You accept a divorce case on an hourly fee basis with an advance deposit of $1,000, which you place in your trust account. Three months into the case the deposit is depleted and you send the client a bill for that month’s services. The bill goes unpaid. At your next client meeting you bring up the matter of the past-due account. The client explodes.
“What are you talking about? I paid $1,000 for you to handle my case and you haven’t even finished the job. Now you expect me to pay you more?”
With a calm and practiced professionalism you open the file and whip out the signed Agreement of Legal Representation – which you knew to use because you attended the most recent Lawyers Mutual risk management seminar. You begin reading in a clear and patient tone, starting at the first Whereas. Before you have finished the first sentence, however, the client interrupts.
“I don’t care what that piece of paper says. All I know is I paid you $1,000 and I’m still married. So you better get to work and quit trying to squeeze me for more cash.”
You leave the conference room and return with a towel to wipe up the water that spilled on your burnished mahogany table when the client gesticulated angrily and accidentally knocked over the drinking glass. You dab your file dry because it got soaked too. Then you take your seat and with a coolness that cannot be taught in any ethics course you resume reading the Agreement – at least the parts that remain legible.
But again the client interjects.
“Save your breath. So what if I signed that thing? I didn’t read it and wouldn’t have understood it anyway. Disbursements and replenishment. Bunch of legal mumbo-jumbo. You said just sign it and you’d get right to work. So I did. But obviously you didn’t.”
Again you excuse yourself, this time for the mop bucket. When the client banged the table in fury the entire pitcher of water went flying. You swab the deck and set up a yellow “Caution-Wet Floor” cone – another nifty tip from Lawyers Mutual.
You decide to try another approach. You point out the considerable effort you have already undertaken, the time you’ve put in, the remarkable complexity of matrimonial law, and the eminent fairness of your hourly rate. Not to mention the fact that the Agreement of Legal Representation is a valid and binding document printed on expensive stationery now dripping wet and somewhat blurred but nonetheless still enforceable – or will be after a few seconds under a blow dryer – and that the client’s failure to pay a fee when due constitutes a clear breach, pursuant to Page 4, Paragraph 3, Line 1, Section A, Subsection B, Clause I of said contract.
“Wait a minute,” the client says. “You’re threatening not only to quit my case but sue me if I don’t pay you more money?”
For the third time you exit the conference room. You can hear the client loudly laughing behind the closed door as you walk down the hall to the break room for a bottle of aspirin and a Mountain Dew.
Okay, so what went wrong here? Clearly, you did some things right. You used a written engagement document and you had the client sign it.
You even did the right thing by talking to your client in person about the unpaid bill.
What we have here is a failure to communicate. Somewhere along the line there was a breakdown. Although you signed the same page contractually you were not on the same page mentally.
Sure, it is better to have a written fee agreement than no agreement at all. And better yet to have it signed. But you can get as many signatures as you want – along with a slew of notary seals, attestation clauses and witnesses from Wilmington to Wyoming – and it adds up to a hill of beans if you end up with an unhappy client. Because an unhappy client means an unhappy lawyer, and enough unhappy clients will sink a law practice quicker than you can say “Sue me.”
Cures for the Billing Blues
Here are a few risk management tips to avoid time-billing tragedies:
Get paid in advance. Getting money up front is the surest way to avoid trouble later. Collect enough so that even a worst-case scenario (i.e., you never get paid another cent) is not catastrophic.
Minimize “pay as you go” clients. Most solo and small-firm practitioners have no choice but to accept clients who pay counsel fees as the case proceeds. But this creates the need for a billing and collection system, which takes time and labor. It can also lead to trouble down the road. At some point, for example, you will have gone too deeply into the matter to be able to withdraw ethically, or at least without complications. Shoot for a healthy mix of billable cases, flat fees, blended fees, contingency fees and so on.
Communicate. Talk candidly – and in plain English – with new clients about fees. Explain what you charge and how you expect to be paid. Have them not only sign the agreement but also initial key provisions regarding fees and billing. Read these parts out loud. Watch out for clients who say “money is not important” or “it’s the principle of the case, not the money.”
Say it, Say it again, and then Say it a third time. Some communication experts say important points have to be stated three times before they fully sink in. In the above situation, you could have explained your fee procedure to your client at the outset – emphasizing that the initial payment was only an advance deposit and not the final fee – and then reiterated the same points as you went through the written agreement together. Before adjourning, you could have asked the client to repeat the fee and billing terms, to make sure there was no misunderstanding.
Follow-up. Send a letter to new clients after the initial interview thanking them for their business and confirming important aspects – listed as bullet points – of fees and billing.
Educate your clients. Prepare a simple brochure outlining your billing procedures. Explain the difference between fees and costs. Define the terms retainer, advance deposit and trust account. Post this information on your website.
Keep a roll of paper towels handy. You might need it. There’s just no pleasing some clients.
Jay Reeves is an attorney licensed in North Carolina and South Carolina. He has practiced in both states and was Legal Editor at Lawyers Weekly and Risk Manager at Lawyers Mutual. He writes the Risk Man column of practice pointers and risk management tips. Contact firstname.lastname@example.org or phone 919-619-2441; www.riskmanlawsolutions.com.
Jay Reeves practiced law in North Carolina and South Carolina and is author of The Most Powerful Attorney in the World. He runs Your Law Life LLC, which helps lawyers and firms improve their well-being and create saner, more successful law lives. He is available for talks, presentations and confidential consultations.