Suing a client for unpaid legal fees many times is a bad idea. Yes many attorneys wait until after the statute has run, and yes this may prevent a counter claim or at least provide a defense. But this does not prevent a bar complaint and if done with any frequency will impact on your attorney malpractice premiums. Anything done with frequency puts you in the “actuarial crosshairs”.
The attorney’s arguments for suing clients for fees:
1. I do not want to work for free
2. I could get a reputation for not having clients pay me
3. It was not much money
4. It was a lot of money
5. We did everything right, but they still will not pay
6. We always let the statute of limitations run prior to suing
7. I am angry with this client (Really Bad Reason)
In reality approximately 1/3 of all malpractice claims involve some aspect of a fee dispute. In many cases there is an unresolved issue with the client. The fee suit can open up old wounds provoking retaliatory suits and bar complaints. Let you in on a little secret, Lawyers Professional Liability Insurance Companies know this. Many malpractice insurance carriers will not write a law firms making a regular practice of fees suits. This increases the premiums that a law firm will pay as there is less competition for your account. Other malpractice insurers will write the firm, but put an exclusion endorsement on the policy for retaliatory fee suits. This opens the firm’s and attorneys’ assets up in the event of a retaliatory suit. Law firms that make a practice of fees suits are not preferred attorney malpractice risks.
Worse yet, for firms that have had retaliatory fee suit claims or bar complaints filed against them are pushed closer and closer to the non-admitted/surplus insurance market where like “Double Jeopardy” the premium dollars do double.
As important as a good docket control system and intake procedures are, so are good billing practices. An ounce of prevention can go a long way to preventing uncollectable fees. While attorneys normally love practicing law, many do not like the business side of law. Collecting client fees start with the original client intake. Firms should require a retainer to be paid up front.
Avoid fee disputes by explaining the fee arrangement in great detail during the first meeting. Confirm this understanding in writing and have the client agree by signing the agreement. When billing the client, ensure there is enough detail in the bill to allow the client to understand everything you are doing on their behalf. Use simple terminology and avoid abbreviations to make sure the bill is easily understood.
Depending on the services provided, there may be ongoing fees. If this is the case regular monthly billings should be part of the firm’s procedures. Firms should also have someone other than the attorney that is handling the client matters reviewing all of the firm’s billings monthly. If billings are going unpaid, then these unpaid bills should be a regular part of the management committee’s or managing partner’s meetings.
Communication with the client on unpaid fees should take place promptly to determine what the issue is before the unpaid bills get out of hand.
If none of the above works and the law firm decides to sue for fees, make sure you pick your battles. If the unpaid fees are below a certain amount, it may not be worth it. If there are issues with how the firm handled the client’s work, then think carefully prior to filing. If the client has no money, it is tough to get “blood out of a turnip”.
If you are committed to filing suit, remember the repercussions of a retaliatory suit. Time that the firm will end up spending on the matter is time not spent on billable hours. Remember the possible impact on the firm’s attorney malpractice premiums.