TLIE Top Tip: Be Nice When Collecting Fees
TLIE Top TipsLawyers are not immune from having clients or customers who refuse to pay their bills. The consequences to the lawyer can be great, particularly when the client owes a large amount or the representation causes the lawyer to forego other clients or taking on new ones.
A desire for retribution or justice by using harsh collection practices is understandable, but not advised. In TLIE’s experience, harsh collection tactics frequently lead to malpractice claims. In fact, a claim for legal malpractice is a compulsory counterclaim to a suit for fees. Before suing for fees, it is important to first determine whether the client has the means to pay the outstanding fee and to consider the time, expense and stress of being involved in a litigation that places your work, billing, and services under a microscope. You may find that instead of being a plaintiff seeking recovery, you end up spending more time defending you and your firm’s work. Given the scrutiny that will be placed upon the quality and degree of services performed for the fees sought, consider retaining independent counsel to review the file to determine if there are any concerns or deficiencies in the work performed that could support the likely counterclaim for malpractice or a possible grievance complaint.
In the event you believe you need to turn up the pressure, Ethics Opinion 652 notes that a lawyer may use a debt collection agency but may not report a client to a credit bureau. To remain compliant with the Texas Disciplinary Rules of Professional Conduct when utilizing a collection agency, a lawyer must ensure the following are true:
- The lawyer is no longer handling the matter giving rise to the unpaid fees;
- The fee must not be unconscionable (TDRPC 1.04(a));
- The lawyer has tried other reasonable means to collect before hiring the agency (including written notice of the fee and services, considering arbitration or mediation, and at least one demand letter informing the client of what will happen if the fee isn’t paid including the possibility of being turned over to a collection agency);
- The lawyer retains control over the collection process in order to fulfill their ethical responsibility for the conduct of their agents; and
- The lawyer reveals only the minimum amount of client information necessary for the debt collection.
But lawyer beware…your collection efforts may be met with client complaints about your representation, and the cost of defending those, along with the potential reputational damage, could far exceed the debt owed. Give careful consideration to cause and effect and proceed cautiously.
