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Rule Mandating Arbitration of Lawyer Fee Disputes Held Constitutional and Binding

2003-1017. Shimko v. Lobe, 2004-Ohio-4202.
Franklin App. No. 02AP-872, 152 Ohio App.3d 742, 2003-Ohio-2200. Judgment affirmed.
Moyer, C.J., Resnick, F.E. Sweeney, Lundberg Stratton, O'Connor and O'Donnell, JJ., concur.
Pfeifer, J., dissents.
Opinion: http://www.supremecourt.ohio.gov/rod/newpdf/0/2004/2004-Ohio-4202.pdf

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(Aug. 25, 2004) In a case challenging the constitutionality of a state attorney discipline rule, the Supreme Court of Ohio ruled today that: 1) the disciplinary rule requiring attorneys to submit fee disputes with other attorneys to arbitration by a bar association (DR 2-107(B)) does not infringe on a lawyer's right to trial by jury under the Ohio Constitution; and 2) an arbitration award made by a bar association under DR 2-107(B) is final, binding upon the parties and unappealable.

The case involved a dispute between two Ohio attorneys, Timothy A. Shimko and Thomas G. Lobe, over the terms of an oral agreement for the division of legal fees in a case that was tried in California.

Unable to resolve their differences, Lobe requested that the dispute be arbitrated by the Cleveland Bar Association (CBA) under the provisions of DR 2-107(B). The rule requires that fee disputes between lawyers who are not in the same firm shall be resolved “in accordance with mediation or arbitration provided by a local bar association.” If the local bar is unable to resolve the dispute, the rule provides that it must then be referred to the Ohio State Bar Association (OSBA) for mediation or arbitration.

When the CBA accepted jurisdiction to arbitrate the dispute, Shimko filed a lawsuit against Lobe, the CBA, and the OSBA in the Franklin County Court of Common Pleas. Shimko asked the court to declare the fee-dispute arbitration rule invalid on several different constitutional grounds, including that it violates an attorney's right to a trial by jury. The trial court rejected all of Shimko's constitutional arguments and upheld the rule. On review, the 10th District Court of Appeals affirmed the trial court's ruling, with one exception. The appellate court found that in order to decide the jury-trial issue, the trial court must first determine whether the disciplinary rule is a reasonable restriction on the practice of law. Accordingly, the 10th District remanded the case for a hearing on whether DR 2-107(B) is reasonable.

Following a two-day hearing in which it heard testimony regarding the rationale for the fee-dispute arbitration rule, the trial court held that the rule is a reasonable restriction on the practice of law as it prevents the erosion of public confidence in the legal profession and, therefore, does not deny Shimko his constitutional right of trial by jury. In May 2003, the 10th District upheld the trial court's judgment.

In today's 6-1 decision written by Justice Alice Robie Resnick, the Supreme Court affirmed the lower court rulings, finding that “DR 2-107(B) is a lawful exercise of this court's inherent and plenary power to regulate, control, and define the practice of law in Ohio.”

Acknowledging that the constitutional guarantee of trial by jury “does not merely extol a procedural privilege, but secures a sacred and fundamental right, anchored in the founding of our nation and state and basic to the institution of American democracy,” Justice Resnick pointed out that it “is still a qualified right.” The right to a jury trial is preserved only “in cases where under the principles of the common law it existed previously to the adoption of the [Ohio] Constitution,” she explained.

After reviewing cases from other jurisdictions in which analogous rules mandating arbitration of fee disputes between attorneys and clients were upheld as constitutional, and based on an historical analysis in which she traced the right of an attorney to charge and recover a legal fee from antiquity to present-day Ohio, Justice Resnick concluded that “the right of trial by jury … does not exist in cases of fee disputes between attorneys. … Indeed, compensation for advocacy has never been treated as an ordinary debt or contractual right [enforceable at common law], but has since antiquity been regulated by the prevailing governmental authority possessing the power to control the practice of law.”

Justice Resnick also rejected Shimko's contention that DR 2-107(B) is not supported by “a compelling governmental interest.” She explained that the rule is “designed to preserve public confidence in our system of justice [by allowing] for remuneration of legal services without compromising the integrity of the legal profession. … However, when the judicial machinery is used to resolve a simple fee dispute between lawyers, and when clients perhaps exhausted by litigation are once again summoned to court in a public battle between their attorneys, compelled to publicly reveal the terms of their fee arrangement and other secrets and confidences, then the court's failure to remedy that situation with a dignified and expedient dispute-resolution mechanism would directly reflect upon its ability to control the conduct of its officers, and the public confidence in the judiciary would most assuredly be affected.”

With regard to whether arbitration awards under the challenged rule are “final” and “binding,” the Court held that “(c)onsidering that DR 2-107(B) explicitly requires division of fees ‘in accordance with mediation and arbitration,' that the Disciplinary Rules … are mandatory in character … and that the salient purpose of the rule is to prevent litigation of disputes between lawyers over the division of fees, it is clear the DR 2-107(B) cannot and was not intended to be interpreted otherwise. Lest there be any further uncertainty, we hold that an arbitration award rendered pursuant to DR 2-107(B) is final, binding upon the parties, and unappealable.”

Justice Resnick's opinion was joined by Chief Justice Thomas J. Moyer and Justices Francis E. Sweeney, Evelyn Lundberg Stratton, Maureen O'Connor and Terrence O'Donnell.

Justice Paul E. Pfeifer dissented, noting that “(n)othing in DR 2-107(B) makes fee-dispute arbitrations final, binding on the parties or unappealable. Thus, the rule as written does not raise any constitutional problems. We should leave it as written and apply it as written.”

Timothy Shimko, pro se: 216.241.8300.

Fordham E. Huffman, 614.469.3934 and J. Todd Kennard, 614.469.3939, for Cleveland Bar Association.

Eugene P. Whetzel, 614.487.2050, for the Ohio State Bar Association.