Don’t Shoot Yourself in the Foot (or the Wallet)

Common mistakes that cost lawyers fees

Don’t Shoot Yourself in the Foot (or the Wallet)

The only thing worse than working as hard as we do for our clients is working that hard for less than a fair fee (or even for free). Here are seven mistakes that lawyers make most often that jeopardize their right to be paid fairly for their hard work. Each could legitimately command an article of its own, so use them only as a starting point.

1. No Retainer Agreement

Despite the fact that lawyers frequently advise clients entering into business transactions to reduce the terms to writing, they are remarkably inconsistent about doing so themselves. Without good retainer agreements, lawyers may preclude themselves from (among other things): withdrawing for non-payment of interim bills, insisting on retainers, charging for travel time, charging for staff time, and charging more for exceptional results.

2. Lack of Security

Lawyers frequently prejudice themselves by acting without retainers even though it seems unassailable that it is better to be secured or to know, at the outset, that a client will be unable to pay. It should also be noted that a retainer is not the only way to solve the security problem. Mortgages against land, security interests in personal property and assignments of litigation or transaction proceeds are very useful, but often overlooked, alternatives.

3. Inaccurate or Unqualified Estimates

Depending on the circumstances, an estimate of cost may be contractual, thereby requiring the bill to come within a reasonable tolerance of it. Even when they are not “true estimates,” predictions of cost give rise to clients’ expectations, and missing them often leads to disputes and to fee reductions on reviews of bills. Take the time to ensure that estimates are well thought out and are properly qualified by the facts and circumstances known at the time, and if projections change, communicate the change in a timely way.

4. Failing to Document Time or Instructions

The time spent by the lawyer is a factor that must be considered on a review of a bill even where the fee is based on something other than time spent (such as a flat fee or a percentage contingency fee). Lawyers who keep a good record of time spent and what it was spent on — even when they don’t have to in order to calculate their fees — give themselves a major advantage if their charges are ever challenged. Documenting instructions is equally important. Showing those steps, which the lawyer might have advised against or which might not have been strictly necessary or were specifically instructed by the client, can go a long way toward ensuring that the lawyer is paid for work to which the client later objects.

5. Improper Withdrawal

Engagements for a single transaction, such as a piece of litigation or a purchase and sale transaction, have been frequently held to be “entire contracts.” Where lawyers withdraw from entire contracts for non-payment of interim bills in the absence of a contractual term allowing them to do so — or where they withdraw prior to completion for any other reason not amounting to cause — they may well find that they must refund any fees paid up to that point.

6. Failing to Assert Lien or Charge

Although lawyers have been given significant statutory and common law rights to ensure payment, including possessory and charging liens and charging orders, they frequently make no use of those rights, use them incorrectly or inadvertently waive them, thereby losing valuable leverage to compel payment of their bills.

7. Missing Limitation Dates

A review of an unpaid bill must be commenced within 12 months of its delivery. A civil action to collect on a bill must be commenced within two years. In either case, if more than two years has passed since the retainer was completed and the lawyer could have billed, the lawyer’s claim will be out of time.

Related Articles