By Ken Raynor
Learning from the mistakes of others is far better than learning from your own follies. The work of the Mecklenburg County Bar’s Fee Dispute Resolution Committee allows its members to see patterns of conduct which end up in disputes between attorneys and clients. Hopefully, the members use this experience to develop procedures and practices which will help avoid fee disputes. We thought it may be good to share with our associates some of the insights we have learned through our service as members of the Fee Dispute Committee.
Pick Good Clients
Don’t accept new cases in January. A friend of mine says he does not accept new contingency cases in January. The reason is that he is inclined to panic about a drop in business and accept bad cases (and difficult clients) in the doldrums which follow the Christmas season.
The best way to avoid fee disputes is to avoid difficult clients. Bad clients cause a lot of difficulties no matter how well represented. One common symptom is a fee dispute. Some difficult clients are never satisfied with the course of their case or the services of their attorneys. These clients often express their dissatisfaction in the context of objecting to their attorneys’ request for payment of fees properly earned. A frequently heard comment from attorneys in fee dispute mediations is something to the effect, “I knew this guy was going to be a problem when he first hired me.”
In thinking about problem clients, I am reminded of the cartoon with the caption to the effect of “Nature’s warning signs” and illustrations of pesky animals such as skunks and porcupines, and a strange person. Too bad difficult clients are not as easy to spot as a skunk. But, I think we can spot some at early stages of engagement. So, it is easier said than done, but avoiding the client who does not pass the smell test will help you avoid fee disputes and reduce the stress of practicing law. Of course, you will still have to deal with life’s other difficulties such as difficult opposing counsel and judges who disagree with your analysis of the law.
Written Fee Agreement
You have heard it before, but put your fee agreement in writing. A written fee agreement will not prevent all fee disputes. However, a written agreement is an opportunity for the attorney to eliminate arguments which would otherwise flow from misunderstandings on the client’s part.
Of course, the attorney should make sure the language of the agreement is consistent with the intended fee agreement. Smart attorneys review and revise their fee agreements to address issues raised by clients. You should periodically review agreements used by other firms and hopefully learn from their experience. I had the opportunity to observe the evolution of the standard fee agreement used by a local bankruptcy practitioner. The document changed in response to the myriad of issues raised by clients over the course of years. I am sure the agreement, which became very complex and specific, avoided a lot of headaches for the attorney.
Follow the fee agreement you have entered. You would be surprised to learn the number of attorneys who have been embarrassed when their failure to follow the fee agreement they drafted is pointed out to them in a fee dispute mediation. Firms sometimes have this problem when they prepare standard contracts but don’t train their attorneys and staff on what are acceptable billing practices under the contract with the client.
A common situation where the attorney has not followed his own contract is where he has performed work which he considers to be in addition to the services covered by a set fee agreement. Don’t assume your client will recognize that you are providing services outside the scope of your agreement and for which you expect to be paid additional work. As a rule, attorneys hate to talk to clients about bills. It is much better to have difficult conversations with the client early in the process than at the end. So, despite the unpleasantness, have this conversation as early in the process as possible.
Also, if you are aware of common problems which often put you in this situation, include language in your standard agreement that there will be extra charges in the event you are called upon to deal with such issues. For example, a closing attorney can include language that any work to clear title defects will be paid on an hourly basis in addition to the closing fee.
Bill Early and Often
I define any unpaid bill as a fee dispute even if I write it off. Formal fee disputes often arise from an attorney’s efforts to collect unpaid bills. I bet your malpractice carrier would advise you not to sue a client to collect a bill. The reason being is that such suits often generate counterclaims and ethics complaints.
I advise business clients that the best way they can win a debt dispute case is to simply avoid it. The corollary of this statement is that if you have to pursue a debt collection action, you have already lost: money, time, and goodwill. Employing good business billing/collection practices is the best way to avoid an unpaid bill and a fee dispute. An excellent billing practice in cases involving hourly billing is to send timely bills which document the work performed during the period, such as a monthly bill. Timely billing avoids the situation where the client is surprised with a large bill and claims that he was unaware that such work was performed. It is surprising how often we see cases at fee dispute mediations where attorneys failed to send bills in a timely manner even though they had an hourly billing arrangement with the client. There really is no good reason to wait for months during which extensive services are provided by the attorney for him to send a bill which is the client’s first notice of what he owes.
I know a lot of readers will say a better way to avoid unpaid bills to receive payment up front. I agree. However, not every matter can be handled on this cash on the barrel method. Certainly, obtaining a retainer is a good compromise.
Another good practice is to not involuntarily provide free legal services. There are lots of good opportunities to provide pro bono services. A deadbeat client is not a deserving charity. As a former managing partner once said, if we are not getting paid for the work we are doing, we should just go fishing. So, in addition to sending timely periodic bills, such as monthly bills, the attorney should monitor the account and upon the failure to receive timely payments and proper notice to comply, withdraw. This procedure should be spelled out in your fee/retainer agreement. Don’t be surprised that a client who fails to pay the bill when due, will later fail to pay a larger bill and assert a fee dispute claim as justification for not paying for services. Conversely, it is better to write off a small bill than a much larger one you saw accumulate over months of a client’s failure to pay.
Speaking of retainers, an attorney should monitor and enforce retainer provisions in their fee agreement. A good sign of a client who is going to fail to pay a bill is one who fails to honor his agreement regarding a retainer.
Law practice management consultants advise attorneys to delegate the task of monitoring accounts and trust account retainers to a staff member. There are a lot of good reasons to do this. One is that attorneys simply do not like to talk about unpaid bills to clients. This is the reason so many attorneys continue to provide legal services to clients who have not paid numerous outstanding bills. Oftentimes, a client’s failure to pay a bill reflects dissatisfaction with the attorney’s services (or communications). Focusing on an unpaid bill in a timely manner could help alleviate the client’s problem and prevent a problem, real or perceived, from boiling over into a fee dispute and a large unpaid bill. Think about it, it is easier to write off a bill for a couple of months of work than six or seven. A staff member assigned the job of monitoring account receivables and retainers will hopefully catch the problem early and avoid larger issues down the road.
We hear it all the time. One of the biggest complaints clients lodge against attorneys is their failure to communicate. So, in addition to returning phone calls, communicate in a timely fashion regarding the status of the client’s case. Most clients now prefer emails to formal letters. So, in this day of emails and text messages, it has never been easier to communicate with clients.
Give the client options regarding what can be expensive undertakings in a case, such as depositions or expert witnesses, before incurring these expenses on his behalf. Report developments, such as actions initiated by adverse counsel, which will generate extensive services in response and accompanying fees.
It is always interesting to see attorneys describe all of the work they performed on a case at mediations where their client has professed ignorance of any services provided on their behalf. I don’t’ know why, but usually, I see this at mediations in the context of a criminal case involving a parent who paid the bill for a child. Timely reports of services provided will help avoid the situation where the client professes ignorance of the work as a basis to contest the fee. I suspect such efforts will help you generate a more satisfied client in addition to avoiding a fee dispute.
It Just Happens
A final note. We are often dealing with people who are facing difficult, challenging situations. Clients often target their attorneys in an effort to vent their frustrations which should be aimed at other parties, like the difficult ex-spouse. So, you will not be able to avoid every unhappy client or fee dispute.
A confession. I did not learn all of the pointers above from my experience on the Fee Dispute Committee. Unfortunately, I learned some of them the hard way. Hopefully, the above tips will help you learn to avoid fee disputes without the experience.
Also, remember to keep an eye out for nature’s warning signs.
Ken Raynor is the principal at Raynor Law Firm in Charlotte and a member of the North Carolina Bar Association’s Law Practice Management & Technology Section. Reach him via email at Ken@Raynorlawfirm.com. This article first appeared in the NCBA’s LPMT section newsletter.