According to an article in the Connecticut Law Tribune, during the past several years there has been an uptick in the instances of law firms suing to recover their fees. O’Connell, Flaherty & Attmore based in Hartford, Connecticcut, has been suing clients since 2008, and the firm “has 29 pending cases seeking about $523,000 in unpaid fees.” The Hartford office of Bingham McCutchen, “is seeking $764,000 in fees from former client Richard D. Cohen of Capital Properties.” And, Pepe & Hazard, now part of McElroy, Deutsch, Mulvaney & Carpenter, filed three collections lawsuits in the past two years – which is one more than it filed in the past ten years.
As recognized in the article, some of the largest law firms nationwide have been filing collection actions during the past few months, including Debevoise & Plimpton, McDermott Will & Emery, and Williams & Connolly. And, earlier this year, a jury awarded Drinker Biddle & Reath $1.8 million in a fee dispute case.
This agressive collection strategy has been criticized by some. According to Bill Jawitz, a law firm consultant in Milford, Connecticut, more law firms are asking Jawitz about the strategy of filing lawsuits against clients. He is quoted in the article as saying he “strongly” advises against it given such suits can lead to bad publicity for a firm and often invites malpractice counterclaims. As well, he says, “It sucks up time and money to fight these battles. It’s a sign of bad financial management.”
Although it is true that law firms have traditionally been hesitant to file a claim against clients for fear of being hit with a counterclaim sounding in malpractice, the article’s author points out that a check of Connecticut court records “revealed no pending malpractice claims filed by clients sued over past-due bills.” More than likely at least a few such counterclaims exist and the author merely missed them. On the other hand, plaintiff’s burden in proving a malpractice claim is not slight. A plaintiff often needs to prove “a case within a case” in order to recover.
And, getting plaintiff’s counsel to take on a malpractice counterclaim may not be as easy as it once was given the costs involved in battling a law firm hungry for its fees and seeking to protect its reputation. In other words, maybe the counterclaims are really not as frequent as they once were. In any event, professional liability insurers should be pursuaded not to penalize those law firms who fight to recover fees.
It is clear that malpractice insurers currently take notice of fee disputes. Indeed, a common question found in most any professional liability application is: “How many suits for collection of fees have been filed by the Applicant Firm during the past 2 years?” The obvious assumption being that such suits bring with them malpractice claims. And, whether frivolous or not, such suits must be defended.
There are strategies that exist which completely obviate the need to file suit against a client. These strategies apply risk management techniques usually undertaken by manufacturers and not professional service firms. Moreover, not only would they help on the collection backend, they would help on the front-end when a decision is made to take on the client in the first instance. As a final added benefit, these strategies will also serve to lower professional liability insurance rates.