Fee 'Write-Down' Could Save You Headaches — and Dollars

Published on: 
10/03/2012
A dilemma that is occurring with increasing frequency in these tough economic times is this: A client receives the lawyer's bill, contends that it is too high, and refuses to pay it unless the invoice is written down.

There are two potential ways to respond to such a request, depending on how the fee arrangements for the engagement have been structured.

If the client signed an engagement agreement before the matter began, the lawyer is under no obligation to write down the invoice simply because the client thinks it is too high. Because the engagement agreement is the foundation for all invoices, be as detailed as possible in the terms spelled out.

Two criteria in particular can prevent a write-down request:

  • Set a written fee agreement. Typically, a written fee agreement is required for contingency work but not for hourly or transactional work, though states are moving in the direction of requiring writings.

    Many attorneys miss an opportunity by not having a written fee agreement. There are marketing benefits in terms of defining and managing client expectations and how these expectations will be met, and removing uncertainty about fees.

  • Specify the collection cycle. Set specific dates of the month by which clients will be billed. For example, state in the agreement that invoices will be sent on or about the 25th of the month with payment due by the 20th of the following month.

    With the terms established, bill in a regular and timely way, using statements that contain a full narrative of the work done and the goal accomplished by that work.

There is, however, a second instance in which a lawyer could consider a fee write-down to adjust disputed bills in order to match value as seen by the client. The only professional requirement is that a fee should be reasonable and in proportion to the value of the services performed.

Does the lawyer have the skill and experience to justify the fee? Does the client understand the amount and nature of the fee and the work done to justify it? Answering "no" to either of those questions could mean that an invoice write-down is warranted.

Note that what is being discussed here is not the result of a matter but the value a client attaches to it.

For lawyers to guarantee a result in a legal matter comes under Rule of Professional Conduct 7.1's prohibition of false or misleading communication, which, according to the American Bar Association's commentary, includes "lead[ing] a reasonable person to form an unjustified expectation" about what an attorney can accomplish.

However, lawyers and law firms can be held accountable to a level of effort and standards of performance for service factors within the lawyer's own control.

Some lawyers take the approach that once a bill is sent to a client, any dissatisfaction on the client's part is reason enough for them to write down the amount to what the client thinks it is worth. Of course, the firm hopes that doesn't happen.

The real advantage is that it can proactively prevent a problem that no law firm wants to have — an unhappy client who refuses to pay.

Of course, the better way to please a client is to keep them satisfied and only too happy to pay for your services.

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