Want to Sue a Client for Unpaid Fees? That Can Backfire

A judge looks at a case file at his desk, a gavel in the foreground.

(Image credit: Getty Images)

We’ve all heard the saying “happy wife, happy life.” Of course, today we might update the saying to “happy spouse, happy house.”

For the purposes of today’s article, let’s stick with the “happy wife” version, as it is a partial key to the mess that Atlanta attorney “Josh” has found himself in.

“Dennis,” his email began, “my law school grades weren’t the best, and I couldn’t find a decent-paying job, so I opened my own office, discovering the hard way that law school does not prepare graduates to practice law. I’ve made some mistakes in taking on cases and clients I should have avoided. I took whatever walked in the door so as to make the rent payment.”

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Reading Josh’s email made me think of my article Starting Your Own Law Practice? Here’s How to Fail, in which a law practice management consultant shared some good advice on this very topic.

Josh’s email went on, “One (client I should have avoided) was a contractor who was sued over alleged poor-quality work for a kitchen remodel. He was likable and persuasive and convinced me that it was an excellent job, but the customer stiffed him. Relying on what he told me, I filed suit against the homeowner. Had I done an internet search, I would have discovered my client was a crook, had been sued left and right and lost his contractor’s license. But I needed the money. My bad!”

H. Dennis Beaver

After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column. "I love law for the reason that I can help people resolve their problems," he says. "I know it sounds corny, but I just love to be able to use my education and experience to help — simply to help. When a reader contacts me, it is a gift."

This comment made me think of yet another article I wrote about contractors, called How to Spot a Contractor Who's Not Playing by the Rules.

“We lost the case at trial,” Josh wrote, “and there was a balance owing of about $8,000 in fees, which he never paid. I felt it would have been best to forget the whole thing, but my wife insisted that I go after the guy. I didn’t want to, but she implied that if I did not, I would look weak. So, I did.”

A lawyer suing their client for fees can have far-reaching consequences. One of the most serious is that it can make it more difficult to obtain malpractice insurance. While malpractice insurance is not required in most states, any lawyer who does not carry it, in my opinion, is someone to be leery of.

'Have you sued a client for your fees?'

I ran this question by several underwriters at insurance companies who insure attorneys for malpractice: “If a lawyer answers ‘yes’ to the question on your malpractice application/renewal form, ‘Have you sued a client for your fees?’ what impact will this have, if any, on that lawyer’s ability to obtain coverage?”

Every underwriter replied with something to the effect of: Generally, an automatic decline. We might accept the risk of our insured filing suit for fees, but their premium would be greatly increased, or we could add a provision that excludes any malpractice claim that arises out of a suit for unpaid fees.

Avoiding the slow-pay, no-pay quagmire

Some of the ways that attorneys — and this does not apply only to lawyers — can reduce the risk of clients who fail to pay include:

Requiring a substantial upfront cash retainer, universally requested in criminal law matters.
Billing frequently and not hesitating to end the attorney-client relationship when fees and expenses are unpaid after a set amount of time. These conditions must be spelled out in the retainer agreement.

But a law degree and license to practice law (as well as medicine, accounting, architecture — you name it) does not mean that you have business smarts. When it comes to being paid, patience and “empathy” for a client going through tough times are contagious. “She’s my best (client, customer, etc.). I can’t drop her,” is a frequent response to, “Why isn’t Sally paying our bills?”

Clients are consistent. Deadbeats and con artists will rip off their attorneys the way they rip off everyone. That’s why, before a lawyer agrees to representation, their best friend is Yelp and other online reputational sources. The bad reviews will save your skin!

The get-even suit for malpractice

Every underwriter I talked to said that 40% to 60% of malpractice suits against lawyers are a direct result of the attorney suing for past-due fees, according to industry estimates.

The best way to get a lawyer suing for fees to go away is to allege the case was lost due to their negligence, they said. Even where there is absolutely no evidence of any professional negligence, that’s the position taken by the attorneys who represent the insured’s former client.

I was referred to lawyers retained by legal malpractice carriers and received an earful of disturbing comments about the lawyers hired by deadbeat clients to respond to the lawyer suing for unpaid fees. The saying “no honor among thieves” applies to certain lawyers who seem to relish representing crooked former clients, even though they know there is no legal basis for these suits.

The insurers’ attorneys acknowledged that, on occasion, their insured have committed legal malpractice, which justifies a suit against them. But, they said, when it is a matter of attorney fees alone, this is an area in our legal system where deadbeats often hire like-minded counsel.

And that is what Josh is facing. He admitted, “I should have told my wife, ‘Honey, I respect your sense of fairness, but let’s just chalk this up to a learning experience.’”

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, You and the Law. Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."