Issue: December, 2009
Author: Lynda C. Shely
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Ethical Billing Tips to Get Paid
The following ten billing tips were first presented at the Wyoming State Bar Annual Meeting & Judicial Conference in September. This article summarizes the ethics considerations and practical client relations issues in billing matters.
- Have a Written Fee Agreement – Even Though it Might Not Be Required
Although the Wyoming Rules of Professional Conduct, ER 1.5(b) do not require a written fee agreement, it is a really, really good idea. Particularly in this economy, the goal is to avoid any misunderstanding with clients about how and when they need to pay your legal fees. In the written fee agreement include the following topics:
a. Who is (and IS NOT) the Client?
If someone other than the client is going to pay the legal fees, include an Ethical Rule 1.8(f) clause indicating the client is the only person who controls the representation, the client must consent to the disclosure of confidential information to the third party, and if a refund is due, it goes to the payor.
b. What is the Scope of the Representation?
c. Fee and Cost Calculation
Whether it is hourly, flat or contingent – explain how the client will be billed and how a refund, if any, might be calculated.
d. Client Responsibilities
e. Termination Provisions for You
Remind clients that if they do not pay (assuming there is no trial date), do not cooperate or engage in conduct that would require that you violate the Ethical Rules, you will withdraw.
f. File Retention Policy
Tell clients up front that you will send them copies of all documents during the course of the representation and they need to KEEP those courtesy copies as their file – and you will keep your copy of the file for whatever number of years you must according to statutes and your malpractice carrier (usually five years).
- Bill Regularly – Even When There is Nothing to Bill
Most of what lawyers do clients never see or hear. They don’t see research, they don’t see drafting, and frequently clients do not even see negotiations with other parties. One way to keep clients informed about what is going on in their legal matter is to tell them in invoices – regularly. Plus, clients are more likely to pay a modest monthly bill than a huge bill received only quarterly.
Include “no charge” entries – clients love to see that they are getting something for “free.”
- Use Complete Sentences
Acronyms and too short time entries only cause confusion, not payment. For example, “Draft document,” “telephone call with RSS,” and “Research” are insufficient billing entries. What document and for what purpose? The more explanation to add to a bill, the more likely the client will understand what you did and be willing to pay. Detailed sentences also help in the event that the client does not pay and the firm must ask a court or arbitrator to decide if the fee was reasonable for the services performed.
Never assume that your understanding of an acronym will be the same as a client. Remember, for example that “SOL” has one connotation to lawyers (statute of limitations of course…) and possibly another for clients.
Clients hate to have their names misspelled. They frequently will raise this as an objection to fees in fee arbitration hearings – both in the billing and if you misspell their names in pleadings. Do not be sloppy – proofread.
Clients also do not like to be referred to in billing statements or in letters as “client” – use their names.
- Never Block Bill or Use Excessive Minimum Units
The Ninth Circuit has held that block billing may inflate a bill and makes it difficult to ascertain the reasonableness of the charges for a particular activity. Welch v. Metropolitan Life, 480 F.3d 942 (9th Cir. 2007). For instance:
TC w/ client; Conf. w/ opp. Counsel;
R choice of law; office conf. w/ co-counsel
To correctly bill this time, try:
TC w/ client (.4); Conf. w/ opp. Counsel (1.0);
R choice of law (11.0); office conf. w/ co-counsel (3.0)
CAUTION: The Welch decision also upheld the district court’s 20% reduction in the fee request because it found that a minimum billing unit of .25 hour for everything was excessive. Lawyers are warned – do not use .25 as a minimum unit for everything.
- Keep Track of Time – Even for Contingent and Flat Fee Matters
Law firms are businesses. A firm cannot quantify whether the lawyers are handling matters efficiently, whether a flat fee or contingent fee accurately reflects the actual costs of performing the services, and whether the firm should consider alternate billing arrangements unless the lawyers and paralegals keep track of their time.
Even if the firm charges a flat fee for a service or a contingent fee, all professionals should record their time. In contingent fee cases it is crucial to keep time records because the firm will not be able to make a quantum meruit claim if it is terminated prior to settlement.
- Always Identify Whether the Money is Coming From Trust or Owed
Billing statements must, according to ER 1.15, identify whether client money will be coming out of trust to pay the invoice or whether the client must pay the invoice. The Ethical Rules require regular accountings of how client money being held in trust is disbursed. Thus, if a client has paid an advance fee deposit (aka, retainer) and part of that deposit will be applied to the bill, the invoice should note how much will be applied and how much will be left in trust.
- If you Change the Terms of the Fee Agreement, Be Careful
Once you have established an attorney-client relationship, any substantive change in the fee agreement may be considered a business transaction with a client and require you to comply with the very strict written disclosure requirements in ER 1.8(a). While the initial fee agreement is not a business transaction, subsequent changes could be considered such because you are now in a fiduciary relationship with your client and they are relying on you to look out for their interests – which may not be the case in changing the agreement. To avoid having to comply with ER 1.8(a)’s “business transaction” disclosures when you have your annual increase in hourly rates, anticipate this change in the initial fee agreement and include language noting that the rate may change from time to time with notice to the client.
- If There is a Dispute, Use the Bar Fee Dispute Program
Once a client disputes the amount of your fees, consider participating in the Bar’s Fee Dispute Program. Frequently, clients just want someone else to review the file and tell them whether or not the fee is “fair.” By providing an objective forum to voice their concerns, you appease the client and hopefully prevail with an award of your fees. Note: Before ever suing any client for outstanding fees, check with your malpractice carrier – many carriers have strict policies about suing clients because of the likelihood of a counterclaim for malpractice.
- If a Client Becomes a “Slow-pay/No-pay” – GET OUT!
One of the biggest mistakes lawyers make when a client starts to become tardy in paying or not paying bills at all is being helpful. Really. Stay on top of your firm’s accounts receivable, which means actually calling clients and writing to them when their account becomes even 30 days overdue. Usually the situation does not get better. Talk to the client and arrange a payment plan.
Remember to review Ethical Rule 1.16 for the reasons a lawyer may withdraw and remember too to not disclose any confidential information in that Motion to Withdraw.
Lynda Shely was the Director of Lawyer Ethics for the State Bar of Arizona for ten years, prior to opening The Shely Firm, PC in 2003.
Lynda was a member of the State Bar of Arizona’s Ethical Rules Review Group, which drafted the 2003 amendments to the Arizona Rules of Professional Conduct. She also served on the Bar’s Multijurisdictional Task Force, which recommended amendments to the Ethical Rules to permit temporary practice in Arizona by out-of-state lawyers. She currently serves on the State Bar’s Unauthorized Practice of Law Advisory Committee, which drafts UPL Advisory Opinions, and the State Bar’s Professionalism Task Force.
Lynda is a member of the ABA Standing Committee on Professionalism and Professional Responsibility Conference Planning Committee. She is a past chair and member of the Standing Committee on Client Protection as well as several other ABA Committees.
Copyright © 2009 – Wyoming State Bar