Call Us: (800) 367-2577

How to Avoid the Legal Fee Suit Counterclaim

You finish a client matter. You believe you did good work and got a good result for your client. Then, as sometimes happens, you are forced to come to grips with the reality that this client has stopped making payments and now owes you quite a bit. It should go without saying that you deserve to be paid so what are your options? For a number attorneys who find themselves in this situation they make a decision to sue for fees based upon a belief that they did good work and got a good outcome. Of course, post fee suit, none of that will matter to the client. If you do decide to sue for fees based upon the reasons set forth above, don’t be surprised if and when a malpractice counterclaim is filed and things start to get ugly. Seems to me the better approach would be to do all you can to avoid the necessity of ever having to consider suing for fees. With this in mind I offer the following thoughts.

  • It begins at intake and the best advice I can share is this. Never take on a client who can’t afford your services from the get go. This will always be a losing proposition and you’re going to be the one who makes the decision to step into that mess. If you do, don’t blame the client when the bill goes unpaid. You really must determine every prospective client’s ability to pay for all proffered services before you take any matter on. This will always require a thorough discussion. For example, it’s not enough to simply state that your hourly rate is $175 because that figure is meaningless without a reasonable estimate of the number of hours involved. Fail to do this properly and you’ll find yourself torn between doing all the work that is truly called for and trying to minimizing the loss you’re about to take. Remember that while it’s easy for an attorney to get involved in a matter, it’s often far more difficult to exit that matter prior to its completion. Avoid the headache. Learn to identify and say no to prospective clients who simply don’t have the financial wherewithal to move forward.

  • Have a written fee agreement with all new clients and on all new discrete matters for existing clients. This doesn’t mean that the document used must always be your firm’s standard engagement contract. For repeat work with long-term clients, a simple confirming email or perhaps a thank-you letter may suffice. Whatever its form, the document should clarify the scope of representation, and don’t forget to detail any limits on the scope of your representation, and it should also detail the fee structure in play. Where appropriate, be specific regarding the types of out-of-pocket expenses for which the client will be responsible such as filing fees, court costs, expert witness fees, photocopy charges, travel, etc. If possible, estimate what those expenses might be because first-time clients often are astonished by the amount of out-of-pocket expenses that can be incurred on their behalf.

  • Always bill monthly unless the client has specified otherwise. While regular billing can prevent the client from receiving large unexpected bills that sometimes results in sticker shock and anger, they also encourage the client to make regular payments on their account. Hopefully this will help prevent a delinquency from ever developing. Think about it this way. When clients receive bills on a haphazard basis, the message they receive is its fine for them to pay whenever they decide to get around to it. After all, if regular billing isn’t important to you, why should making a timely payment be important to them?

  • Never try to raise your rates on an active matter. If you undervalued your work at the outset, that is your problem. Put yourself in your client’s shoes and think about how you would feel if your attorney tried to raise her rates midway through. In short, this can be an invitation for trouble. If your fee structure is changing, change it only with new clients and on new matters with current clients.

  • Provide detail in your billing statements. The billing statements should describe the work performed on a daily basis, who performed it, and how long it took. In addition, an entry such as 20 hours for “research” is unacceptable. Rather, the entry should read something like, “research state case law on piercing the corporate veil.” Clients want to know what they’re paying for and so would you. Provide the bill you’d expect to receive if your roles were reversed.

  • Review all your bills. As the attorney and prior to mailing, you should review each bill in order to check for errors, identify any write downs that should be made and perhaps add a brief personal note or update. For those who are current with their bills this personal note could be as brief as “Thank you for keeping your account current. I appreciate your business!”

  • Copy the client on all correspondence and other materials relating to the client’s matter. These blind copies not only show your client that you want to keep him informed, they also indirectly serve as informal status reports. Ask yourself which client is more likely to pay the monthly bill: the client who hasn’t received a single sheet of paper from their attorney in three months, or the one who regularly receives informational copies from his attorney?

  • If you are one who continuously struggles with delinquent accounts, try collecting a retainer at the start of all new matters. If the request for a retainer causes the prospective client to take her business elsewhere, she probably wasn’t a client worth having. That said, remember that a retainer is almost always considered an advance payment and thus is fully refundable (minus what may have been earned for work started or costs advanced) if the client later decides to take her business elsewhere.

  • Take prompt action on all accounts in arrears. This is the single biggest mistake that attorneys make with respect to fee disputes. Often the client who can’t pay your fee today isn’t likely to pay it tomorrow, and the bill won’t get smaller or easier to collect over time. In addition, many attorneys are surprised to learn that there are resources that discuss ways for people to reduce the cost of legal services. One of the cost saving techniques tells individuals to delay paying their legal bills for as long as possible because it’s almost standard practice for an attorney to discount delinquent bills and that advice is often accurate! So be aware that a few clients intentionally withhold payment in order to force a fee discount. Require timely payments and, if it becomes necessary, withdraw if you can as soon as the situation becomes clear. One side note here. Beware of clients who promise to pay next month. That’s often one of those “fool me once shame on you, fool me twice shame on me” situations and the money never materializes. It’s better to cut your losses when the past due amount is $5,000 as opposed to having to eventually write off $25,000. If they can’t pay now, most won’t be able to pay later.

  • If a delinquency is developing, you should personally speak to the client within the first sixty to ninety days. You will have far more success with a personal phone call asking for payment than you will with letters from your bookkeeper or a collection call made by your receptionist. At the very least, you will have made a good faith effort to collect the fee and you might learn something that can help you decide how to proceed.

These ideas are not meant to be the final word in effective collection practices. In addition, a decision to follow them doesn’t mean that you will never face a fee dispute. All I can say is this. If you ignore the above, you can unintentionally give a disgruntled or unscrupulous client the opportunity to take a shot at your malpractice insurance coverage (via a counterclaim) if you ever end up deciding you have no other option but to file a suit for fees. Personally, I don’t like the idea of painting a target on my chest and I suspect you feel similarly.

Related Posts:

Problem Clients and the Lessons They Teach

CLAIMS CORNER: "I Knew I Shouldn't Have Taken That Case"

---

As a Risk Manager for ALPS, Mark Bassingthwaighte. Esq. is responsible for developing and delivering new risk management and CLE products and services, risk management consulting, law firm risk evaluations, and writing content for the ALPS 411 blog at www.alps411.com. In his tenure with the company, Mark has conducted over 1,000 law firm risk management assessment visits, presented numerous continuing legal education seminars throughout the United States and written extensively on risk management and technology. Mark received his J.D. from Drake Law School. He can be contacted at: mbass@alpsnet.com

Comments for How to Avoid the Legal Fee Suit Counterclaim


Name: buck archambeault
Time: Thursday, November 19, 2015

Mark:

Great advice. I have tried to incorporate as many of your comments as possible over the past 48 years. Never too old to learn!

Leave a comment





Captcha