Having Problems Getting Paid?Collecting Your Fees

Within The Line Of Ethics

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The Business Of Law®: How To Build Your Practice

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Edward Poll is the nation’s foremost expert on law practice management, focused on helping attorneys andlaw firms effectively manage The Business of Law®.

With over four decades of professional experience, Ed’s extensive background in business and law have made him one of the nation’s most sought-after experts in law practice management. He is the first recipient of the California State Bar (LPMT Section) Lifetime Achievement Award in 2010.

Ed Poll, J.D., M.B.A., CMC

Law Is Both A Business & A Profession

“Law is not a profession at all, but rather a business services station and repair shop.”

- Adlai E. Stevenson, Senator

OR IS IT?

Law Is Both Profession & Business

“Law is subject to the same laws of economics as any other business. Having a great product is not enough.”

Tower Snow, Chairman (2001)

Brobeck, Phleger & Harrison

San Francisco Corporate Law Firm

The Work Cycle

Doing the work

Getting the work

Collecting your billings

Overview

1

2

3

Collecting your fee – from the start

Dealing with slow payers

When non-payment becomes serious• Withdraw• Alternatives to secure payment• Suit or arbitration

Collection Begins At Intake

• Understand what client wants• Seek that result for that client• Want vs. Need• “Competent” to handle the matter• Want this client / matter

Written engagement Letter• Consequences

Credit Check

Selecting Clients

Poll #1

Do you discuss timely payments with clients during engagement sessions?

Fees

• Excessive (ABA)• Unconscionable (CA)

“Reasonable” under Rule 1.5

Types of fees

•Time-based (usually hourly) fees

•Fixed

•Contingent

•Value

Budgets

• Estimate future costs and expenses

• Manage client expectations

• Document likely outcomes

• Memorialize course of action client selects

• Makes client part of team

Bills Influence Collections

• Can the client understand the bill?

1

• Value provided?

2

• Does the bill make the services sound meaningful and reasonably priced?

3

• (If billing cycles are relevant) Has the firm sent the bill when client is likely able to pay?

4

Poll #2

Do you have a collection policy?

Who Handles Collections?

• Lawyer involvement

• Staff involvement- Obligation to supervise

• Need for joint plan and staying informed

Poll #3

During the course of your representation, how often do you connect with your client?

Bills Not Paid Timely

• Did client receive the bill?

• Did client understand what was done and what was billed?

• Does client have any questions or problems with the bill or the services?

• When will the client pay?

Follow up – “Dial & Smile”

Interest On Delinquent Accounts

• Must disclose possibility of interest fees at outset of representation

• Some jurisdictions require written client consent to arrangement

Generally permitted but . . .

Stopping Work

• See engagement / fee agreement

• Impact on client and matter

• Impact on lawyer-client relationship

Withdrawal When Non-Payment

Permitted under Rule

1.16

Will not cause

materially adverse effect on

interest of clients

Time sensitivity

Alternatives To Non-Payment

• Payment plans

• Revisit when client’s finances improve

Avoid an arrangement that the client will almost certainly fail to satisfy.

Lien On Client Files And Property

• Can’t withhold client’s file for nonpayment

• Can withhold much or part of a file to obtain payment

• Can withhold only work product

• Can withhold only opinion work product

• May withhold file even if client prejudiced

Check your jurisdiction

Reporting Client To Credit Agency

States that reporting is not permitted because the disclosure is not reasonably necessary to collect the fee.

NYSBA Opinion 684 (1996)

Promissory Note To Secure Payment

• Fair and reasonable

• Terms fully disclosed to client in (understandable) writing

• Advised in writing to seek independent counsel

• Signed agreement documenting informed consent

Comply with Rule 1.8(a)

Mandatory Arbitration Clause For Fee Disputes

• Generally permitted under ethical rules- DC Bar Opinion 218: Arbitration is consistent with

Rule 1.5

• Generally may not require arbitration of all disputes between lawyer and client

- Rule 1.8(h) limits when lawyer may make an agreement prospectively limiting

liability

Filing Lawsuit

• Check jurisdiction regulations

• Review E & O insurance policy- Carrier may want / require notice

• Use outside counsel- Objectivity- Better protection for confidences

Risk Of Cross-Complaints For Legal Malpractice

• Only 10-15% of suits for fees result in cross-complaint

• First loss is best loss

• Need to make sure case is one worth sending to suit

• Peer review of file before suit is filed

Selling Accounts Receivables?

• DC Bar Opinion 298: Outright sale not permitted

• Must use alternative means of dispute resolution when possible under Rule 1.5

• Must retain sufficient control over disclosure of information to satisfy Rule 1.6

Taking Stock In A Client

• Fee must be reasonable

• Comply with Rule 1.8(a)

• Be mindful of potential conflicts

ABA Opinion 00-418 permits a lawyer to acquire stock in a client.

Settlement / Compromise Of Claims

• Agreement should be confirmed in writing

• Release of claims – beware Rule 1.8(h)

• Implications for future billing

Poll #4

What do you do when your client doesn’t pay you in accordance with your payment agreement?

Process Summary

• First meeting

• Engagement letter

• Budget

• Internal collection procedure

• Peer review of file

• Arbitration if required

• Write-off

• Lawsuit

Contact Us

Ed Poll, J.D., M.B.A., CMCLawBiz Management Co.www.lawbiz.comwww.lawbiztips.comwww.lawbizblog.com(800) 837-5880

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