About one-third of legal malpractice claims are counterclaims filed by clients who were sued for fees by their lawyers. Some clients will counter-sue for malpractice to avoid paying fees that they cannot afford to pay. Other clients may not have paid the fees because they were unhappy with the services provided but were not going to sue for malpractice unless forced to do so because they were sued for fees.
There are some things a lawyer can do to try to prevent a client from getting substantially behind on the legal fee bills. First, have a solid fee agreement up front that clearly sets forth what the client will be obligated to pay, how quickly the client will be required to pay, and the lawyer’s remedy if the client does not pay timely. You may want to require the client to pay a deposit upfront that will be held in the lawyer’s trust account as security for payment of the last invoice.
Second, have someone in your office assigned to track accounts receivables closely and, if the client gets a predetermined number of days behind, or owes over a certain threshold amount, let the client know you will have to withdraw if the bill is not paid, and stick to your threat. Don’t stay in the case until the eve of trial and then try to withdraw. At that point, the judge may not let you withdraw, and you cannot ethically withdraw if it would prejudice your client’s rights — e.g., if it would be too late for the client to hire someone else.
Despite your best efforts at the beginning of the relationship, the client may still get behind and owe money by the end of the relationship. Before suing the client for fees, consider other alternatives. Ask the client to agree to make payments over time or consider reducing the bill for an upfront substantial payment. Find out if there is any reason the client is not paying other than lack of funds. Was the client unhappy with your services?
Next, consider an alternative to litigation. For example, is there an option to file an attorneys’ lien on the case? Will the client agree to mediate any disputes that there may be regarding the amount of the fee.
If the client will not respond to your requests for payment or take your calls, your next step is to evaluate the risks and benefits of filing suit against the client. For example, consider the significance of the amount of unpaid fees and expenses. Is the unpaid amount worth pursuing if you are going to get a legal malpractice claim in response and you are going to have to pay your legal malpractice insurance deductible to defend that claim? If your deductible is more than the amount the client owes, the suit for fees may not be worth it. The cost of defense of the malpractice claim may also affect your future malpractice insurance premiums. You also should consider whether a judgment against the client will be easily collectible because you will have your own costs in pursuing the suit and collecting on the judgment.
In the end, suing a client for fees should be a last resort, and it should be done only when the benefits of filing suit against the client outweigh the risk of having to defend a legal malpractice case.
On the other hand, if the client sues for legal malpractice and happens to owe fees to the lawyer, we often recommend the lawyer counterclaim against the client for the unpaid fees. At that point, assuming the lawyer was not negligent and is innocent of any wrongdoing, the lawyer has nothing to lose by pursuing the fee claim. If the lawyer files a counterclaim for unpaid fees, the client then has a downside in pursuing the legal malpractice claim.
Steven Schwartz is a principal at Brown & James in St. Louis who has defended lawyers in legal malpractice cases, malicious prosecution cases and ethics complaints for more than 30 years. He can be reached at [email protected]. The views expressed in this article are not intended to be taken as legal advice.