Volume 1, Number 2
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Collection of Attorney Fees as a Practice Area
Representing attorneys for the collection of fees owed them has become a practice niche over the last decade. As a disclaimer, I have never sued any of my own clients for the collection of my fees, partly because of the old rubric regarding having a fool for a client, but also because I have just never been able to bring myself to do so philosophically. I have not been “stiffed” often nor has the amount of money involved been significant.
The bar and malpractice carriers tell us that suing clients for fees is a sure way to elicit bar complaints. Sure enough, I have had a number of defendants threaten to do just that, either as a counterclaim or separately. Fortunately, none has followed through on the threat. (With that statement I have probably just “jinxed” myself.) I, nevertheless, have a long session with potential attorney-clients to review and seriously consider the risks inherent in suing clients.
I treat attorney fee collections the same as any other type of collection. The first step is a review of the contract (or whatever the attorney may have titled it), invoices, correspondence, etc. Generally, I do not recommend suing on an oral attorney fee agreement as the chances of prevailing do not warrant the risk involved. And, of course, there are jurisdictions which require written fee agreements. There are also some statutory limitations on the level and method of what fees can be charged. So, the client’s practice area and jurisdiction must also be considered. It may be obvious, but the local rules of professional responsibility but also be reviewed and considered.
There must also be a determination made as to whether the FDCPA and any state version govern such collection by one attorney for a client attorney. I err on the side of caution in making this determination. While the attorney collecting his or her own fees would not be subject to such acts, the outside collection attorney might very well be deemed a “collector” and be subject to the strictures and disclosure requirements of federal and local acts. The onerousness of the collections attorney treating the action as subject to the FDCPA is greatly outweighed by the penalties imposed for running afoul of the statute.
Absent exigent circumstances, I begin with a demand letter. This has the advantage, at least, of determining whether the address provided is good and sometimes (infrequently but not unknown) of resulting in payment of the bill without further adieu.
The second step is to review any response to the demand letter with the attorney-client and decide whether to proceed to file suit and, if so, in what court. This jurisdictional decision requires basically the same considerations that govern any cause of action.
After suit has been instituted, the rules are the same as for any action. Because of the possible perceptions and biases, it is important to studiously keep the focus on the fact that it is just another contract action. More often than not it becomes a process of negotiation. With any luck, your client will be able to get beyond the emotions, recognize the vagaries inherent in litigation, and make rational decisions.
Another wrinkle for the attorney-client to be fully aware of is that all the legal malpractice insurance applications that I have ever seen inquire whether the applicant has sued any client for fees. The level of further required specificity then varies somewhat according to the carrier. No doubt the answer to such question will impact whether coverage will be provided and at what rate. While we are all lawyers and receive the same insurance applications, bar association warnings, etc., I go over this point carefully and explicitly before undertaking the representation. I most assuredly do not want my attorney-client suing me.This area has been rewarding for me and I believe for the client-attorneys. On occasion it has resulted in some rapprochement between the client-attorney and the attorney’s client. Also, it has been nice to have been helpful to the attorney-client in tightening his or her business practices. By taking a more businesslike approach to the collection of receivables, the profitability of the practice is improved.