Could Your Lawyer Have Cheated You on Your Bill?

Today’s story looks at billing practices that may violate ethical rules that apply to lawyers across the country. Before reading further, if you have hired an attorney recently or in the past few years and still have the paperwork, pull out the retainer agreement and accounting sheet. Look for this type of language under costs:

“$50 scanning/storage of file fee; $75 file/cost maintenance fee; $75 long-distance telephone toll calls/faxes; $75 initial data entry.”

If you have been charged for these things, especially for long-distance telephone calls, depending upon the state you live in, you may very well have been overcharged.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

In the 1980s a phone call from California to New York cost over 30 cents a minute. However, for the past several years, long-distance telephone toll charges have almost completely vanished.

And when was the last time you actually mailed a letter? Stamp-licking has generally been replaced by email, both personally and in business.

Requested Proof of Charges but Got Stonewalled

Let’s say your lawyer’s bill shows a charge of $75 for long-distance toll charges and postage. You know this just can’t be, but imagine asking for proof those charges were really incurred, and you get stonewalled. They can’t show proof because those charges did not exist.

You would feel cheated, wondering, “How many other clients have they done this to?”

And that’s exactly what Brittany Zuniga of Fortuna, Calif., thought after the accounting sheet for her personal injury case included that $75 long-distance toll/postage charge as well as another $75 “as a file and cost maintenance fee,” plusa “$50 scanning and storage of file fee.”

In addition to suspecting malpractice, she wondered, “These things sound like office overhead. Should I be paying for that?”

She should not, according to State Bar Associations and the American Bar Association.

But there was even more that Brittany had every reason to be upset about. And it all began in April 2018 when she was involved in an auto accident, needed legal representation but did not know any lawyers.

Saw Their TV Commercials

“I phoned a law firm that advertises on television. It was a huge mistake,” she told me. “They were disorganized, non-responsive and settled my case, leaving a large hospital bill unpaid. Now I am in collections.”

Bakersfield personal injury attorney David Cohn, after being briefed on Brittany’s situation, said, “Leaving your client open to being sued for a medical bill falls below our professional standard of care. It is a lawyer’s job to have all the bills resolved, and when you only have so much money to work with, getting hospitals and health care providers to compromise is often the hardest part of the case, but that’s our job.”

Brittany did not know it at the time, but she hired what is known as a personal injury settlement mill. These are high-volume law practices with one goal in mind: to mass produce settlement of injury claims using advertising campaigns to obtain clients.

And we have all seen their television ads. Of course, not every firm that advertises is a mill, and in my town, a number of highly competent personal injury and workers’ compensation attorneys do advertise. So, my recommendation is to hire locally, if possible — where clients are able to actually meet their lawyer. You can’t do that with many of these settlement mill lawyers, who are often hundreds of miles away.

“We Gave Her a Discount”

With Brittany’s written authorization, I spoke with the senior partner of this firm — who appears on their TV ads. He denied doing anything wrong, even claiming, “We gave her a discount!”

Really? His retainer called for an attorney fee of one-third of the settlement amount. This is typical for personal injury cases that settle before a lawsuit is filed. If the settlement is reached after a suit is filed, but before trial, fees can climb upward to 40%. After trial has begun, 50% is common. In this case, the accounting showed a $10,000 attorney fee out of a $30,000 settlement, or one-third. In other words, no discount.

It is important to note that attorney fees are negotiable. Often, unscrupulous firms will almost immediately file a lawsuit — even when there is no question as to liability — so they can claim a higher fee. That is generally seen as improper.

Besides claiming he gave Brittany a discount, he also stated, “She told us not to pay that hospital bill and to give her the money instead.” Brittany adamantly denied that. I repeatedly asked him for written proof of his claim, something from her instructing him to not pay the bill.

“Any lawyer wanting to protect his firm’s reputation would insist on that from a client,” commented Bakersfield labor and employment attorney Jay Rosenlieb.

When I asked, “Would you please show me proof that you incurred $75 phone and postage charges for Brittany,” the lawyer could not.

Fee Arbitrators Give Their Opinion of Brittany’s Case

I ran this situation by lawyers who serve as attorney fee arbitrators and auditors.

Aaron Shechet, from Los Angeles, stated: “If the retainer agreement provides that they can charge for actual costs, and they are not incurring those costs, charging the client is fraud and could be seen as theft. If they are charging $50 for file storage, but all they're doing is putting the file on a 2 cent CD and keeping it in a drawer, that’s stealing.”

Sonoma, Calif.-based Jim Schratz has been qualified as an expert on attorney fees in both state and federal courts, said, “From my experience, as a fee auditor and attorney fee arbitrator for over 25 years, I would disallow that bill. You need documentation for any charges.

“Moreover, it is improper to wrap up a case with outstanding medical bills, leaving the client exposed. It is too bad that lawyers do things like this instead of just giving top-quality service to their clients,” he stressed.

Brittany is filing a complaint with the California State Bar Association, which has the power to order that law firm to repay thousands of clients these improper charges.

So, What Does This Mean for Consumers in General?

Schratz offers these recommendations: First, be selective in deciding which lawyer to hire. Consumers should know that this is a tough time for attorneys. They are hungry for business, so don’t let a lawyer intimidate you. You are in the driver’s seat. You are not going to alienate him if you ask about the retainer or the way you are charged.

Read the retainer agreement carefully. Don’t be afraid to ask questions, like “Is this standard that you charge so much for opening a file?” If you don't like the answer say, “I’m sorry, this is not going to work” and walk down the street to the next lawyer.

And if you find yourself in Brittany’s shoes, looking at a bill that doesn’t seem right, Shechet suggests the following steps:

1. First, write the lawyer a friendly inquiry: “I have a couple of questions about these items on the retainer agreement/invoice, can you please clarify?" See if the lawyer's answer makes sense or if it is immediately defensive. Watch out if you cannot get in touch with your lawyer directly. A busy lawyer will make time to call you back or schedule an appointment (even if it’s not right away). If you can’t get in touch with them directly, then they are avoiding you for some reason. If you get a bad feeling from the answer — or lack of response — trust your gut.
2. Check to see if the lawyer has any reviews online. Not all lawyers will, but some areas of law lend themselves to a higher quantity of online reviews. See if there are any negative reviews complaining about the same issues that you are concerned about.
3. If all else fails and you have concerns about the invoices you are receiving from your lawyer, consult with an attorney who has experience with legal ethics or fee disputes.

Schratz agrees, also suggesting, “If you feel having been the victim of improper or illegal charges, go to your state bar association and file a complaint.”