar will appoint a Chair.

      6.5 A Board member may decline to act as an arbitrator in a particular dispute
for good cause shown.

      6.6 I a disqualified arbitrator is an attorney, the alternate arbitrator-shall be the
            f
attorney on the list sent to the parties with the next lowest number. If the arbitrator
disqualified is a lay person, the alternate-shall be the lay person on the list sent to the
parties with the next lowest number. The State Bar shall immediately advise the parties
of the name of the alternate arbitrator-to replace the disqualified arbitrator. If there are
no alternates available from the initial list of proposed arbitrators submitted to the
parties, the State Bar will submit a new numbered list of three (3) names of either all
attorneys or all lay persons, whichever is to be replaced. Within ten (10) days of receipt
of the list, each party will cross off the name of one person and return the list to the State
Bar. The alternate-will be the person remaining on the list with the lowest number.

      VII. ARBITRATION HEARING

      7.1 If both parties agree to waive a hearing, the arbitrators shall decide the
dispute upon written statements of position, signed under oath or affirmation and
notarized, along with any supporting documents submitted by each party, without
personal attendance at an arbitration hearing.

      7.2 If a hearing is requested by either party, it shall be held in the judicial district
from which the board is chosen, within ninety (90) days after the final arbitration Board
has been selected, subject to postponement or continuance as provided in 7.4 5. The
Chair shall determine a convenient time and place for the hearing and cause written
notice to be mailed to the parties and other arbitrators not less than twenty (20) days
before the hearing. Appearance by a party at a scheduled hearing shall constitute
waiver by said party of any deficiency with respect to the notice of hearing. Either party
or an arbitrator may appear by telephone, for good cause shown, at the discretion of the
State Bar.

       7.3 The parties shall submit copies of all documents to be reviewed, along with a
list of witnesses, to each arbitrator, and to the opposing party no less than ten (10) days
before the date of the hearing. Documents not timely submitted shall be excluded
absent a showing of good cause as determined by the Chair.

      7.4 The Chair shall preside at the hearing. The chair shall be the judge of the
relevance of the evidence offered and shall rule on questions of procedure. The chair
shall exercise all powers relating to the conduct of the hearing, and conformity to
Federal or Montana Rules of Evidence shall not be required.

     7.5   The hearing may be postponed or continued from time to time by the chair.

      7.6 The parties to the arbitration are entitled to be heard, present evidence and
cross-examine the other party or-witnesses appearing at the hearing. Any party to an
arbitration has the right to be represented by an attorney, at the party's own expense,
during all stages of the arbitration.

      7.7 The testimony of witnesses may be given under oath or affirmation. The
chair shall administer such oaths.

     7.8 If any party to an arbitration who has been duly notified fails to appear at the
hearing, the Chair may either proceed with the hearing and determine the controversy
upon the evidence produced or reschedule the hearing for a later date.

      7.9 Either party may, at their expense, have the entire proceeding recorded by a
court reporter or by mechanical means. In such event, the other party shall be entitled
to a copy of the transcript or recording at their own expense.
VIII. ARBITRATION DECISION

     8.1 The arbitrators shall consider the following factors, taken from the Rules of
Professional Conduct, in determining whether the fees are justified:

          "Rule 1.5 - Fees
          (a) A lawyer shall not make an agreement for, charge or collect an
          unreasonable fee or an unreasonable amount for expenses. The factors to be
          considered in determining the reasonableness of a fee include the following:
                (1) the time and labor required, the novelty and difficulty of the
          questions involved and the skill requisite to perform the legal service
          properly;
                (2) the likelihood, if apparent to the client, that the acceptance of the
          particular employment will preclude other employment by the lawyer;
                (3) the fee customarily charged in the locality for similar legal
          services;
                (4) the amount involved and the results obtained;
                (5) the time limitations imposed by the client or by the
          circumstances;"
                (6) the nature and length of the professional relationship with the
          client;
                (7) the experience, reputation and ability of the lawyer or lawyers
          performing the services; and
                (8) whether the fee is fixed or contingent.
          (b)   The scope of the representation and the basis or rate of the fee and
          expenses for which the client will be responsible shall be communicated to
          the client in writing, before or within a reasonable time after commencing the
          representation, except when the lawyer will charge a regularly represented
          client on the same basis or rate. Any changes in the basis or rate of the fee or
          expenses shall also be communicated in writing. This paragraph does not
          apply in any matter in which it is reasonably foreseeable that total cost to a
          client, including attorney fees, will be $500 or less.
          (c) A fee may be contingent on the outcome of the matter for which the
          service is rendered, except in a matter in which a contingent fee is prohibited
          by paragraph (d) or other law. A contingent fee agreement shall be in a
          writing signed by the client and shall state the method by which the fee is to
          be determined, including the percentage or percentages that shall accrue to
          the lawyer in the event of settlement, trial or appeal; litigation and other
          expenses to be deducted from the recovery; and whether such expenses are
          to be deducted before or after the contingent fee is calculated. The
          agreement must clearly notify the client of any expenses for which the client
          will be liable whether or not the client is the prevailing party. Upon
          conclusion of a contingent fee matter, the lawyer shall provide the client with
          a written statement stating the outcome of the matter and, if there is a
          recovery, showing the remittance to the client and the method of its
          determination.
          (d) A lawyer shall not enter into an arrangement for, charge or collect:
                (1) any fee in a domestic relations matter, the payment or amount of
           which is contingent upon the securing of a divorce or upon the amount of
           maintenance or support or property settlement in lieu thereof; or
                (2) a contingent fee for representing a defendant in a criminal case.
           (e) A division of a fee between lawyers who are not in the same firm may
           be made only if:
                (1) the division is in proportion to the services performed by each
           lawyer or each lawyer assumes joint responsibility for the representation;
                (2) the client agrees to the arrangement, including the share each
           lawyer will receive, and the agreement is confirmed in writing; and
                (3) the total fee is reasonable.

      8.2 A written decision of the arbitrators shall be rendered after the matter has
been submitted for decision. To enhance the efficiency of this process, the arbitrators
shall attempt to issue their ruling within twenty (20) days of the hearing. The
arbitration decision shall be made and signed by at least two (2) of the arbitrators. It
shall state the amount of fees and costs awarded, if any, the terms of payment, if
applicable, and to whom any payment shall be made.

     8.3 The Chair shall forward the decision to the State Bar of Montana, which shall
mail a copy of the decision to each party to the arbitration.

       8.4 If at least two (2) of the arbitrators cannot agree on a decision, the matter
shall be submitted to a new arbitration board within thirty (30) days of the failure of at
least two (2) of the arbitrators to agree.

      8.5 The parties may agree to be bound by the decision of the arbitration board by
signing under Rule 5.3, Option (a) in the Arbitration Agreement. Absent an Arbitration
Agreement signed by both parties, the arbitration decision shall become binding thirty
(30) days from the date it is mailed to the parties, unless an action is filed in a court of
law to settle the dispute.

IX.   CONFIDENTIALITY AND IMMUNITY

      9.1 All records, documents, files, proceedings and hearings pertaining to the
arbitration of any dispute under these rules shall be confidential, except as necessary to
enforce these Rules, or coordinate efforts with the Montana Supreme Court's Office of
Disciplinary Counsel,-and will be closed to the public.

      9.2 Parties and witnesses shall have such immunity as is applicable in a civil
action in the jurisdiction. Committee members, arbitrators, panels and staff shall be
immune from suit for any conduct in the course and scope of their official duties.

X.    ENFORCEMENT

     If, within sixty 60 days of the mailing of the-Board's decision, an attorney against
whom an arbitration decision is rendered has not filed an action in accordance with
Rule 8.5 and has failed to comply with the Board's decision, the Supreme Court shall
issue an order to show cause why the attorney should not be suspended from the
practice of law. If good cause is not shown, the Supreme Court shall suspend the
attomey from the practice of law.

     Nothing in this Rule allows parties who have agreed to binding arbitration to
bring an action in a court of law.

      Upon compliance with the Board's decision, the attorney shall provide proof of
compliance to the Supreme Court. The Supreme Court may then issue an order of
reinstatement to the attorney.

XI. DECISION ENTERED AS AN ORDER OF COURT
     If no action is filed in a court of law within thirty (30) days as referred to in 8.45
above, the arbitration decision may be entered and filed as an order of court pursuant to
the Uniform Arbitration Act, MCA 27-5-311, (1993).