Attorney-Client Fee Disputes

When it comes to billing, over the years there have been times when I wished I sold tires. Abraham Lincoln said, “A lawyer’s time and advice are his stock in trade.” An invoice for a new set of steel-belted radials, though, is easier to explain.

The attorney-client relationship is based on trust, and good communication and a clear retainer agreement go a long way to prevent misunderstandings. In a perfect world, the attorney performs a task, sends a bill, and then the bill is promptly paid. This is in fact the case most of the time. Occasionally, though, billing questions arise and disputes occur, and guess what… it is not always the client’s fault.

When an attorney and client reach an impasse regarding the attorney’s fees, the parties can opt to go to the Fee Dispute Resolution Committee of the Chattanooga Bar Association (herein, the “committee”). The committee, which I co-chair with Barry Abbott, decides disputes which might otherwise end up in the court system or morph into a board complaint. It renders a valuable service to the bar and to the community, and this service is free of charge. 

Cases come to the CBA office pursuant to a petition from an aggrieved client, as a referral from a local court, or sometimes as a referral from the Board of Professional Responsibility. 

The arbitration is heard by a three-person panel of local attorneys, all of whom are members of the Chattanooga Bar Association. The committee consists of a pool of 15 to 20 attorneys from which the three-person panel is pulled. These attorneys volunteer their time and expertise, and each may hear two or three cases a year. Since a co-chair sits on every case, we each hear several more than that.

Prior to engaging the committee’s services, both the client and the attorney must agree in writing to binding arbitration. The panelists sign a statement that they have no conflict relating to either of the parties, and the parties also are asked to approve the composition of the panel prior to proceeding with the hearing. Once agreed, the constitution of the panel is final, the decision of the panel is binding, and there is no appeal from the panel’s decision. 

The Board of Professional Responsibility distinguishes ethical complaints from fee disputes. The BPR does not hear fee disputes, and as mentioned, some of these cases come to us as referrals from the BPR. 

The committee, in turn, has neither the power nor the authority to decide ethical complaints. Non-performance by an attorney or the delivery of a questionable bill may indeed raise ethical issues (See Rule 1.5, Rules of Professional Conduct), but the committee is empowered only to make monetary decisions; it does not censure, suspend or disbar. 

The committee hears and decides some variation of the following fundamental questions: Was a service performed and delivered? Was there a clear understanding regarding compensation, or if not, can a contract be inferred? Is the attorney’s bill correct, reasonable and consistent with the parties’ agreement? In addition to rendering its monetary decision, the panel will also include recommendations to the attorney as to how he or she might avoid a similar complaint in the future, or include an explanation to a confused or unreasonable client as to the nature and workings of the legal system. 

The committee’s cases are decided by a majority decision of the three-person panel. In my experience, though, I have yet to see a split decision, although the unanimous decision is often achieved only after much debate. 

The committee members are pulled from many and various areas of the law. The CBA staff tries to assure that at least one of the panelists practices in the same area of law as the respondent attorney, and the other panelists often give some deference to that panelist. She often has valuable insight regarding the customary practices relative to that area of the law which can assist the panel in making an informed decision.

Not all non-payment rises to the level of a fee dispute. Sometimes a client does not pay because he simply can’t or he does not want to. Fee disputes, however, on their face do not initially appear to involve a broke or deadbeat client. They involve a lawyer who believes she is owed a fee, and a client who believes that the lawyer does not deserve to be paid the amount of the tendered bill. 

So how did we get here? The following is a list of errors that attorneys make which will invariably lead to fee disputes:

-1- Probably the most common error is the failure of the attorney to prepare, discuss and execute a clear engagement letter with the client. Rule 1.5(b), RPC, requires that the scope of the representation and the fee arrangement be clearly communicated to the client; that rule further recommends that the same be in writing. Sometimes attorneys skip this step, or as likely have inadvertently overlooked it on this one file and now there is trouble. 

Says Barry Abbott, “Most lawyers who find themselves in fee disputes could have avoided that issue if they had discussed the business relationship with their client at the very beginning and documented their fee agreement in writing. Many lawyers want to jump right in to working on the case and do not first establish the clear financial basis of their relationship with the client.”

Billing arrangements take many forms, including but not limited to the following: (1) Straight hourly billing; (2) an up-front retainer and hourly billing; (3) a non-refundable retainer and hourly billing; (4) a flat fee; (5) a contingent fee; or (6) a modified contingent fee, with reduced hourly billing and a reduced-percentage contingent fee. 

Quoting retainers and qualifying potential clients is an art and not a science, but Rule 1.5 of the Rules of Professional Conduct provides general requirements and guidelines for reasonable fee arrangements. A number of factors come into play, including the attorney’s experience, the complexity of the case, and the customary charge in that locality. Remember that non-refundable fees must be agreed in writing, RPC Rule 1.5(f), and contingent fees are disallowed by law in most domestic and all criminal cases, RPC Rule 1.5(d)(1) and (2).

Other businesses, such as the local tire center, understand that they must have a clear agreement with regard to what work is to be performed and how much will be charged. A consumer cannot purchase a set of steel-belted radials without signing a printout which shows what is being bought and how much is being paid. Attorneys need to do this as well, in every case. Get it in writing. Include in your contract the right to withdraw as counsel at any time.

Honest people have bad memories, and a client is never an enemy until he becomes one.

-2- Communicate with the client and let him know what you are doing. Copy the client on all pleadings and correspondence. That way, when the client receives the bill, his first response will not be, “What is this all about?” The RPC requires that the client be reasonably informed (Rule 1.4(3)). Err on the side of too-much-information.

Barry Abbott agrees: “Lawyers who communicate regularly with their clients rarely find themselves in disputes over fees down the road.”

-3- Quote a realistic retainer, one large enough to get something done. Particularly in domestic cases, we see small retainers that will get the client into court but will not get them out. This can result in confused and unhappy clients who did plan for additional fees. Often the retainer agreement is clear on that point, but the client never read it, nor was it explained. Next comes the inevitable motion to withdraw for non-payment, leaving the client left within the court system with but with no counsel. By now, the attorney has run up a substantial bill which the client will not or cannot pay, because the client has paid all his money to retain substitute counsel. 

-4- When trouble strikes, do not disappear. Consider this hypothetical: The attorney gets a complaint from the client, and then gets more complaints, each with greater frustration and intensity. The lawyer inexplicably goes silent. She stops returning calls, stops answering emails, and she hides in her office while the client vents to the receptionist. 

At first, there may have been a legitimate misunderstanding and the client simply wanted answers to his questions. While the client wants to resolve the issue, addressing it sooner rather than later will reassure the client that his interests are being properly handled. Face the issues personally and promptly, unless of course…

-4- The client is at best unreasonable and at worst unhinged. Consider these additional facts: The attorney suddenly become aware that everything she says is being used against her and that there is no agreement to be had. The client may have buyer’s remorse or litigation-fatigue, or maybe the client thinks he can get all of his money back if he starts making threats. 

“In such event,” says Sam Jones, who is a former BPR hearing panelist, “respond to the client in writing and require that all future contact be in writing. Do not get pulled into an argument over the telephone and possibly find yourself losing your temper or otherwise saying something that will give the client grounds for a board complaint for unprofessional conduct. Copy all such correspondence to the file.”

In closing, I will add that serving on the committee has provided me with the opportunity to work with attorneys whom I otherwise might only know by name. It is impressive what three lawyers working together can accomplish. 

The arbitration hearings are confidential. Speaking generally, sometimes a case is easy because one of the parties is blatantly unreasonable. Other times, a case can be difficult, with favorable and unfavorable facts being almost equally distributed between the parties. The committee strives to clearly explain the basis of the decision in the written order, as well as provide a clear basis for the amount of the award. There is no bias for or against the attorney in these hearings.