January/February 1997

Practical Suggestions to Avoid Problems With Fees

by Joy McLean, WSBA Disciplinary Counsel

originally published in two parts in Washington State Bar News, January-February 1997

Opinions expressed herein are the author's and are not official or unofficial WSBA positions.

This article continues a series on lawyers' fees. Prior articles discussed legal issues. This article suggests some practical ways to avoid problems with fees, and focuses on the formation of the attorney-client relationship.

If the client has never been to a lawyer, discuss how lawyers, as business people, operate. Even if the client has never used legal services before, she or he may have incorrect expectations based on television ads, the experience of a family member, or movies. If the client has previously been to a lawyer, you need to understand what that experience was like for the client so that you can either duplicate it or avoid it. Also, if appropriate, differentiate for the client the type of service you may be rendering from the previous experience. For example, if the client's prior lawyer handled a personal injury case, and you are handling a boundary dispute, explain the differences in fees and projected course of the case.

Talk to your client about your fees and costs. Do not leave this important aspect of the attorney-client relationship exclusively to staff. Clients are ready to hear about fees, and they want to hear about it in person from you, not by letter or from your assistant. Remember, however, that clients often feel uncomfortable in coming to a lawyer, and some may find lawyers intimidating and may expect to find you arrogant and lacking empathy. Disappoint them in these expectations!

Take the lead in talking to your client about fees and putting them at ease. Do not be shy about discussing fees with clients. Your discomfort with the subject will be sensed by the client who, in turn, will hesitate to raise questions or concerns about fees with you. Most people value what they have to pay for, and the expect to pay for good legal services. Generally, if clients seek you out in the first place, they will not be discouraged by the reality that you must earn a living. If that troubles them, you want to know this before you agree to represent them — and likely before you end up performing involuntarily free legal services for them.

Try to standardize your fee agreements and information. The more your fees are set up with forms and checklists, the more clients sense that all this is "institutionalized" and not personal to or directed at them. It also assures that you cover completely with each prospective client the important aspects of your fees and costs.

The pattern of communication should start with your initial consultation. Thus, the consultation should be in-person, uninterrupted, and with an interpreter if the client has difficulty communicating in English (making sure to comply with the confidentiality provisions of RPC 1.6). At the initial consultation, consider telling the client, "If you ever feel I am not doing a good job, I am charging you too much, my staff or I am not treating you well, or you are bothered by something in my representation of you, I would like us to talk about that. I cannot tell you I will be able to resolve the concern to your satisfaction, but I want to have the opportunity to try to do so." This will let the client know that he or she can talk to you and that you welcome him or her doing so. It may also save you from having a disciplinary grievance filed against you by a client whose real intent in doing so is merely to get you to pay attention to his or her concerns.

Establish a procedure to make sure that your fee agreement is signed before you begin representing the client. Sometimes in defending against a grievance a lawyer relies upon a fee agreement signed only by the lawyer; this is not always helpful since assent is a basic element of contract law.

Consider asking the client to sign a fee agreement at the initial consultation, even if the client is uncertain whether to start the representation; and perhaps insert a notice above the client's signature line which states the fee agreement is not effective until the client pays the entire advance fee deposit stated in the agreement. If the client is unwilling to sign at that time, or the case involves something other than an advance fee deposit, give the client a copy of the agreement and tell the client that you will not start representing the client until the copy is signed and returned. This requires you and your staff to diligently insist that the agreement be returned before you start work.

These procedures are much more effective if: 1, you ask your prospective client to read the fee agreement at the initial consultation; 2, you leave the room to allow him or her to do so without pressure; and 3, you then personally explain the agreement to the client. The prospective client is more likely to trust you if you willingly talk up front about fees and the less attractive aspects of the fee agreement, and if you frankly discuss the benefits and detriments with the client. If you doubt the client's literacy, read and explain the agreement to the client, and make a note of the reading and explanation on the agreement and have the client initial it.

Costs are as important to address in a fee agreement as the basis or rate of the fee. Explaining the difference between fees and costs helps the client understand the lawyer's meaning and use of the term "costs" in subsequent bills. A list of typical costs (for example, medical reports, court filing fees, service of process fees, newspaper publication costs, etc.) also helps the client understand the meaning of "costs." A recitation of RPC 1.8(e)'s requirement that the client remains ultimately liable for any advanced costs is recommended. Since whether payments or advances on the bill should be applied to costs or fees is a frequent source of disciplinary inquiry, clarifying this issue in the fee agreement is advisable.

Because fee agreements will generally be construed against you (the author), clauses giving an advantage to you, such as shifting more risk in contingent fee cases to the client, giving you presumptive entitlement to client funds coming into your possession, or providing that a fee is nonrefundable, may be considered unethical without clear evidence of your client's knowing agreement and fairness to your client. See Anne Seidel, "Nonrefundable Retainers and Advanced- fee Deposits," Washington State Bar News, September 1996.

If you need advice regarding a specific clause you propose to insert into your future fee agreements, you may ask the Professional Responsibility Counsel in the WSBA Lawyer Services Department to give you an informal opinion — although he cannot formally review or "approve" entire fee agreements. He can be reached by leaving a voice mail message at 206-727-8284. You may also request an informal written ethics opinion regarding a particular proposed clause in your fee agreement (but not for the entire agreement) from the WSBA Rules of Professional Conduct Committee. To request an opinion, write to the Rules of Professional Conduct Committee at the WSBA.

This sounds obvious, but it is important. Do not charge less than you really think you should merely because the client is a friend, a friend's friend, a relative, or a sad case. RPC 6.1 asks us to render public interest legal service and recognizes this may include providing professional services at no fee or a reduced fee to persons of limited means. But if you are planning on doing pro bono work, plan it when you take on the client, don't let the representation become "involuntary" pro bono because you didn't initially accurately estimate what it would cost you to provide the services or determine the prospective client's ability to pay. Too frequently, such "involuntary" pro bono leads to resentment on the lawyer's part and dissatisfaction and the filing of a disciplinary grievance on the client's part.

If you work hard without regularly insisting on payment of your bill, your client expects you to do much for little. Meanwhile, you will likely resent working without being paid. You may also likely begin having a more lax attitude toward your ethical duties, such as diligence, because, "after all, it's just my buddy/my sister/a favor." Don't. Your involuntary pro bono client deserves, and the RPCs require you to provide, the same quality of legal services and the same ethical representation as your paying client.

Bill monthly, whether or not you intend to be paid monthly. This assures that your clients know what you are doing and, if you are working on an hourly basis, how much it is costing them. Disciplinary Counsel often cite the absence of regular time records/bills as evidence the client was not kept informed, diligently represented, or reasonably charged for services. Additionally, you may want to establish an ongoing advance fee deposit to be paid in set monthly installments. This avoids the client having to come up with a large "trial retainer" all at once. Insist upon monthly payments, either toward advance deposit or on account. This helps assure that the client appreciates the cost of your services and will not take your work for granted, and, equally important, that you get paid or realize early the necessity of withdrawal for nonpayment.

If you think the client is in any way dissatisfied, attend to it immediately. An upset client is a priority. Your staff can often best gauge your client's attitude. When your secretary tells you, "Client Jones seemed upset by our paperwork," or, "Client Smith said it doesn't do any good to have a lawyer," pay attention. This is a dissatisfied client and dissatisfied clients file grievances and malpractice suits. An in-person conference with your client more effectively gets to the root of the problem. You must both be and appear caring and open, not confrontational or defensive. Say, "You seem upset/unhappy/dissatisfied with us. Can we talk about that?" You may be surprised to learn the client has some misconception of procedure or law which you can easily correct.

Before the client's bill becomes too large to collect, consider withdrawing from representation or counseling the client on the merits of settling to avoid further legal fees. The debt must become a reality for the client long before the trial retainer is due. You may begin your representation with a full expectation of being paid for your work, obtaining a substantial advance fee deposit, regularly billing your client, and assuring the client is making payments on the bill. Somewhere in the heat of battle, this often is lost. A series of motion hearings can add thousands of dollars to a client's bill over a period of a few weeks. In the stress and frenzy of litigation, you fail to notice the client had fallen behind on monthly payments. Suddenly, the dust settles, and you realize the client's bill has grown to an outstanding balance of thousands of dollars, an amount your client can only pay in small installments over a long period of time. Trial may be on the horizon. This scenario happens all too easily and frequently. You become caught because you are doing what you are trained to do and feel useful doing (litigating) and because you carry a sense of ethical and moral duty toward your client's case. On balance, energy may be better spent advocating for clients who pay. The ethical rules do not expect you to work for free, except to discharge your pro bono obligation. Consider withdrawing as soon as the client's unpaid bill reaches a certain amount, but review Short v. Demopolis, 103 Wn.2d 52, to consider possible consumer protection ramifications before doing so. Withdraw by motion, rather than by notice, if you need judicial involvement in the process to afford the client a simultaneous continuance, etc. More grievances involve withdrawals within four-to-six weeks of trial, or attempts to collect fees post-case, than involve withdrawals mid-case. Withdrawal may not, of course, be available to you in criminal and certain other cases where withdrawal requires court approval, and whether the lawyer works for free may not be the deciding factor for the court in the withdrawal decision.

Conduct an "exit" interview with your clients and consider arranging a feasible plan for payment of any outstanding bill. This may well prevent a malpractice suit or bar grievance if the client is at all dissatisfied with you. Although these interviews are sometimes left to the receptionist or bookkeeper, you will likely be far more effective if you yourself conduct the interview.

What situations call for it? Although you should do so with every client, you may not be able to take the time, particularly if you have a volume practice. If your client has a large outstanding balance, however, or has suffered an unfavorable outcome, or has recently become either noncommunicative or hostile with your staff or you, or his or her ability to pay seems marginal, you should discuss these matters with the client before closing the client's file.

Why should it be done? People usually do not sue their friends since friends communicate openly, resolve issues between each other, and demonstrate understanding of each other's problems. Thus if you meet with your dissatisfied client, it helps the client to express or take a position regarding his or her feeling about your work and your bill, and it gives you an opportunity to fix any mistakes you made or to settle a potential malpractice claim. Clients who do not have money cannot pay you and may become immobilized by not having a plan for how to pay. Face-to-face communication may help you clear up misconceptions, allow your client to vent pent-up feelings, and give you and your client a chance to devise a workable plan for paying the bill.

When should it be done? Sometimes it's best to allow a final, complete billing to be sent and digested by your client before you meet with the client. If your client received an unfavorable result in the case, you may want to allow the client a "breather" of a few weeks to come to terms with it. Certainly, you should conduct this meeting before sending an "overdue" billing notice, dunning letter, or notice of collection agency referral.

What should you cover? You should sympathetically allow your client to express any dissatisfaction with your services. Was there anything you did not like about my representation of you?" If your client is completely satisfied, let that point register with the client. You should forthrightly explain that you face a statute of limitation cut-off in collecting your fee and need to make arrangements to have it paid or to toll the statute. You should bring to the meeting optional agreements, promissory notes, liens, or other documents which the client can take home, review, and select. This extra step of meeting with the client can smooth the way for nonresistant payment of your bill. It also allows you to repair any errors or problems with the representation. In the end, of course, some unhappy clients, often the ones you felt most sorry for in the beginning, will decide they should not have to pay you no matter how well you represented them. Hopefully, you have documented your steps to satisfy them.