April 2006

Tips for Avoiding Fee Disputes with Clients And How the WSBA Can Help When Fee Disputes Arise

by Marilyn J. Endriss for the WSBA ADR Committee

Most of us are fortunate in that we only infrequently encounter dis-satisfied cli--ents who refuse to pay all or a significant portion of their bill. When this type of dispute occurs, what options are available? Are there steps we can take to avoid these conflicts in the future?

The WSBA Lawyer Services Department provides an ADR Program that offers both arbitration and mediation services to lawyers and clients when disputes about attorneys’ fees arise.

Fee Arbitration Program

The WSBA’s voluntary Fee Arbitration Program was established in the mid-1970s as an inexpensive and quick method to settle fee disputes between lawyers and clients. Participation is voluntary and confidential. Both the lawyer and the client must agree to participate, and both must agree about the amount in dispute. Arbitrators are lawyer and nonlawyer volunteers who have been appointed by the Board of Governors to five-year terms. Arbitrators render a binding award regarding the fair and reasonable value of the lawyer’s legal services to the client.

Mediation Program

The WSBA’s Mediation Program was established by Admission to Practice Rule 16 in September 1999 as an informal way for lawyers and clients, lawyers and lawyers, and lawyers and other professionals to resolve disputed matters with the assistance of a neutral third-party mediator. Participation is voluntary and confidential, and both parties must agree to mediate the dispute. Mediators are lawyer and nonlawyer volunteers who facilitate settlement negotiations between the parties. If a resolution is reached, the mediator can help the parties write a settlement agreement which they may sign and, if they agree, make binding.

Avoiding Disputes

Are there steps to take to avoid these disputes over fees from arising? “Yes!” say the mediators and arbitrators who volunteer on these pro bono panels. Panel members report that there are common issues to the cases they have mediated or arbitrated, and these issues share the same theme — the importance of open and continuous communication.

1. Written fee agreements

A substantial number of the cases that are arbitrated or mediated arise because there was no written fee agreement. Or, if there was a fee agreement, material terms (usually about money) were written in vague and ambiguous language. In some instances, the lawyer changed the terms (about money) unilaterally and without any prior notice to the client.

Lawyers are encouraged to prepare a written fee agreement for every client that clearly describes (a) the nature and scope of the legal services that will be provided; (b) how legal fees will be calculated; (c) the hourly rate of their fees; (d) payment terms for legal fees and costs; and (e) how often billing statements will be sent. The agreement should include reference to the WSBA Fee Arbitration and Mediation Programs as a preferred way of resolving any disagreements about fees. This agreement should be signed by the client and the attorney prior to the lawyer providing legal services.

2. Billing practices

A number of fee disputes have arisen because of irregular and infrequent billings. Billing a client for an 18-month period and mailing the bill several weeks after having been terminated as counsel is likely to generate a fee dispute. Describing work performed as “review documents” and “telephone call” is too vague to provide the client with a clear sense of what work the attorney has performed. Clients have disputed bills when they have been charged costs without any detail information or without having been provided a copy of the third-party bill. With the user-friendly software now on the market, lawyers are encouraged to set up a billing system that ensures that client bills are sent on a regular monthly basis, specifying date, work performed, amount of time, fees incurred to date, and a detailed ledger of costs.

3. Talk about costs

At the outset, lawyers should be up-front with their clients and explain about projected costs — what types of expenses will be required for this particular type of case, how much the case is likely to cost, and what the payment arrangements will be. Clients repeatedly complain that their attorneys are not up-front about projected costs at the start of the attorney-client relationship.

Don’t be afraid to talk directly with your client about projected costs. You might say: “Litigation in this area is expensive. We’ll have to hire two or three medical experts. We’ll need to take depositions of all the decision-makers whose opinions factored into the action the defendant took, as well as the medical experts the defense hires. We’ll be photocopying all the records that pertain to what happened to you. The costs will be substantial, and, over the 20 months until trial, could amount to $50,000, or the equivalent of a Lexus. Let’s talk about how these costs will be paid.” Confirm your conversation with a follow-up letter. Clients need to know what they are signing on to.

4. Stay connected

Pro bono arbitrators and mediators report hearing a common refrain from clients in many of the cases that come before them: “My lawyer did not communicate with me!” When you receive a message that a client has called, do you return the call within 12, 24, or 48 hours? Do you promptly reply to clients’ e-mails? How long before you are reminded that you have not had contact with a client — 30 days? 45 days? 60 days?

Clients need to have connection with their lawyers. When the need for connection is unmet, clients can begin to feel disrespected, anxious, suspicious, and even angry. Some attorneys have created a simple “check-in” letter that they send to clients periodically, whether or not action has occurred on their clients’ case, to keep the communication connection open.

5. Straight talk

When your client asks you questions, do you answer them honestly, in a straight-forward manner and using language that your clients understand? Do you refrain from making promises that you aren’t likely to be able to keep? Do you answer the hard questions? Or do you dodge and create false hope? Some of the cases suggest that clients have felt led on, manipulated, and outside the decision-making process. This disconnect can lead to problems down the road.

A number of fee disputes have occurred because there was little or no communication about the expected size of the bill. As is true for all of us, clients need financial security. They want to know what their financial risks are. They need information from the lawyer about what this legal endeavor is going to cost in terms of time and money. It is important that lawyers convey this information honestly to their clients. Although none of us has a crystal ball, we can provide clients with benchmarks based on our own experiences with cases of a similar nature. Clients begin to lose trust when the statements lawyers have made (that are heard as promises) do not come true. When lawyers tell their clients that they will be performing specific work, that it will take a certain amount of time to get the matter resolved, and that it will cost a certain amount in fees and expenses to obtain the desired result, the clients rely on the lawyers to carry out these promises. Relationships become sour when promises are not kept, excuses are made, and work does not get done. Lawyers can avoid these pitfalls if they take time to communicate with their clients and avoid making empty promises. If the situation changes, let the client know and explain the changed circumstances.

Clients hire lawyers because we’re in the business of giving legal counsel and advice. It is important, then, that we listen carefully to our clients — hear their stories, assist them in figuring out what is in their best interest, and talk to them respectfully in ways they can hear and understand. When your clients ask you the tough questions, check your own level of discomfort, address it, and then “give it to them straight.” Clients want to trust their lawyers and to know you’ll be there on the easy days and on the hard days and that you’ll be honest, straightforward, and respectful.

6. Do the work and do it well

Another common refrain heard from clients is: “My lawyer wasn’t adequately prepared. He didn’t meet with me ahead of time.” Ask yourself: Do I spend sufficient time familiarizing myself with my client’s circumstances and legal case? Do I obtain the additional information that will assist me in evaluating the strengths and weaknesses of my client’s case? Do I take the time to sit down and make a deliberate assessment? Do I proof my final product, whether a letter, a motion, or a brief? Do I set aside time for my clients to convey information to me? (And do I hear what they’re saying?) Am I adequately prepared for my court appearances? How do I come across? Am I perceived as a knowledgeable lawyer or a fancy-talking showman?

There are hundreds, if not thousands, of clients who receive disappointing results from the court system. Orders in response to motions for summary judgment, jury verdicts, and bench decisions all bring one of the parties bad news. Yet not every client objects to paying his or her attorney, even when they are the ones receiving the bad news. In those cases when the client is disputing payment of fees, it is common to hear that the lawyer did not meet and talk with his or her client in preparation of the upcoming legal event, or that the lawyer did not review materials that the client had provided and made blatant errors in oral argument or in written submissions. In either case, the client has felt left out and not at all responsible for the outcome. Blame is easily shifted to the lawyer and, depending on how disconnected the client feels from the lawyer, any monetary responsibility may likewise be placed on the lawyer. Once again, communication and being prepared are key elements to a successful attorney-client relationship, even when the outcome is not.

7. Don’t sleep with your client, and, maybe, don’t represent your lover or best friend

Cases have come to the WSBA ADR Program when attorneys and clients have blurred boundaries and each feels taken advantage of by the other. Expectations may have been miscommunicated; favors may be misinterpreted. Because of the social relationship, the lawyer and client often find themselves with heightened personal feelings and unable to negotiate. Rule 1.8(k) of the Rules of Professional Conduct prohibits lawyers from engaging in sexual relations with a current client unless there was a pre-existing consensual relationship at the time the lawyer-client relationship started. And even a pre-existing consensual relationship can go sour. The lawyer may find himself or herself accused of professional misconduct amid allegations of sexual harassment. See RPC 8.4(g). Our best advice? Don’t begin a social relationship with your client until the case is closed or it has been referred to another lawyer. And refer your lover to another attorney. It’s not worth risking disciplinary action, should the relationship take an (un)expected turn.

Bottom Line — Communicate With Your Clients!

When the lines of communication break down, problems begin to occur. As clients feel more and more disengaged, trust is lost, suspicions grow and, before too long, there is a breakdown in connection. The client no longer feels obligated to pay all or some portion of the attorney’s fees — “My lawyer didn’t live up to my expectations; why should I live up to his?” If the lawyer invests the time to maintain open channels of communication with his or her clients, many of these fee disputes will not occur. When they do occur, fortunately for both lawyers and clients, there are resources within the WSBA to help bring about a fair resolution, quickly and inexpensively. 

Marilyn Endriss is a principal in Sound Conflict Solutions, LLC, a conflict-resolution firm that provides mediation services and training in collaborative law, communication skills, and team-building. She was a member of the WSBA ADR Standing Committee (2005-2006) and served as 2005-2006 chair of the WSBA Dispute Resolution Section. She serves as a volunteer mediator on the WSBA Pro Bono Mediation Panel. She may be reached at mendriss@soundconflict
solutions.com. The author would like to thank Jerome Alhadeff, Lisa E. Schuchman, and Elizabeth Martin for their insights and contributions to this article.