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Collecting Your Fee -- Sue As Last Resort

By Edward Poll, J.D., M.B.A., CMC

In my book, Collecting Your Fee: Getting Paid from Intake to Invoice, I maintain that your intake procedure is the most important step in the collection process; that an appropriate conversation with your client about payment of fees in the beginning of your relationship will almost certainly assure payment; and that a business-like approach to the pricing of legal services and collection of legal fees will assure collection of most, if not all, your outstanding billings.

However, where there is delayed payment, be sure it is not because of a legitimate complaint against you or the service provided. Given that, if the client has the ability but not the commitment to pay, you may want to consider filing suit against the former client.

You should review certain considerations before doing so:

1. Review the file to make sure there are no legitimate potential claims of malpractice staring at you
2. Ask a colleague for peer review to confirm your conclusion
3. Realize that your malpractice insurance carrier has risk management policies in place and you will want to know how these risk management policies may affect you
4. For example, your policy coverage may exclude fee disputes, your carrier may increase future deductibles or increase future annual premiums -- do your due diligence to uncover the position of your carrier before you move
5. When lawyers sue for payment of fees, they are met with malpractice claims either as an offset (counter-claim) or direct attack  (cross-complaint).
   
6. Of all the suits filed by lawyers to collect their fees, 10% arise as a result of counterclaim; 30/40% of the malpractice claims come from cross-complaints.

That is not all that many -- about 1/2 of all lawyers' suits to collect unpaid billings will result in an off-setting claim of malpractice and, I suspect, only a few of these prevail against the lawyer. Thus, if you know your client has the ability to pay, but is not, evaluate the risk, know your carrier's risk management policies and evaluate the likelihood of winning  your unpaid billing before filing suit. Then, pursue your claim, file suit and move on.

Full post as published by Law Biz Blog on February 01, 2008 (boomark / email).