You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Miller v. Purvis (7/26/96), 921 P 2d 610
<![CDATA[
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the
attention of the Clerk of the Appellate Courts, 303 K Street,
Anchorage, Alaska 99501, phone (907) 264-0607, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
A. FRED MILLER, Attorneys )
at Law, P.C., ) Supreme Court No. S-6679
)
Appellant, )
) Superior Court No.
v. ) 1KE-94-212 CI
)
MARY JANE PURVIS, ) O P I N I O N
)
Appellee. ) [No. 4372 - July 26, 1996]
______________________________)
Appeal from the Superior Court of the State of
Alaska, First Judicial District, Ketchikan,
Michael A. Thompson, Judge.
Appearances: 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, Justices. [Moore, Chief Justice,
not participating.]
MATTHEWS, Justice.
RABINOWITZ, Justice, dissenting.
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. (EN1) Under the fee
arbitration rules, (EN2) 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,
(1) the award was procured by fraud or
other undue means;
(2) there was evident partiality by an
arbitrator appointed as a neutral or
corruption in any of the arbitrators or
misconduct prejudicing the rights of a party;
(3) the arbitrators exceeded their
powers; [or]
(4) the arbitrators refused to postpone
the hearing upon sufficient cause being shown
for postponement or refused to hear evidence
material to the controversy or otherwise so
conducted the hearing, contrary to the
provisions of AS 09.43.050, as to prejudice
substantially the rights of a party[.]
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:
(1) there was an evident miscalculation
of figures or an evident mistake in the
description of a person, thing or property
referred to in the award;
(2) the arbitrators have awarded upon a
matter not submitted to them and the award may
be corrected without affecting the merits of
the decision upon the issues submitted; or
(3) the award is imperfect in a matter of
form not affecting the merits of the
controversy.
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.
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, 18 Cal. Rptr. 2d
626 (Cal. App. 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. at 636. The
court reviewed the law applicable to mandatory arbitration as
follows:
The California cases are consistent with
federal law and law from other states. The
United States Supreme Court, in a trilogy of
cases in the 1920's, addressed the validity of
a Kansas industrial relations act requiring
compulsory arbitration of certain industrial
disputes. (Chas. Wolff Packing Co. v. Court
of Industrial Relations (1923) 262 U.S. 522,
43 S.Ct. 630, 67 L.Ed. 1103 (Wolff I); Dorchy
v. State of Kansas (1924) 264 U.S. 286, 44
S.Ct. 323, 68 L.Ed. 686; Chas. Wolff Packing
Co. v. Court of Industrial Relations (1925)
267 U.S. 552, 45 S.Ct. 441, 69 L.Ed. 785
(Wolff II).) The Court found the act's scheme
of compulsory arbitration deprived business
owners of their property and liberty of
contract without due process of law in
violation of the Fourteenth Amendment. (Wolff
I, 262 U.S. at p. 544, 43 S.Ct. at p. 636 [as
the act applied to fixing wages]; Wolff II,
267 U.S. at pp. 560, 569, 45 S.Ct. at pp. 442,
445 [as the act applied to fixing hours of
labor].) In Nebbia v. People of State of New
York (1934) 291 U.S. 502, 54 S.Ct. 505, 78
L.Ed. 940, the court later held price control
regulations were unconstitutional "only if
arbitrary, discriminatory, or demonstratively
irrelevant." (Id. at p. 539, 54 S.Ct. at p.
517). The court has upheld compulsory binding
arbitration schemes against due process
challenge where the legislative choice is not
unreasonable or arbitrary and the procedure
adopted satisfies constitutional requirements
of notice and an opportunity to be heard.
(Hardware Dealers' Mut. Fire Ins. Co. v.
Glidden Co. (1931) 284 U.S. 151, 158 52 S.Ct.
69, 70, 76 L.Ed. 214 [fire insurance policies
required to provide for compulsory binding
arbitration of the amount of loss].)
Compulsory, binding arbitration still
remains limited in large measure to situations
in which the parties have agreed to
arbitration as an alternative form of dispute
resolution; however a growing number of
statutory schemes whereby either one or both
parties are compelled to submit to binding
arbitration do exist. Statutory schemes
requiring binding arbitration are normally
found valid in limited contexts including
resolving disputes in contracts with
government agencies (see, e.g., Hjelle v.
Sornsin Construction Company (N.D.1969) 173
N.W.2d 431), resolving labor disputes with
public employees such as police and fire
fighters (see, e.g., Buffalo v. New York State
Public Employment Relations Board (1975) 80
Misc.2d 741, 363 N.Y.S.2d 896, affd. (N.Y.
Ct.App. 1975) 37 N.Y.2d 19, 371 N.Y.S.2d 404,
407, 332 N.E.2d 290, 293) and where the rights
to be arbitrated have been created by federal
statute (see, e.g., Thomas v. Union Carbide
Agr. Products Co. (1985) 473 U.S. 568 593-594,
105 S.Ct. 3325, 3339-40, 87 L.Ed.2d 409, see
generally Allison, The Context, Properties,
and Constitutionality of Nonconsensual
Arbitration: A Study of Four Systems, J. of
Dispute Resolution (Vol.1990) No. 1, 1.)
Statutory schemes requiring binding
arbitration have also been found valid when
applied to highly regulated industries such as
insurance or licensed professionals such as
attorneys. (See, e.g., Hardware Dealers' Mut.
Fire Ins. Co. v. Glidden Co., supra, 284 U.S.
151, 52 S.Ct. 69 [binding arbitration clause
to determine amount of loss required in every
fire insurance policy]; Guralnick v. Supreme
Court of New Jersey (D.C.N.J.1990) 747 F.Supp.
1109, affd. (3d Cir.1992) 961 F.2d 209
[compulsory binding arbitration of attorney/
client fee disputes].) While states have
broad power to regulate housing conditions and
landlord-tenant relations (see Loretto v.
Teleprompter Manhattan CATV Corp. (1982) 458
U.S. 419, 440, 102 S.Ct. 3164, 3178, 73
L.Ed.2d 868; Birkenfeld v. City of Berkeley
(1976) 17 Cal.3d 129, 130 Cal.Rptr. 465, 550
P.2d 1001), our research has not found rent
disputes typically to be an area subject to
compulsory binding arbitration.
Even in areas where statutory schemes
requiring compulsory arbitration have been
upheld, constitutionality often depends upon
whether meaningful judicial review of the
arbitrator's decision is provided. (See Peick
v. Pension Ben. Guar. Corp. (7th Cir.1983) 724
F.2d 1247, 1277 [compulsory arbitration
constitutional where it is "merely the first
step"in dispute resolution with subsequent
court review]; Mount St. Mary's Hospital v.
Catherwood (N.Y.Ct.App.1970) 26 N.Y.2d 493,
311 N.Y.S.2d 863, 260 N.E.2d 508 [for
compulsory arbitration due process requires
judicial review of whether the award was
supported by the evidence in record].)
Id. 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: (EN3)
When parties agree to submit their
differences to an arbitrator, they should be
bound by his decision. Courts should be
reluctant to upset arbitrators' awards, lest
the advantages of arbitration as a fast and
certain means of resolving disputes be lost.
Occasional uncorrected errors in arbitrators'
decisions are tolerable because the parties
have agreed to accept reduced possibilities of
appellate review in order to have their
dispute resolved quickly and with certainty.
Compulsory arbitration is different. The
parties have not agreed voluntarily to accept
reduced possibilities of appellate review in
order to resolve their dispute swiftly. It is
by operation of law that the parties are
denied their usual right to have their
disputes resolved by the courts. Therefore, a
standard of review higher than gross error is
appropriate.
Many states provide such a heightened
standard of review by statute; Alaska does
not. Other states have adopted a heightened
standard of review as a matter of
constitutional or common law. The New York
Court of Appeals has held that due process
requires that awards in private sector
compulsory arbitration "be judicially
reviewable for errors of law, competency and
substantiality of evidence, as well as
arbitrary and capricious conduct." Mount St.
Mary's Hosp. v. Catherwood, 26 N.Y.2d 493, 311
N.Y.S.2d 863, 870, 260 N.E.2d 508, 513 (1970).
It thus held that contractual provisions
imposed in compulsory interest arbitration
should be reviewed under the arbitrary and
capricious standard and awards in compulsory
grievance arbitration should be reviewed under
the substantial evidence standard. Id.
Noting that compulsory interest arbitration is
a quasi-legislative function, the Rhode Island
Supreme Court has also held that courts should
review compulsory interest arbitration awards
to determine whether an arbitrator's decision
was arbitrary. City of Warwick v. Warwick
Regular Firemen's Assoc., 106 R.I. 109, 256
A.2d 206, 211 (1969).
We believe it appropriate to apply the
arbitrary and capricious standard when
reviewing awards in compulsory interest
arbitrations. Without deciding whether such a
standard is constitutionally required, a
question the parties have not briefed, we will
henceforth apply it as a matter of common law.
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 fee arbitration systems similar to Alaska.
The leading New Jersey case is In re LiVolsi, 428 A.2d
1268 (N.J. 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. 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:
There is something almost anachronistic
about the challenge to the Court's power to
adopt R.1:20A under the New Jersey
Constitution. For 33 years this Court has
exercised plenary, exclusive, and almost
unchallenged power over the practice of law in
all of its aspects under N.J. Const. (1947),
Art. VI,  II, par. 3. The enormous scope of
this power puts R.1:20A in proper perspective.
Though critically important, it is but a minor
regulation of the practice of law compared to
others whose validity is beyond dispute.
The heart of the constitutional
provisions concerning the judicial system was
the concentration of responsibility for its
proper functioning in the Supreme Court and
Chief Justice. Such responsibility requires
appropriate power over courts, judges,
practice and procedure, and lawyers.
Responsibility for an adversarial judicial
system requires responsibility for the
adversaries, and control over both.
In exercising this responsibility, one of
the many goals this Court has sought to
achieve has been maintaining public confidence
in the judicial system. The intended direct
beneficiary of that system is the litigant,
the client, who can realistically gain access
to it only through his relationship with a
lawyer. The value of the judicial product
depends upon the effectiveness of this access,
the effectiveness of this relationship. If
lawyers refuse to represent, the judicial
system is almost worthless; if the terms and
conditions of representation are unfair, the
judicial system is impaired to that extent.
This dependency of the public's confidence in
the judicial system on its satisfaction with
lawyer-client relationships is not
theoretical: those dissatisfied with the
system include a fair proportion dissatisfied
with their lawyers. The most common cause of
that dissatisfaction concerns fees, see
section IIIA, infra.
Given the critical importance of the
constitutional power of this Court over the
practice of law, and its pervasiveness,
starting with admission, ending with
disbarment, and covering everything in-
between, we have no doubt that the power
extends to every aspect of fee agreements
between lawyers and clients. If this Court
can set a limit on fees for certain matters,
American Trial Lawyers v. New Jersey Supreme
Court, 66 N.J. 258, 330 A.2d 350 (1974)
(upholding the contingent fee schedule
promulgated in R.1:21-7); require service for
no fee at all in others, State v. Rush, supra,
46 N.J. at 411-12, 217 A.2d 441 (noting this
Court's authority to require attorneys to
defend indigents without charge); and
disregard completely fee agreements in all
matters (if they are unreasonable), Steiner v.
Stein, 2 N.J. 367, 372, 66 A.2d 719 (1949)
(see section IIC, infra); if, in short, this
Court has the authority to control the
substance of the fee relationship, then a
power of a lesser magnitude -- determining the
procedure for resolving fee disputes -- must
also be within our province.
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, 386 A.2d 1290
(N.J. 1978), where the court had stated, "Because it is compulsory,
principles of fairness, perhaps even due process, require that
judicial review 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:
The holding of Division 540 is
inapplicable to arbitrations conducted
pursuant to our constitutional authority to
regulate the Bar. The same rationale -- that
attorneys are subject to extensive regulation
by this court -- which justifies compulsory
arbitration of their fee disputes also
justifies eliminating appeals from such
arbitration despite the general "principles of
fairness"enunciated in Division 540.
Id.
The LiVolsi court went on to state the general policy
justification for mandatory attorney fee arbitration:
We concur fully with the findings of a 1974
Report by the American Bar Association that
forcing clients to go to court to resolve
attorney fee disputes places a heavy burden on
the clients. ABA, Report of the Special
Committee on Resolution of Fee Disputes 2-4
(1974) ("Report"). Clients, especially those
of limited income, often find it very
difficult to procure another attorney to
represent them in fee disputes. Also, if a
client were forced to give the attorney a
retainer that eventually proved to have been
unreasonably high, the client might not be
able to afford the delay of another trial
before being reimbursed. As the ABA Report
concluded, imposing these burdens on clients
causes "immeasurable"harm to the relationship
between the Bar and the public.
Id. at 1279-80. Finally, the court specifically addressed the
policy behind denying appeals on the merits:
The wisdom of denying appeals on the
merits from Committee decisions necessarily
must depend on one's view of the importance of
public confidence in the lawyer-client
relationship. If it is true -- and we believe
it is -- that public confidence in the
judicial system is as important as the
excellence of the system itself, and if it is
also true -- as we believe it is -- that a
substantial factor that erodes public confi-
dence is fee disputes, then any equitable
method of resolving those in a way that is
clearly fair to the client should be adopted.
The client's position in fee disputes is one
of vulnerability from the beginning to the
end: the lawyer has superior knowledge,
usually superior bargaining power in arriving
at the initial fee agreement, and, in any
event, the ability to refuse the representa-
tion if not satisfied with its terms. If and
when a dispute develops, a system that
requires a client to hire another lawyer for
trial and perhaps appeal on the fee dispute
increases the client's initial vulnerability
by significantly weakening his negotiating
power to resolve the fee dispute. The client
perceives, correctly, that the lawyer is part
of the system, and when added to his
dissatisfaction with his experience with that
lawyer, the system offers him a remedy that,
to him, promises not to solve his problem but
only to compound it, dissatisfaction turns
into despair and resentment. The least we owe
to the public is a swift, fair and inexpensive
method of resolving fee disputes. This may
not end the dissatisfaction of some with the
Bar and with the judicial system, but, at the
very least, it will minimize the extent of
such dissatisfaction. Further, it is
important to assure the public that this
Court, which has the ultimate power over the
practice of law, will take an active role in
making certain that clients are treated fairly
in attorney-client disputes.
Besides helping to sustain public
confidence in the Bar, the finality of
Committee determinations also protects clients
who can ill afford the time and expense of
defending a Committee judgment on appeal. As
we noted in section IIIA, supra, one of our
primary concerns in promulgating R.1:20A was
that clients should not be forced to incur
such expenses in fee disputes.
Finally, we find unpersuasive the
position of petitioner and the Association
that the unappealability of Committee
determinations is unfair to lawyers. If that
is unfair, it is at least equally unfair, for
the client similarly has no appellate right.
Further, when it is noted that Committee
arbitration panels must consist of a majority
of lawyers, it is difficult to see how such a
system can be unfair to lawyers. Upon
analysis, the claim that lawyers are treated
as "second class citizens"is really not being
seriously pursued, but rather the underlying
claim is that lack of an appellate review
renders the system less certain, in the
aggregate, to yield just results. With that
proposition taken in the abstract we have no
argument, for appellate review is almost as
essential a part of our notion of justice as
is the trial itself. But just as in
conventional arbitration proceedings, so here,
appellate review may sometimes give way either
in part or in whole to other social goals. It
is our judgment that the advantages of swift,
inexpensive proceedings outweigh by far any
greater likelihood of just results achieved by
allowing appellate proceedings. The loss of
public confidence in the judicial system is
too high a price to pay for some indeterminate
improvement in the quality of fee arbitration
determinations. We reaffirm, therefore, that
appeals on the merits from Committee decisions
will not be allowed.
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 (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:
[A]n attorney-client fee dispute is no
ordinary contractual controversy. Members of
the public as a practical matter have access
to the courts only through their attorneys,
and that access is impaired by collateral
controversies over legal charges.
Furthermore, in the view of many observers,
attorney fee disputes are the principal source
of public dissatisfaction with the judicial
system. . . . Practicing lawyers have few
more difficult tasks than billing their
clients, and at the same time clients often
misunderstand the basis of their attorneys'
bills.
In these circumstances it is advantageous
to both lawyers and clients to have available
a simple, speedy, and reliable system for
resolving fee questions. In particular, the
system must be one that can be used
effectively by clients whose experience with
the legal system is likely to be limited and
bewildering, and who in disputes with their
own attorneys go into court on an unequal
footing. In light of that need, the Supreme
Judicial Court's requirement that an attorney
be prepared to submit to a less formal nonjury
adjudication of fee disputes is an entirely
reasonable exercise of the judicial power to
superintend the bar.
Rule 9 is a narrowly tailored response to
a problem that arises not infrequently in the
attorney-client relationship. Rule 9
replaces, at the client's request, any trial
in court with a method of dispute resolution
that accords full due process to the attorney,
including the judicial safeguards of the
Uniform Arbitration Act. Furthermore, the
entire fee arbitration system operates under
the direction of a creature of the court, the
Board of Overseers of the Bar. The lawyer
appealing in the case at bar makes no
argument, and could make no argument, that fee
arbitration is likely to produce any less
reliable, or any less fair, determination than
a jury trial. In these circumstances, the
court's action in providing the client a
faster and procedurally less forbidding forum
for fee disputes, while at the same time
assuring the attorney a fair and reasonable
determination, comes within the court's
constitutional authority to regulate the
attorney-client relationship.
Id. at 1049.
We are in substantial agreement with the language quoted
above from the New Jersey and Maine courts. (EN4), (EN5) "The crux
of due 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. (EN6)
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
Matthews v. Eldridge, 424 U.S. 319, 335 (1976):
[I]dentification of the specific dictates of
due process generally requires consideration
of three distinct factors: First, the private
interest that will be affected by the official
action; second, the risk of an erroneous
deprivation of such interest through the
procedures used and the probable value, if
any, of additional or substitute procedural
safeguards; and finally, the Government's
interest, including the function involved and
the fiscal and administrative burdens that the
additional or substitute procedural
requirement would entail.
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 Matthews 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.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 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):
Compulsory arbitration is different. The
parties have not agreed voluntarily to accept
reduced possibilities of appellate review in
order to resolve their dispute swiftly. It is
by operation of law that the parties are
denied their usual right to have their
disputes resolved by the courts. Therefore, a
standard of review higher than gross error is
appropriate.
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 (EN1) 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:
(1) the award was procured by fraud or
other undue means;
(2) there was evident partiality by an
arbitrator appointed as a neutral or
corruption in any of the arbitrators or
misconduct prejudicing the rights of a party;
(3) the arbitrators exceeded their
powers;
(4) the arbitrators refused to postpone
the hearing upon sufficient cause being shown
for postponement or refused to hear evidence
material to the controversy or otherwise so
conducted the hearing, contrary to the
provisions of AS 09.43.050, as to prejudice
substantially the rights of a party;
(5) there was an evident miscalculation
of figures or an evident mistake in the
description of a person, thing or property
referred to in the award;
(6) the arbitrators have awarded upon a
matter not submitted to them and the award may
be corrected without affecting the merits of
the decision upon the issues submitted; or
(7) the award is imperfect in a matter of
form not affecting the merits of the
controversy.
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). (EN2)
In conclusion I would hold that the attenuated standard
of review provided for under Alaska Bar Rule 40(u) violates due
process under Alaska's Constitution. (EN3)
ENDNOTES:
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. 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&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 deter-
minations, "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. 1-4.
ENDNOTES (Dissent):
1. DeLisio v. 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).
]]>
