Jul., 2011 - Mecklenburg County Bar

Paying the Piper
By Camille Stell
Last year, international law firm Squire
Sanders (now Squire Sanders and Hammonds)
sued a client for $1.2 million in unpaid legal
fees. Not surprisingly, their client retaliated
with a legal malpractice lawsuit. In addition to
the $1.2 million in unpaid fees, the firm is
now running up its own legal bills by hiring
an outside law firm to represent them. It’s
hard to imagine how a law firm can allow a
client to run up so large a tab. The case
exemplifies the advice you might receive from
your malpractice provider to avoid suing your
clients for unpaid fees.
Law office management experts were
appalled that collections were allowed to
languish to the point that the client owed $1
million. To avoid this scenario, there are a few
rules you should follow:
1. Screen clients effectively on the front end.
Look for red flags of financial difficulty that
would prohibit a client from being able to
pay you. Also, look for red flags that would
prohibit a client from wanting to pay you.
Do they bash the legal system? Are they
cynical of lawyers? Do they protest each
and every charge?
2. Keep a close eye on account receivables.
When you see a client is more than 30 days
past due, reach out with a phone call or e-
mail. Offer a quick status report on their
matter, and then ask about the late bill.
Don’t be embarrassed to make the call. You
have earned your fee; it’s easier to collect
one month late than six months late.
3. Get help. Delegate responsibility to your
accounting department or a support staff
member to keep you apprised of
collections and to provide you with a
report when clients are late with payments.
You may also want the first reminder to
come from your staff, but don’t separate
yourself completely from the billing process.
It’s easy for a client to avoid your staff’s
request for payment, make it hard for them
to stiff you for the money they owe you.
4. Send timely bills. It’s easier for a client to
avoid paying you if they don’t get the result
they want. For this reason, you’ll also want
to keep your accounts receivable up to date.
Also, don’t wait too long after getting a good
result to final bill your client. They are the
most pleased with your work on the day
you give them the good news.
Rule 1.5 of the North Carolina Rules of
Professional Conduct guide a lawyer’s conduct
with regard to fees. Lawyers need to be explicit
with clients about fees. Put everything in
writing so there will be no misunderstanding
later. However, it is inevitable that sometimes
a client will fail to pay his bill for legal services
in a timely fashion or will simply refuse to pay
because he is unhappy with the outcome of
his case. In these circumstances, the lawyer
may feel his only recourse is to sue the client
for the cost of the unpaid services.
Before you decide to sue a client for fees
ask yourself the following questions:
1. Is the amount collectible? You cannot get
fees from a client who is broke. You might
get a judgment against the client, but you
will probably also find yourself defending a
malpractice suit.
2. Is the amount substantial? Is the amount
of money owed significant enough to cover
the costs, loss of reputation, time and
aggravation associated with a malpractice
suit? If not, you may be better off letting it
ride and claiming the tax deduction.
3. Did you obtain a good result for the client?
If not, it is more likely than not that the
client will blame you. The jury hearing the
malpractice suit might think that you not
only failed to do a good job for the client,
but that you are greedy as well. As the
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public becomes increasingly cynical about
the legal profession, it is less likely that
jurors will sympathize with an unpaid
lawyer who sues his client for fees after an
unfavorable result.
4. Has another attorney gone through the
file to see if there are any weak links that
could lead to a malpractice claim? If you
are going to take a chance on being sued
for malpractice, you will want to be sure
that you can argue that the counterclaim
for malpractice is without merit. An
independent peer review can help you
decide whether the attorney fees are worth
pursuing in light of the risk.
If, after answering these questions, you still
decide to pursue a lawsuit against your client,
you must first comply with Rule 1.5 of the
Rules of Professional Conduct regarding the
fee dispute resolution program. Please contact
the MCB at 704/375-8624 to learn more about
the fee dispute process. If you have any
questions about what to do if you find
yourself in this situation, you should contact a
claims lawyer.
Camille Stell is the Director of Client Services
for Lawyers Mutual. With over 20 years of
experience in the legal field, Camille has worked
for law firms as a paralegal, legal recruiter and
business developer. Contact Camille at
800/662.8843 or
Camille@lawyersmutualnc.com.
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