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Practical Advice for Lawyers Dealing with Slow-Paying Clients

By Katherine W. Wittenberg, Litigation News Associate Editor – November 15, 2009

“The check is not in the mail.”

Unfortunately, lawyers are hearing this more frequently from clients these days. Implementing good business practices and firmly insisting on payment may yield positive results, especially for those small-firm and solo practitioners who understand that the practice of law is also the business of law.

Consider financial issues before accepting a new client
Attorneys must outline their expectations—and the client’s responsibilities—for fees at the outset. This can be accomplished in the context of an engagement agreement suggests Diane A. Seltzer, Washington, D.C., Section of Litigation Solo & Small Firm Committee cochair. After all, an attorney “has every right to be paid; this is not a hobby,” she says.

Obtain sufficient advanced fees
Requesting a sufficient retainer is another means to ensure some financial security at the outset, advises Stephen J. Curley, Stamford, CT, cochair of the Section’s Solo & Small Firm Committee. He is now more aggressive than ever in demanding larger retainers. “I used to use three to four months of projected expenses at the benchmark [for setting a retainer] at the outset of a case; now I look for four to six months,” he says.

Send detailed and timely bills
Make sure bills are sent out every 30 days, suggests Seltzer. Billing regularly avoids that “shock factor” of an invoice which may cover an extended period. Detailed bills curtail potential client complaints of not understanding what the attorney actually did for the fees.

Follow up with late-paying clients
Focus on late-paying clients, says Curley. “I usually will not permit deficiencies to run past 90 days or $10,000 before I alert the client that failure to come current will result in a motion to withdraw or suspension of activity on the file.”

If a client is late in making a payment, Seltzer may send a “gentle reminder” by email, telling the client that the next bill will reflect a cumulative payment. If there is an on-going delay, she may call the client for a candid discussion and an explanation for the delayed payment. “I’m a lawyer, not a banker.” “Most clients understand that this is a business,” she adds.

Encourage the client to propose a payment solution
When a late-paying client asks for a discount or modified payment terms, Seltzer avoids “bidding against [herself].” Because she expects full and timely payment, Seltzer asks the client to propose an alternative payment plan. “Let the client own the solution,” says Seltzer, so that the client is more likely to meet terms of the proposal.

Don’t bank on withdrawing
Withdrawing from a case due to non-payment of fees is a drastic remedy, not easily available to attorneys, notes Michele D. Hangley, Philadelphia, Section Ethics & Professionalism Committee cochair.

Under Rule 1.16 of the Model Rules of Professional Conduct, a lawyer may withdraw after a reasonable warning if “the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services” or if “the representation will result in an unreasonable financial burden on the lawyer.” Withdrawal requires court approval.

“If withdrawal is necessary, the lawyer should start the process as quickly as possible. If the lawyer puts off the decision until later in the litigation process, when important deadlines and trial dates are looming, the court may well require the lawyer to continue the representation, even if the client is not paying,” advises Hangley.

Before withdrawing, give the client notice and be prepared to document your attempts to work on the payment problem. “Under no circumstances should the lawyer simply stop working on the case or stop doing essential work on the case. Until the lawyer has actually withdrawn from the representation, she is still obligated to represent the client zealously and diligently,” Hangley adds.

“The lawyer must always act in the best interests of the client, even if the client is not keeping its promises to the lawyer,” cautions Hangley. “Among other things, this means giving the client reasonable assistance in finding a new lawyer, securing extensions, and transferring files that the lawyer holds,” she says.

Maintain a positive relationship
Even though the client’s payments are late or insufficient, it is important to maintain positive client relationships. “I express sympathy and offer alternative billing mechanisms,” such as smaller and more frequent billings or flat-fee arrangements, “to accommodate their needs” says Curley. “A little empathy and a touch of humor” can keep a good client relationship on track, says Seltzer.

Keywords: Clients, fees

  • December 11, 2009 – This ABA article might be a good article to circulate to all partners.


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