Ralph Adams 0000-00-00 00:00:00
Are You Inviting Your Clients To Sue You For Malpractice? Four Ways To Reduce The Risk. Every lawyer knows, or should know, that suing a client for unpaid fees is an open invitation for a malpractice suit. Why? Because legal malpractice is the natural counter-claim to a collection action. Despite this fact, lawyers continue to sue clients. Maybe you have reached the conclusion that the amount involved is sufficiently large and that the funds will actually be collectable, such that the risk of a malpractice claim is outweighed by the benefit of the recovery. Cases like that do occur, but still come with the risk. It is impossible to completely alleviate the need to sue clients for unpaid fees, however, there are ways to reduce the need from arising. How can you avoid getting to the point of a collection suit against your client? One: Choose your clients wisely. Some clients arrive at the office door waiving red flags. How many lawyers has the client already discharged (or been discharged by) in the same matter? Does the client have a realistic objective, or, do the client’s goals seem more motivated by passion? Will the client put up sufficient funds as an advance deposit to demonstrate commitment to the matter? Does the client have sufficient documentation to support the claim? Two: Use comprehensive and clear fee agreements or engagement letters. The ethics rules require that fee agreements state the scope of representation and the basis or the rate of the fee and expenses. Contingency cases require additional terms specifically addressing percentages of fees at various stages in the representation and the deduction of expenses. (See, ER 1.5) No matter what the representation involves, make your fee arrangements clear, and, make sure the client fully understands the terms, from the beginning the representation. Don’t let a lack of clarity result in a mid-representation dispute. Three: Send invoices on a regular basis. Without regular invoices you can’t expect regular payments. This also reduces the “sticker shock” of a large lump sum request. In addition to sending regular invoices, don’t allow the receivables to build up. Merely sending regular invoices doesn’t guarantee regular payments. Discussing outstanding balances with clients may be the most unpleasant part of the representation, but, early discussion may save you a later lawsuit. Four: Just don’t sue the client. Some insurance carriers will not insure lawyers who regularly sue clients for unpaid fees. Other carriers require that if such a suit is filed, it must be filed past the statute of limitations for tort actions. The reason is obvious: When you sue, you invite a counter-claim. If the outstanding balance is not sufficiently large, or, if the amount will not be collectable, you may just have to write it off as a cost of doing business. After all, if you chose the client wisely, made your fee agreement clear from the beginning, sent regular invoices and discussed the outstanding balances along the way and performed your duties appropriately, and the client still didn’t pay you, it is likely they can’t pay you. So, a law suit isn’t going to be worth the risk.
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