To Sue or Not to Sue: Risks to Consider When Contemplating a Fee Dispute
Erin McCartney, Esq.
December 7, 2022
Reading time: 4 minutes
It is 5:00 p.m. on Friday and a calendar notification to follow-up with D. Lynn Quent pops up on the screen. D. Lynn Quent has not paid her outstanding legal bill and has been non-responsive to phone calls, letters and emails. Today marked the deadline that the attorney set for herself before taking legal action. After all, she did great work on the case and is entitled to her fees. She believes it is time for legal action!
Unfortunately, some attorneys find that after providing legal services, the client refuses to pay all or some of the amount billed. Clients may be dissatisfied with the outcome of the case, subsequently decide that the agreed upon fee should no longer be adhered to or they may challenge the time and expertise that was dedicated to the matter. Regardless of the reason, when a fee impasse develops, suing a client for fees should not be done lightly and not without an objective review of the file and case handling.
When contemplating suing for fees, attorneys should understand that fee suits are often met with malpractice claims either as a counter-claim, cross-complaint or a disciplinary complaint. Often these actions are taken simply as delay and defense maneuvers by the client with no expectation of winning. Regardless of the intent, once a malpractice claim is filed the attorney’s work-product will be put under a microscope. So, before suing a client for fees lawyers should consider:
- How objective and thorough a review of the file was completed?
- What could the client claim the attorney did wrong and is there any justification for that claim?
- Is the fee collectable and worth the time and effort to pursue?
After considering these questions, the firm should recognize that fee suits create exposure for liability claims, but also business losses. Litigation expenses and lost professional time may outweigh any potential recovery in court.
A possible alternative to litigation is arbitration or mediation. Many states have mediation or arbitration programs available to their attorneys to handle fee disputes with clients.1 These programs may offer an informal, confidential, and lower cost avenue for resolving fee disputes and may reduce the chances of a malpractice or ethical complaint. However, the programs are voluntary for the client and as with most compromises, the firm may walk away feeling they received less than deserved (or earned.)
If a firm frequently finds itself chasing legal fees and contemplating fee suits, it should reevaluate its client intake procedures and billing practices. Taking adequate time during the initial interview to assess whether the client might be a problem is time well spent. Does the potential client have unrealistic expectations? Did they have prior representation regarding the matter? Will they be difficult to satisfy? Not only can these types of clients be difficult to deal with during the course of representation but they may also be more likely to dispute the bill regardless of the quality of work or outcome. Lawyers should use analysis and instincts when accepting a client and not ignore waving red warning flags!
Clearly establishing the fees and billing structure at the client intake interview and confirming it in the engagement letter is another measure that can help avoid a fee dispute down the road. When billing clients, firms should bill accurately, timely, and frequently. Avoiding vague billing descriptions and providing itemized billing can help the client better understand everything the firm is doing on their behalf and can also validate the time and expertise being spent on their case.
If a firm is having continual issues with collections, it may consider requesting an upfront cash retainer and requiring that the client replenish it on a regular basis. This practice can provide a way to weed out those clients who are less likely to pay when the bill comes. It may also be beneficial for a firm to establish its stance regarding withdraw when unpaid fees reach a certain amount. Severing ties with a non-paying client early on can be an effective way to avoid a costly fee dispute down the road. It is better to terminate the attorney-client relationship before outstanding legal fees get too high. Although Model Rule 1.16 allows attorneys to withdraw from a case if the client refuses to abide by the terms of the fee agreement, due to a lawyer’s ethical duties, withdraw becomes much more difficult as the case progresses.
Certainly there are situations where a lawyer may consider floating a client for a short period, but it is common for clients to fall behind and never catch up. An attorney should talk with the client as soon as a bill goes unpaid or retainer is not replenished as agreed. Before an outstanding legal bill turns rampant and prior to the client blocking the firm’s number, there should be an honest conversation about why the client is not paying their bill. If law firms want to avoid being in a position in which it is contemplating a fee suit, it should be selective about clients, meticulous about billing practices and stay in frequent communication with its clients. In other words, a good offense is the best defense.
Additional Billing content
So, how do you craft a meaningful billing entry that gets you paid and protects against future claims? It is as easy as 1-2-3.
Law firms differ from other businesses because they must track hours, apply retainer funds, and comply with state rules for IOLTA accounts. As such, sophisticated billing software is essential to accurately record time and create bills, so you can get paid.
ABA Model Rule 4.2 prohibits attorneys from communicating with a person who is known to be represented by another attorney about the subject matter of the representation, unless that attorney has given consent or you are authorized by law or a court to speak with that person.
Information provided by AttPro Ally is not intended as legal advice. This publication provides best practices for use in connection with general circumstances and ordinarily does not address specific situations. Specific situations should be discussed with legal counsel licensed in the appropriate jurisdiction. By publishing practice and risk prevention tips, Attorney Protective neither implies nor provides any guarantee that claims can be prevented by the use of the suggested practices. Though the contents of AttPro Ally have been carefully researched, Attorney Protective makes no warranty as to its accuracy, applicability, or timeliness. Anyone wishing to reproduce any part of the AttPro Ally content must request permission from Attorney Protective by calling 877-728-8776 or sending an email to [email protected].
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