Many lawyers and law firms are faced with this problem. The firm has done all the right things trying to avoid billing problems by setting expectations clearly and in writing from the outset to avoid surprises for clients: obtained an upfront retainer, billed on time, providing clear understandable bills, and specified the deadline for payment. But it’s a fact that lawyers will not collect all that they bill for. The term ‘realization rate’ refers to the amount of money the firm actually receives from clients versus the amount the firm billed.
The client has not been responsive to email or phone messages from your support staff. Before you go any further, review the file, the outcome of the services provided and the client’s satisfaction with the services. Determine if you want to pursue this collection matter further as you are about to get on the phone to get paid. Here are some tips for doing it effectively:
1. Know the law and ethical rules. Although you want to get paid, you do not want to be accused of violating any debt collection laws. Unlike the Fair Debt Collection Practices Act debt collection state laws can extend to any person who is owed a debt,. Remember while the objective is to get paid stay within the constraints of various laws and ethics rules. Don’t do something stupid that turns a collection matter into a malpractice claim and/or grievance.
2. Prepare a written script and stick to the script. Discussing money owed is not always comfortable. It is easy to become flustered or angry and get emotional when someone is avoiding payment. Stick to the script, staying calm during for the conversation keeps you in control and affords you the best chance of getting paid.
3. Be professional and assertive. Although some small talk may be helpful to start, keep the small talk to a minimum. Get to the point of the call which is you have not been paid.
4. Silence is your friend. With the client understanding the call reason giving a longer than normal pause gives the client time to respond. Make sure you let the client respond. You never learn anything by taking.
5. Determine the reason(s). Is it because the client does not have any money? Is the client dissatisfied with the outcome or service? Or is it a large organization that typically is slow to pay? Or is the ‘check in the mail’? Based on the reason for nonpayment, make sure you are prepared with a solution(s) to help the client pay you.
6. Confirm the conversation in writing via letter or email summarizing the agreement reached. Make sure to have agreed to concrete dates to know whether the bargain has been kept.
7. Don’t forget your attorney malpractice insurance. The last thing you want to happen is to have the call evolve into threats about suing for nonpayment of fees or counter-threats to file a grievance. Suits for fees, grievances filed against the firm and retaliatory claims will raise your attorney malpractice insurance rates and could get you non-renewed. Sometimes the most effective collection call is the one not made. “Know when to hold them and know when to fold them.”
You have now done all of the above steps and still have not been paid. Before you sue for fees remember that approximately 1/3 of all malpractice claims involve some aspect of a fee dispute. In many cases there is an unresolved issue with the client. The fee suit can open up old wounds provoking retaliatory suits and bar complaints. Let you in on a little secret, Lawyers Professional Liability Insurance Companies know this. Many malpractice insurance carriers will not write a law firms making a regular practice of fees suits. This increases the premiums that a law firm will pay as there is less competition for your account. Other malpractice insurers will write the firm, but put an exclusion endorsement on the policy for retaliatory fee suits. This opens the firm’s and attorneys’ assets up in the event of a retaliatory suit. Law firms that make a practice of fees suits are not preferred attorney malpractice risks.
Worse yet, firms that have had retaliatory fee suit claims or bar complaints filed against them are pushed closer and closer to the non-admitted/surplus insurance market where like “Double Jeopardy” the premium dollars do double.