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A WORD TO THE WISE CLIENT: MONITOR YOUR ATTORNEY’S SPENDING

              In my law practice, I regularly come across clients of other attorneys, who discovered, too late, that their attorneys had run up legal fees, or incurred out-of-pocket costs, considerably in excess of what was warranted in the particular legal matter. The upshot is that many clients are paying way too much for representation. The following tips should help clients (including my own) avoid that costly and frustrating situation.

              In a typical situation, I represented a professional who had served as a party’s expert witness in a complex lawsuit. When the company that had retained him needed his crucial services, they made sure to pay him. They regularly praised his work and encouraged him to do all that he deemed necessary, since a gigantic amount was at stake. But--lo and behold!--when the company settled the case before the fruition of the expert’s work, the company refused to pay him, ignoring his reasonable invoices, letters, and calls. At that time, the client would have settled for perhaps half the balance due, which was not huge to begin with. But they gave him no choice but to sue for compensation, and we did. The case being a straightforward one with no apparent meritorious defense, and the amount at stake not being large, any rational opposing lawyer acting in good faith would have advised his or her client to make the best settlement they could, and be done with it.

               The lawyer on the other side was the head of his mid-sized big-city law firm and was highly experienced in business litigation. He also had high overhead. While it is possible the client was irrational and chose to spend a small fortune rather than pay the relative peanuts owed to my client, I doubt that was the fact since the defendant was a substantial business entity; experience teaches that businesses retain lawyers largely for their advice and generally follow it. Therefore, had the lawyer advised a quick settlement, I believe the defendant would have made one. That’s what led me to conclude that the lawyer did not render sound advice but may well have encouraged his client to fight a losing battle that would nevertheless have enriched the law firm.

What should have been brief and simple—and therefore inexpensive—litigation  turned into legal World War III. The other side refused to do anything the rules required. We therefore had to make many costly motions to the court for relief, far more often than we normally would in even a much larger case. Several times the judge even assessed monetary sanctions against the company, which paid us thousands of dollars. An objective observer would have thought this was the civil “case of the century.” Through it all, the defendant never offered a valid reason for stiffing my client. And still they fought to avoid giving us the most basic discovery. Even when we obtained a prejudgment attachment and the right to grab the company’s assets to satisfy a likely verdict, the company spent like the proverbial sailor, without apparent regard to what it was costing them.

The case finally settled a couple of days before the jury trial was to start. After spending probably 4 to 5 times the amount of the unpaid expert’s fees, the company paid him almost the entire amount that was due, plus costs. Because we had taken the case on a contingency basis, our client did not have to pay fees out of pocket; if he had had to, he could not have afforded to sue.

Assuming, as I reasonably did, that the lawyers did not render appropriate advice and that the client would have followed it if the firm had offered it, this matter was a disaster for the company. In the lengthy litigation, there were numerous junctures where it was so clear that the company would lose: So why continue to bleed the treasury? Since I’ve seen it so often, I concluded that the opposing law firm was the only one on the other side that benefited. 

Image of two male hands exchanging moneyThere is usually no reason to sympathize with a large business that can or should be able to take care of itself vis a vis its counsel. But what of an individual client, one who has little or no experience with lawyers’ billing and may therefore be compared to low-hanging fruit in the eyes of the unscrupulous attorney? We have seen cases like that, too, and they are instructive. One such case was a suit against an unsuccessful businessman who had borrowed money from our client and promised to pay it back with interest in several months. The agreement was embodied in one short written paragraph. When the time came to pay, the defendant refused to, claiming that payment was contingent on the opening of his new business.  But the agreement did not condition repayment on anything but the passage of several months. A reputable attorney who put his client’s welfare before his own (as the law requires) would have advised a prompt settlement, to which my client was amenable. But no such thing occurred, compelling, once again, an expensive fight.

We settled the case on very favorable terms shortly before trial, and the bad guy made good on his first payment, then petitioned for bankruptcy. We discovered in the bankruptcy that his lawyers had billed him fees in the amount of the promissory note, plus $30,000. In other words, if the defendant had not defended the case but paid my client all he was owed, the defendant would have been on the hook for $30,000 less than his attorneys billed him. I later learned from him that his attorney never advised him to settle, never opined that the case was a loser, and just kept working up the case in vain. Again, the only one who could gain was the lawyer, who had even assigned a second lawyer to work the case—and, of course, to bill for it. In that situation, though, the naïve client got a bit of poetic justice: Since his attorney was not a secured creditor, it was unlikely he would recover much if anything in the bankruptcy. My client, as a secured creditor, continues to receive monthly payments from the bankruptcy trustee.

I believe that the most critical lesson to learn from these cases is that, just as medical patients are well-advised to “be their own doctors” and look out for themselves instead of totally entrusting their lives to their doctors, lawyers’ clients must “be their own lawyers” at least to the extent they must be vigilant to ensure that their fiduciary is not needlessly or unethically running up legal fees and/or costs. Even sophisticated clients often give their attorneys too much leeway in the amount and kind of services they provide. Businesses and other sophisticated operations, no less than individuals, should keep close tabs on what the attorney is billing for, and why. Periodic reports, followed up by phone conversations and meetings, will go a long way toward preventing “runaway” legal work. An ethical and competent lawyer should welcome the client’s involvement  and should be more than willing to discuss the reasons for doing the work, whether it is necessary, whether a less expensive option is available, and similar issues.

There is no reason to assume that any lawyer will try to rip off his or her client. But it happens regularly, and so the individual client, particularly, needs to politely ride herd over his or her lawyer to ensure he or she does not take advantage of naivete or  unsophistication. Lawyers are just other people, having the same financial and other issues as any other service-provider. Though it would be nice to be able to have confidence that our law schools turn out only bright, noble, ethical, and efficient new lawyers, the truth does not allow such confidence. If the client wants to be charged a fair rate for good and necessary work, it behooves him or her to be involved with the case, ask questions, express doubts when necessary, and even seek a second opinion about the way the lawyer is going about his or her representation. The legitimate, upright practitioner will not begrudge the client’s attention but rather will welcome and appreciate it. If the lawyer balks at it or makes the client feel uncomfortable, the client should consider seeking other counsel.

 

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This is not legal advice. This information is provided for educational and informational purposes, only. Nothing here is meant or intended to create an attorney-client relationship. For specific legal advice relating to your situation, contact a competent attorney in your jurisdiction.