The opinion of the court was delivered by: DEBEVOISE
Plaintiff, Kelley Drye & Warren ("Kelley Drye"), commenced this action against defendants Murray Industries, Inc. and Murray Chris-Craft Sportboats, Inc. (collectively referred to as "Chris-Craft") to recover the sum of $109,268.37 for services rendered and disbursements incurred during the representation of Chris-Craft in an action in this court entitled Image Boat Company v. Murray Chris-Craft Sport Boats, Inc., et al., 84 Civ. 2381. The complaint in that action alleged, inter alia, a violation of federal trademark law, violation of state common and statutory unfair competition laws, disparagement, violation of Florida's "anti-splashing" statute, breach of contract and tortious interference with contractual relations. After settlement and dismissal of that action Kelley Drye sought payment of its bills for services and disbursements. Chris-Craft failed to pay. The complaint in this action was filed on May 24, 1985.
On July 11, 1985, purportedly acting pursuant to N.J. Ct. Rule 1:20A-3(a), Chris-Craft filed a Request For Fee Arbitration with the District Fee Arbitration Committee of the Supreme Court of New Jersey (the "Committee"). The Request asked the Committee to "notify the United States District Court with respect to this timely filing so that the pending action will be stayed in accordance with Rule 1:20A-3."
Kelley Drye refused to accede to the jurisdiction of the Committee, and in lieu of answering in the instant case Chris-Craft moved to dismiss the complaint or, in the alternative, to compel arbitration and stay all proceedings.
B. New Jersey's Fee Arbitration System
The New Jersey Constitution grants to the New Jersey Supreme Court exclusive jurisdiction "over the admission to the practice of law and the discipline of persons admitted." N.J. Const., Art. 6, § 2, Para. 3. The Supreme Court has construed its rule making powers in the broadest terms. Winberry v. Salisbury, 5 N.J. 240, 74 A.2d 406 (1950), cert. denied, 340 U.S. 877, 95 L. Ed. 638, 71 S. Ct. 123 (1950).
Acting pursuant to its constitutional powers to regulate the admission to practice and the discipline of persons admitted, the Supreme Court provided for compulsory binding arbitration of attorney-client fee disputes if a client so requests. N.J. Ct. Rule 1:20A-1, et seq.
The Supreme Court has appointed a fee arbitration committee to serve in each of the State's Disciplinary Districts. N.J. Ct. Rule 1:20A-1. Such committees consist of such number of members, not fewer than eight, as the Court may determine, at least four of whom shall be New Jersey attorneys and at least two of whom shall not be attorneys.
Each Fee [arbitration] Committee shall, pursuant to these rules, have jurisdiction (a) to arbitrate fee disputes. . . .
(a) Submission. A fee dispute shall be arbitrated only upon a client's written request or upon written consent to the attorney's request. The fee committee shall have authority to consider such requests whether or not the attorney has already received the fee in dispute. The request or consent shall include a stipulation by the client that if an action for payment of the fee is then pending, it shall be stayed pending a determination by the fee committee, and the amount of the fees so determined shall be entered in the judgment in the action, provided that a client's request for arbitration shall be filed within sixty (60) days after service of process. . . .
The hearing must be held before a panel having at least three members, at least a majority of whom shall be attorneys. N.J. Ct. Rules 1:20A-3(b). Normally a panel has two attorney members and one non-attorney member. The determination will be made by a majority of the panel. Committees have the power, at a party's request, to compel the attendance of witnesses and the production of documents by the issuance of subpoenas. No transcript or recording is made unless ordered by the Administrative Director of the Courts, nor need the rules of evidence be strictly observed. N.J. Ct. Rule 1:20A-3(b).
A committee determination will be entered as a judgment against the client in any action pending against the client for collection of the fee or, if no such action is pending, the attorney may, by summary action obtain judgment in the amount of the fee determined by the committee. N.J. Ct. Rule 1:20A-3(a).
The New Jersey Supreme Court explained its purpose in enacting the Fee Arbitration System in In re Li Volsi, 85 N.J. 576, 428 A.2d 1268, 17 A.L.R. 4th 972 (1981),
which challenged the ...