Addressing Fee Disputes
Fee disputes can arise in numerous situations. Clients being billed on an hourly basis may disagree with the amount they are charged, disputing the reasonableness, quality or necessity of the fee and/or expenses charged. Flat fee clients may discharge the attorney and dispute the amount of the fee the attorney proposes to return. Contingent fee clients may not want to pay the percentage allocated for attorney fees or may fire the attorney prior to settlement and dispute that the attorney is owed anything. Whatever gives rise to the fee dispute, there are several important things to consider.
Be pro-active to prevent fee disputes
Good client communication and clear, concise invoices can help head off fee disputes. Before accepting the representation, discuss the billing arrangement with the client. Explain the fees that you will charge for work done by attorneys and support staff and describe the type of expenses that the client will incur, such as travel costs or expert fees. Be sure the client understands what will be billed, when it will be billed, and how the attorney will accept payment. Put all this in a written fee agreement that the client signs and give the client a copy of the executed fee agreement and keep a copy of the signed agreement in your file. See OBLICAlert Billing Ethically to Get Paid.
Keep the client informed via monthly status updates. An informed client is less likely to feel ambushed if they understand the legal work being performed and how it relates to the invoice they receive.
Don’t build up large accounts receivable
If an invoice has not been paid before the next billing cycle, follow up immediately! Contact the client by phone and determine the reason for the lack of payment. Decide if you will revise the terms of the fee agreement for payment. Put the revised agreement in writing and have the client sign it.
If there is further departure from the revised agreement or if you decide to withdraw from representation, follow Rule 1.16 and return any unearned fees to the client. If you need assistance in this process, give us a call. Withdrawal from representation is one of the most frequently addressed subjects in OBLIC Hotline calls and ethics consults.
Fee resolution procedures
Comment  to Prof. Cond. R. 1.5 provides:
 If a procedure has been established for resolution of fee disputes between a client and a lawyer, such as an arbitration or mediation procedure established by a local bar association, the Ohio State Bar Association, or the Supreme Court of Ohio, the lawyer must comply with the procedure when it is mandatory, and, even when it is voluntary, the lawyer should conscientiously consider submitting to it. Law may prescribe a procedure for determining a lawyer’s fee, for example, in representation of an executor or administrator, a class or a person entitled to a reasonable fee as part of the measure of damages. The lawyer entitled to such a fee and a lawyer representing another party concerned with the fee should comply with the prescribed procedure.
If the fee dispute involves another lawyer
Where the fee dispute is between lawyers trying to determine the fee they will share, Prof. Cond. R. 1.5(f) requires that the fee dispute be submitted for mediation or arbitration to a local bar association or to the Ohio State Bar Association (if a local bar association does not offer such a fee dispute resolution process).
Be sure any settlement is ethical
In discussing a fee resolution with the client, be sure that you comply with Prof. Cond. R. 1.8(h). A lawyer cannot make an agreement prospectively limiting the lawyer’s liability to a client for malpractice or requiring arbitration of a claim against the lawyer unless the client is represented by independent counsel in making the agreement. Further, the lawyer cannot resolve a fee dispute and in doing so settle a claim or potential claim for malpractice unless all of the following apply: (i) the settlement is not unconscionable, inequitable, or unfair; (ii) the client or former client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel in connection therewith; (iii) the client or former client gives informed consent.
We have significant experience in guiding attorneys through efforts to resolve fee disputes and welcome the opportunity to assist before the dispute escalates into a legal malpractice claim or a disciplinary complaint. While we are happy to offer our resources to guide you to a resolution of your fee dispute, remember that your OBLIC policy does not apply:
(n) to any “Claim” for money damages for:
- return of monies or any other consideration provided to an Insured as fees or expenses, or for the offset to fees and expenses, for “Professional Services” rendered or for any other damages, including consequential damages and attorneys’ fees, arising out of an Insured’s alleged failure to return or reimburse such fees or expenses.
We hope these tips will help avoid fee disputes. When circumstances are complicated, give us a call. We’re here to help!
|Gretchen K. Mote, Esq.
Director of Loss Prevention
Ohio Bar Liability Insurance Co.
Direct: 614 572 0620
|Monica Waller, Esq.
Senior Loss Prevention Counsel
Ohio Bar Liability Insurance Co.
Direct: 614 859 2978