To Sue or not to Sue: Risks to Consider When Contemplating a Fee Dispute
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 taking legal action. After all, she did great work on the case and is entitled to her fees. She believes it is time to sue!
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 is no longer appropriate or want to 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:
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 should 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 withdrawal 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, withdrawal becomes much more difficult as the case progresses(2).
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.
2: Mod. Rule Prof. Cond. § 1.16
By Erin McCartney, Esq.
Erin is the Risk Management Lead at Attorney Protective. When she isn’t busy saving lawyers from malpractice claims, she can be found coaching her children’s sports teams and hopelessly attempting to be the next Serena Williams.
When contemplating suing for fees, attorneys should understand that fee suits are often met
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