Issue: December, 2009
Author: Richard G. Schneebeck
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Tips for Avoiding and Successfully Resolving Fee Disputes
Attorneys can unfairly become the focal point for their clients’ legal frustrations, and clients can have legitimate complaints about the quality and cost of legal services they receive. Difficult economic times increase the potential for friction between attorneys and clients, which in turn increases the possibility of a dispute erupting over the lawyer’s fees.
Lawyers can reduce the potential for becoming entangled in a fee dispute by clearly communicating with their clients and by carefully evaluating their billing and client counseling practices. Remember also that, in any fee dispute hearing, the attorney bears the burden of proving the reasonableness of the fee by a preponderance of the evidence. Lawyers who do become involved in fee disputes can increase the likelihood of a favorable resolution by maintaining careful records of their client contacts and of the work they perform. Accordingly, avoiding fee disputes and favorably resolving them requires effort before the attorney accepts the representation, throughout its course, and at its conclusion.
Before Agreeing to Represent a Client, Confirm that the Proposed Fee is Reasonable and Clearly Communicate with the Client about the Representation.
Many fee disputes arise before the attorney actually accepts the representation of a client. Their origins often include:
- Attorney overreaching or client misgivings about the reasonableness of the fee.
Before agreeing to represent a client, critically evaluate whether your hourly rate or other proposed fee arrangement is reasonable. Wyoming’s Rules of Professional Conduct provides a list of eight nonexclusive factors lawyers should consider. Objectively examining the proposed fee in light of these factors can assist the attorney in developing a fee agreement that is fair for the lawyer and the client.
- Failing to discuss the fee with the client.
Discuss the proposed fee with the client, particularly if the circumstances of the case are unique or justify a higher fee. Candidly explaining the amount of the fee to the client – and documenting that discussion – can curtail subsequent disputes concerning the reasonableness of an attorney’s fee.
- Not listening carefully to the client’s problem.
Fee disputes typically concern the client’s perception that the attorney failed to deliver the promised legal service. In these cases, the attorney often provides a service that the client later claims he did not want. At the beginning of a representation, the attorney should identify the client’s needs, goals and expectations, and confirm that the attorney understands them correctly.
- Failing to manage unrealistic client goals.
Client dissatisfaction with the attorney’s performance is a common source of fee disputes. In turn, disappointment with the lawyer’s services frequently results from unrealistic client expectations. To the extent possible, in initial sessions with the client explain the legal assistance that you can provide; the limitations of your representation; potential pitfalls the client may face; and problems the client might encounter during the course of the representation. Avoid exaggerating your qualifications, and resist the temptation to emphasize prior successful outcomes. Anything that a client perceives as a guarantee of the case outcome usually sows the seed of client dissatisfaction. As always, document this discussion.
- Accepting cases beyond the attorney’s expertise.
Every lawyer has the duty to provide competent representation. Before accepting a case, be sure you understand the client’s needs. Honestly evaluate whether you have the expertise to satisfy them. If not, refer the case or associate with another attorney immediately.
After Accepting a Case, Continue to Communicate with the Client, Provide the Agreed-Upon Legal Service, and Document the Work Performed.
Many fee disputes that develop during the course of a representation arise because the attorney and client failed to communicate accurately about the scope of the representation at the onset of the case, because the attorney did not provide the promised legal service, or because the client concluded – unfairly or not – that the attorney did not perform as agreed. Attorneys can prevent these disagreements by:
- Preparing a thorough engagement letter and written fee agreement at the beginning of the representation and having the client sign it.
The lawyer should prepare an engagement letter at the beginning of every representation, even if the attorney has a longstanding relationship with the client. The fee agreement should (a) memorialize the scope and nature of the representation; (b) describe in detail what the attorney agrees to do (and, in appropriate cases, what the lawyer will not do); (c) list any attorneys or legal assistants who will work on the matter; (d) confirm the rates charged for each legal professional’s services; (e) generally describe other costs and charges the client may incur; (f) explain billing frequency and the lawyer’s payment terms; (g) include a clause concerning the attorney’s right to withdraw under appropriate circumstances, including the client’s failure to pay the lawyer’s fee; and (h) an explanation of interest earned on the lawyer’s trust account.
- Performing the work in a timely fashion.
A surprising number of fee disputes concern the attorney’s purported failure to provide the promised legal service or to do so in a timely manner. Simply paying attention to the client’s problem, and performing the work diligently and in a timely fashion, will prevent many fee disputes and ensure compliance with the attorney’s ethical obligation to act with reasonable diligence and promptness in representing the client.
- Keeping accurate, detailed records of the attorney’s work on the case.
Fee dispute proceedings inevitably raise the issue of whether the attorney charged a reasonable fee for the work performed. The burden of proof falls on the attorney. To show the reasonableness of a fee, attorneys should always keep time records of some sort. Moreover, keeping careful notes of meetings, client calls and other significant events in the case will educate the client about your progress and help the attorney defend against a claim that the lawyer charged an unreasonable fee.
Maintaining time records is prudent, even in contingency or flat fee agreements. The attorney may not need to record time in as detailed a fashion as required to support hourly billings. Descriptions of the time spent by an attorney in a contingent fee or flat fee case, however, are extremely important in defending a fee dispute, if the attorney later needs to establish a quantum meruit claim for payment of the fee, or if the attorney needs to establish her share of the contingent fee.
If the fee agreement calls for an hourly rate, the attorney and legal assistants must keep accurate, descriptive time records. Avoid so-called “block-billing” practices. Attorneys sometimes forget that their bills and their time entries are valuable tools to educate the client about the progress of the case and the nature of the work performed. The bill should tell the client what you did; she is entitled to know. Moreover, a detailed, descriptive bill for legal services is an effective tool to help fulfill the attorney’s obligation to communicate with the client.
- Reducing or writing off fees when necessary.
Ensuring that the attorney’s fee is reasonable sometimes requires writing off or reducing the fee. When this happens, tell the client that you have reduced the fee.
Notify the Client When the Representation Concludes.
Remarkably, fee disputes sometimes arise because the client believes that the attorney has not finished the representation or expects the attorney to provide additional legal services that the attorney did not agree to perform. A clear, detailed engagement letter prepared at the beginning of the representation is invaluable in these situations. At the conclusion of the representation, the attorney should prepare and send a letter informing the client that the lawyer has completed the work and is closing the file. Where appropriate, the lawyer should advise the client that the attorney-client relationship is at an end.
If a Client Does Dispute a Fee, Try to Resolve the Problem Informally.
Fee disputes are time-consuming, costly and painful for both the attorney and the client. All too often, once the client files a petition for resolution of a fee dispute, the attorney responds, a hearing panel is appointed, and the dispute goes to a formal hearing. Complications often delay the process, which culminates in the issuance of an order that may displease both sides to the dispute.
For these reasons, attorneys should try to resolve fee disputes informally before they reach the State Bar. If those attempts fail and the dispute reaches the Committee for the Resolution of Fee Disputes, the level of conflict is understandably high. Nevertheless, a mechanism exists to resolve a dispute informally after a petition is filed with the State Bar, but before a formal hearing convenes. These rules authorize the chairman of the fee dispute panel, in appropriate cases, to contact both the petitioner and respondent and explore whether compromise is possible. Before subjecting themselves and their former clients to the ordeals of a formal hearing, attorneys responding to a client’s petition for resolution of a fee dispute (or those who are preparing their own petitions requesting payment of their fees) should consider including a statement expressing willingness to explore informal resolution of the dispute.
Fee disputes are perhaps inevitable where either the attorney or the client tries to exploit the attorney-client relationship unfairly. Most fee disputes, however, are the product of misperceptions and misunderstandings about the attorney’s role in meeting the client’s goals. Clear communication between lawyers and clients, and careful record keeping by attorneys, at every stage of the attorney-client relationship can prevent these misunderstandings and help attorneys successfully resolve fee disputes when they erupt.
Richard G. Schneebeck earned his B.A. at the University of Colorado in 1973. He graduated with honors from the University of Wyoming College of Law in 1985. After a two-year clerkship with the Chief Justice of the United States District Court for the District of Wyoming, he entered private practice. He is currently with the Cheyenne, Wyoming, firm of Hirst Applegate, LLP.
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