Hell hath no fury like a client who feels scorned.
At some point, many attorneys will experience a client who decides not to pay. Sometimes it is a simple oversight or a lack of funds. In a few instances, the client has decided he or she is unhappy with the work performed and withholds payment.
Attorneys, being who they are, the response starts with a demand letter and sometimes ends with filing a lawsuit for unpaid fees. It’s at this point where we separate the unhappy from the truly scorned.
In the world of insurance, counter claims from former clients being sued by their former attorneys are one of the more common types of claims sometimes covered by errors and omissions insurance. These claims typically arise when a client isn’t happy with attorney or, more specifically, the outcome of the legal matter at the center of the fees in question. When the attorney is unsuccessful in prompting the former client to pay fees voluntarily, he or she files a lawsuit seeking payment. That’s when the client responds.
Claims run the gamut: negligence, breach of fiduciary duty, allegations of fraudulent or excessive billing practices, etc. In a few instances, not only does the former client refuse to pay and file a counter claim related to the unpaid fees, he or she may also decide to sue the attorney in question for malpractice.
From here things tend to get scary. Normally the counter claim is significantly higher than the fees the attorney was seeking from the client. Significantly higher.
For a small law firm or solo attorney handling non-complex personal or business legal matters, the counter claim from the former client can average anywhere from $10,000 to $15,000. For bigger firms, and in cases where they original legal matter was particularly complex, the counter claim can skyrocket well beyond a mere $10,000 or $15,000.
With significant dollars hanging in the balance, these counter claims can go a number of ways. In most cases, the governing factor is the original attorney-client agreement. Was it clear how the fee structure would work? Were the legal services carefully enumerated? Did the attorney carefully document the work performed? Did that attorney keep the client apprised of hours, work performed and fees? It comes down to the evidence — the documentation of the agreement and the communication throughout — as well as the judge.
To prevent lawsuits like these, the best defense is good preparation. Make sure your engagement letters are carefully worded, enumerate the services agreed on and outline alternate scenarios. You would be surprised by how many attorneys simply start performing services without carefully outlining their services and fees at the beginning of the engagement.
A good practice is to periodically review the engagement letter. You can evaluate if the scope of work or the needs of the client have changed. You would also be well-advised to prepare a communication to the client advising them of any change from the original engagement letter. Additionally, periodic, documented updates to the client that advise them of work done, work still pending and hours applied provide ample evidence, if needed, of a fully informed client.
Moreover, a sound billing structure is key. In addition to spelling out your fee structure, ensure the manner in which you track your hours, account for work done and how you report both back to the client are efficient, clear, relatively easy to maintain and accurate.
It’s not always possible to please every client. However, unhappy clients need not put lawyers on the defensive and in jeopardy. A thoughtful and well-documented engagement, ongoing communication with the client throughout the matter, and a sound billing structure may be the most important elements of your relationship with your client and your defense if things go sideways.