I am always amazed at how many clients decide not to pay their lawyers. Perhaps as consumers, they are not savvy as to the ultimate costs of legal proceedings that drag on. Perhaps we lawyers need to better educate and fully discuss fees up front. Certainly criminal defense lawyers learned long ago to get most of their fee in advance. As the old lawyer said to the new one: “There are three rules – (1) get your money upfront; (2) be very ethical in all you do; and (3) don’t forget to get your money upfront.”
For those who do charge by the hour, an advance or retainer is suggested for new and unproven clients. Do not hesitate to ask for a reasonable retainer. If they decline to pay such, it might be a clue not to represent them. Often this advance can best be held until payment is past due and not used if monthly bills remain current. By agreement it could be applied to the last bill or returned.
Any engagement letter should address in writing the right to withdraw if not paid and the requirement for the client to make timely payments of bills. You are urged to discuss any withdrawal procedures with them and to give proper notice, under applicable rules, before withdrawing. Lawyers should not be reluctant to withdraw when not paid either. It is important to do that well before any critical deadlines and to advise the client upon withdrawal of all such deadlines in writing. Otherwise, courts may not let you out because it would amount to abandonment, or the client will claim they did not know of the deadlines. The point is that lawyers need to be better business managers of their work done.
In an extreme example, recently the firm of Morgan Lewis & Beckins was finally allowed to withdraw 30 years after it was fired by the client. The Third Circuit would not grant the motion to withdraw until the client could retain substitute counsel, which did not happen. Finally, a three-judge panel upheld the Eastern District of Pennsylvania’s decision to let them out as counsel. It makes the point that there are some clients you do not deserve to represent.
Often when either the case is over or the court has let you out, you are still owed large fees and expenses. This is not a good thing. If you file an action to collect, you most often see a counterclaim back for legal malpractice. Some carriers prohibit such collection action because of such predictable claims back. In fact, some courts have held that any possible claim the client has for legal malpractice is a compulsory counterclaim. Harper v. Anthony, Ohio Eighth District Court of Appeals (2014).
So, what is a lawyer to do when owed money for work performed by agreement with the client. One idea is to fully spell out in the engagement letter a prescribed arbitration that is limited exclusively to fee disputes and nothing else. To avoid adhesion contracts, clients need to be advised to seek separate counsel on that issue. However, it is a way to litigate in an arbitration forum limited only to the fee issue. Arbitration is not a good forum for legal malpractice claims and any agreement needs to be narrowly limited to just fee disputes. That is a more efficient way to quickly handle a fee dispute for both the client and the lawyer.
Other options might be to agree upon a payment plan, backed up with an agreed promissory note. If they fail to pay under the terms arranged, you could then collect upon the note and execute upon any judgment obtained.
Clearly, your best bet is careful screening of clients and their payment worthiness. Refreshing retainers or additional advances will also help mitigate, but all must be clear in writing at the front of any engagement. Discuss all with prospective clients and put it in writing to them. Be a better manager of your own practice this year.