Money is at the root of most attorney-client disputes – many of which ripen into malpractice claims and bar grievances. Lawyers who sue for unpaid fees often face allegations of malpractice. The best defense is to avoid fee fights in the first place through (a) good communication, (b) diligent efforts, and (c) following best practices for billing and collections.
Set Financial Expectations
Fee disputes arise for different reasons and at different points in the relationship: poor communication and unreasonable expectations at the outset, erratic billing and soaring costs in the middle, disappointing outcomes at the end.
Good risk management requires attention to financial matters throughout the case – from the first phone call to the file closing.
Alta Pro Practice Pointers
- Confirm your fee and billing terms in an engagement letter. Set out your arrangement clearly and concisely. Ask the client if they have any questions. Have them sign the letter. Don’t avoid talking about how you charge for your services and expect to be paid. You can bet these issues are on the client’s mind.
- Refer to the letter in the event of a misunderstanding. Don’t argue with clients. Simply pull out the engagement letter and show them what you both agreed to.
- Charge a fair fee. Review the criteria in ABA Model Rule 1.5. Send bills regularly and follow up with reminder notices. Don’t let past-due balances accrue.
- Don’t overbill. It’s a cliché that lawyers routinely pad their bills. But it happens. Insurance audits have found that some lawyers regularly bill more than 24 hours a day. Improper billing is unethical – and perhaps illegal. Managing partners are responsible for making sure everyone in the firm follows the rules.
- Resolve cases quickly and efficiently. Don’t drag matters out to collect more fees.
- Be wary of suing for unpaid fees. Expect the client to assert malpractice as a defense or counterclaim. The liability claim may linger long after the billing dispute is resolved.
- Calendar the statute of limitations for malpractice. When possible, wait until the statute has run before you sue for unpaid fees. That way, the client is barred from bringing a malpractice counterclaim. Some firms notify clients in writing that collection efforts will commence after the malpractice statute has passed. This shows the client was given a timely opportunity to sue.
- Consider adding an arbitration clause to your fee agreement. Learn how to do it here.
- Comply with state and local rules of professional conduct. What do the rules say about fees, billing and collection efforts? Some states require lawyers to advise clients of dispute resolution options before suing for unpaid fees.
- Keep communicating. Many problems can be solved by simply sitting down and talking with your client.
- Establish good internal systems. Time and billing software can help in this regard.
The Bottom Line: Make sure your fees are reasonable, your billing is regular, and your risk management efforts minimize disputes over money.