Wisconsin Lawyer
Vol. 80, No. 7, July 2007
Sleep Easy, Friends. We've Got Your Back.
Kevin Palmersheim, chair, Wisconsin Lawyer editorial board
This issue marks the introduction of a new column, "What Keeps You Awake at Night?" The column will appear bimonthly, addressing common issues facing Wisconsin lawyers in their practices.
As chair of this publication's editorial board, I'm supposed to tell you that this column complements the State Bar's strategic plan and the efforts to provide solutions to the challenges facing Wisconsin lawyers. It certainly does. But more importantly, the editorial board's goal is to be responsive to readers - to invite you to contribute questions to be posed in this column and to assist colleagues in solving practice-related problems by responding to questions.
Many topics addressed in this column are derived from recent Bar surveys in which lawyers were asked to identify their practice-related concerns. Responses to one question in particular form a platform for this column - "What professional issue keeps you awake at night?" We will not only solicit solutions from practicing lawyers but also seek the advice of a variety of "experts."
The best way for this column to be responsive is for you to provide input. Please take the time to respond to the question that will appear in the September column (see "Keep the Dialog Going"), and let us know what other questions or practice issues you would like addressed. Your ongoing participation will assure a more interesting and productive column and hopefully lead to a few less sleepless nights for all of us.
Clearly Set Out Lawyer and Client Obligations and All Aspects of Billing
by Nerino J. Petro Jr.
Raising the issue of how you are to be paid or questioning why fees earned have not been paid can make even the toughest lawyers squeamish. Lawyers who are willing to ask the tough questions on behalf of their clients nevertheless often are afraid to address payment issues head on with their clients. Why this is a continuing issue in the legal profession is puzzling; when you go into the office of a medical, dental, or some other service provider, you generally don't leave that business without making payment. Why should it be any different for lawyers and their clients?
In addition to the obligations that you have toward your clients, you also have an obligation to yourself, your family, and your staff to see that payment is made on time. Many attorneys keep a family picture on their desk to remind them of their obligations when they're listening to the reasons the client can't pay the requested retainer or has not paid outstanding bills.
Lawyers need to approach the issue of fees and getting paid the same as any other business does:
1) Discuss your fees at the initial consultation. Discuss the basis of your fees and your retainer requirements at the initial client consultation. Describe in detail how you will bill - hourly, fixed fee, or contingency. Discuss what expenses the client will be responsible for and the amount of any retainer and how it will be applied against their bill.
2) Use written fee agreements. Using written fee agreements is a "best practice" in running your law practice. Use the fee agreement to detail your billing practices, fees, and expenses, how you expect to be paid, and your right to withdraw for nonpayment. One practice consultant advises having the withdrawal-for-nonpayment provision be a separate paragraph that the client initials, reinforcing the client's obligation for timely payment.
3) Use written engagement letters. Clearly explain in your engagement letter the scope of your representation and specifically list what you will not do for the client. The engagement letter is an opportunity to set out lawyer and client obligations to each other and what the client can expect. The letter establishes the nature of the two-way relationship between the lawyer and the client.
4) Use your bills as a regular status report. Send bills regularly - either monthly or biweekly - even if you are doing the work on a fixed or contingency fee basis. This lets clients see what actions you take on their behalf. Use the bill as another tool to communicate with your clients. Look at the bill with a critical eye - as though you were the customer. What makes more sense to you: "TC with atty Smith re: Dep Scheduling" or "Telephone call with attorney Smith to discuss scheduling of his client's deposition"? Keeping the client fully informed in understandable language helps to keep the client happy and improves the client's desire to pay promptly.
5) Stay on top of your accounts receivable. Keep track of the status of your accounts receivable on a regular basis; close monitoring helps you to identify potential issues with clients if they're not paying or are slow paying and to discuss with them any potential unhappiness with your legal representation or other issues. Regular monitoring also may prevent you from continuing to work for a client who is not paying and gives you an opportunity to withdraw in accordance with the rules.
6) Don't nickel and dime your client. Nothing will irritate clients more than to feel that they're being charged for every paperclip or every minor detail regarding their case. Bill for significant legal work. Rather than charge for every item or expense - such as the actual telephone charges - either build these charges into your hourly rate, assess an overhead charge when you open a case, or do not charge for any expense under a set dollar amount, such as $10. Any work that you do for the client but do not charge for should be shown on your bills as "no charge" (n/c). These billing ideas may not sound like big things to you, but they can engender a great deal of goodwill with your clients, and happy clients pay their bills.
Jay Foonberg, author of the ABA book How to Start and Build a Law Practice, is considered by many to be "the source" for techniques on how to run your practice. He has a very simple rule to ensure prompt and complete payment, which he calls "Foonberg's Rule," consisting of only three words: cash up front. Spend two minutes online and review this brief video at http://tinyurl.com/yv6fa3, and let Jay explain his rule to you himself; it will be time well spent.
Be Mindful of Ethical and Business Concerns
by Timothy J. Pierce
When confronted with current or former clients who are not paying, lawyers must be mindful of ethical as well as business concerns. The Rules of Professional Conduct do not prohibit a lawyer from pursuing (even suing) a former client for reasonable, earned fees, but here are a few things to keep in mind:
1) Don't withhold the file to get the client to pay. The file is the property of the client, not the lawyer, and must be provided to a former client on request, regardless of whether the former client owes the lawyer money. Failure to provide the file violates SCR 20:1.16(d).
2) Don't withhold services to get a client to pay. If a client is not paying, the lawyer still is obligated to provide competent (SCR 20:1.1) and diligent (SCR 20:1.3) representation.
3) It's OK to withdraw from representation of a nonpaying client. SCR 20:1.16(b)(5) allows a lawyer to withdraw if a client fails to pay as previously agreed, but the client must be given reasonable warning and an opportunity to come current. If a matter is pending before a tribunal, the lawyer normally must seek permission to withdraw.
4) There is no prohibition on suing former clients for fees, but be careful what you reveal. SCR 20:1.6(c)(4) allows a lawyer to reveal information to the extent reasonably necessary to establish a claim for fees. Gratuitous disclosure of information, however, can result in discipline. For example, ethics opinions in other states have warned against reporting former clients' delinquencies to credit bureaus, because this serves no purpose other than to harm the former client.
5) Check with your malpractice carrier before suing a former client. Many malpractice carriers strongly discourage, through various mechanisms, lawyers from suing former clients because that is very likely to generate a malpractice claim in response.
This is a very brief list and is by no means comprehensive. Lawyers must be familiar with both the Rules of Professional Conduct and their malpractice policies before pursuing a client for fees.
Keep the Dialog Going…
Add to the discussion of the question: How do I get my clients to pay? Email your response for possible inclusion in a future issue to wislawyer@wisbar.org, subject line: Get Clients to Pay. Limit your response to 200 words or less. Responses may be edited for length, style, and clarity.
To suggest a question: The WL welcomes suggestions for questions to pose to readers. Email your suggestions to wislawyer@wisbar.org, subject line: Proposed WL Question.
Respond to the next question for September: We thank Michael F. Brown, Peterson, Berk & Cross S.C., Appleton, for our next question:
When your client takes a clearly unreasonable settlement position (for example, as a term of settlement demands a written apology, or a payment that exceeds maximum legal damages), and does not accept logical explanations as to why the position will not work, what do you do to get the client to see the light?
How to respond: Email your brief response (200 words or less) by Aug. 1 to wislawyer@wisbar.org; subject line: Settlement. Include your name, affiliation, and city. The editors will select several responses for publication and will notify you in advance of publication if your response has been selected.
Wisconsin Lawyer
