Practical Considerations for Attorneys to Ensure Your Client Pays Your Fees

After spending countless hours, months and even years working on a case, the last thing you want to worry about is not getting paid. You also don’t want to risk State Bar discipline for violating ethical rules in making inappropriate financial arrangements with clients. In addition, you don’t want to draw a complaint for legal malpractice in response to your collection efforts.

A carefully drafted attorney fee agreement, adherence to ethical billing practices and clear communication with your client will help avoid these problems and ensure that your client pays your fees.

Rules for Fee Agreements

Your fee agreement is a contract, and California Business & Professions Code Section 6148 governs its contents. Under Section 6148(a) attorneys must have a written and fully executed fee agreement anytime it is “reasonably foreseeable” that the cost to the client will exceed $1,000. Although the statute does not mandate that all fee agreements be in writing (there are exceptions listed in subdivision (d)(1-4)), the best practice is to obtain a written agreement to avoid future disputes. Section 6148(a)(1) also requires the agreement explain “the basis of compensation.” This means you must state the applicable fee, which includes whether it is a contingent fee, hourly rate fee, fixed fee, statutory fee or any other expense the client will be expected to pay. Sample fee agreements prepared by the 16-attorney-member State Bar Arbitration committee can be found on the State Bar website for your use.

Rules for Your Bills

Business & Professions Code Section 6148(b) provides that if the services provided are more than $1,000, you must send your client a bill, which shall clearly state “the basis thereof.” This means bills for the fee portion shall include the amount, rates, basis for calculation, or “other method of determination of the attorneys fees and costs.” Failure to comply with this statute permits a client to void your fee agreement. Under Section 6148(c) you will only be able to collect a “reasonable attorney fee,” which may be significantly less than the rate stated in your fee agreement. Your failure to comply with these statutory billing requirements may also subject you to civil liability (a legal malpractice action) and State Bar discipline. (See In re Matter of Berg (1997) 3 Cal. State Bar Reporter 725).

Communicate with your Client About Your Fees

It is difficult for many attorneys to communicate with clients about fee arrangements, especially when the client is late in paying your bills or stops paying. You should set expectations with your client at the beginning of the representation. Prepare a comprehensive budget, update the budget as the matter progresses, obtain client written approval for expenses or extraordinary costs, and avoid overpromising or under delivery of services (“you told me it was a slam dunk case and my fees would be less than $5,000 and now the bill is ten times that amount”). You should also address problems early. Unlike wine, billing issues do not get better with age!

Comply with Mandatory Fee Arbitration Statute Before You Sue your Client

If all your efforts to get paid fail, and you decide to sue your client to collect your unpaid fees and costs, remember, pursuant to Business and Professions Code Section 6201, you must send your client the State Bar form “Notice of Client’s Right to Fee Arbitration.” The Contra Costa County Bar Association no longer administers a local program, so you can participate under the State Bar’s program. All forms and numerous advisories that discuss and analyze issues which arise in fee arbitration can be found on the State Bar’s website.

You may also consider the statute of limitations for legal malpractice actions codified in Code of Civil Procedure Section 340.6 in deciding whether or not to sue your client for unpaid fees and costs. It is common for a client who is sued for fees to file a cross-complaint for legal malpractice alleging the reason fees were not paid was because the attorney committed an error in the representation or had an impermissible conflict of interest. Failing to provide the required Notice is grounds to dismiss the lawsuit. There is also a tolling provision in Code of Civil Procedure Section 340.6(a)(5) that applies if you are participating in mandatory fee arbitration. Under this provision, the statute is tolled where there is a pending fee arbitration.

Statistics that the State Bar Mandatory Fee Arbitration Committee maintains about the outcomes of fee arbitration show the program has a very high rate of success. In the vast majority of cases, the attorney and client were satisfied with the arbitrator’s award and did not file a request for “trial de novo” in Superior Court and reject the award. Finally, if you obtain a fee arbitration award and it is not rejected, remember to file a petition to confirm the award as a Judgment judgment, so you can proceed to collect the judgment.

The time you take at the beginning of the representation to prepare a compliant fee agreement and adhere to all billing requirements will help you get paid. It will also prevent your client from electing to void your fee agreement to reduce or stop you from recovering your hard-earned fee.