Maximizing Profits: Practical Tips Concerning Your Written Fee Agreement and Interactions with the Client

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The purpose of this article is to recommend practical tips concerning the decision to represent a client and after that decision is made, to recommend important provisions for your fee agreement.  These provisions can help protect both you and the client, while at the same time preserving and increasing your profits.  Additional practical advice concerning billing is also discussed.

Choosing the Client

The Intake Process

Before the client enters your office for his or her initial interview, employ a screening process to ensure discussions with the prospective client will not create a conflict of interest with respect to another.  Assign the intake responsibilities to a paraprofessional.  (If you do not have a staff person to provide this task, ensure that your screening procedures in your office are sufficient to avoid conflicts.)  Some clients may attempt to purposely create conflicts.   Have the paraprofessional inform the caller at the outset of the intake that no attorney client privilege is created by the conversation and none will be unless and until the prospective client has communicated with an attorney.  The intake should accumulate all relevant information including any name that the potential client has ever used or any business name or fictitious name under which the client has transacted business.  This is critical for the purpose of making a complete conflicts check.  Basic information about the nature of the case is gathered and the billing rate of each attorney should be disclosed.  That there is a fee for the initial consultation should be stated and the intake paraprofessional should note on the intake sheet that the prospective client was so advised.

Initial Consultation

Some lawyers charge for their initial consultation, others do not.  Giving a free initial consultation is not good practice, particularly if opinions are offered to the client.  Every attorney’s time is valuable.  This concept should be imparted to the prospective client at the first meeting.  The initial consultation is the point at which the attorney decides whether to represent a client, assuming the client is interested in retaining the attorney.  This is the point at which an attorney’s instincts are important.  No matter how well written and organized the attorney’s fee agreement may be, like any other contract, it is only as good as the parties who sign it.  The experienced lawyer should follow his or her gut with regard to whether to accept an engagement.  The referral source, which should be established during the intake, is critical.  If there is any doubt about whether to accept the representation, the referral source should be contacted, discreetly, to determine what he or she knows about the client.  The phone call can be made to thank the referral source and then used as a means by which to gain information about the potential client.

Check the register of actions maintained by the Superior Court in the applicable counties  to determine whether the potential client is involved in other litigation.  If so, investigate accordingly.  Google the client’s name.

Use your instincts.  Size the client up.  Lawyers are paid to do this and they should do it on their own behalf and for their own benefit.

If there is serious doubt about the client’s ability to pay, increase the retainer.  But, make sure it is enough to cover a substantial amount of work because if one gets too far into the case, there are the ethical considerations of when and under what circumstances withdrawal is appropriate.

The Fee Agreement

The initial consultation is the point at which the written fee agreement should be given to the client.  Different lawyers have different practices with respect to when that agreement is executed.  My practice has been to send the client home with the fee agreement to take the time to read it and understand it.  Since the essential terms of the written fee agreement are (or should be) non-negotiable, in a real sense, it is a contract of adhesion.  For that reason it is important for a prospective client to have an adequate opportunity to read and review the agreement prior to signing it.  Schedule a second appointment, after the initial interview, to review and discuss the agreement, at no charge, with the client.

The final thing to do at the initial consultation is to get paid for your services.  On the day of the initial consultation, prior to the meeting, have the client sign a form acknowledging that a fee will be paid at the conclusion of the consultation at the regular hourly rate of the attorney participating in the consultation.  Include this provision in a form which requires the potential client to provide other information, not gathered at the intake, or to update information.

Important Provisions in the Fee Agreement

Whenever it is likely that a fee in excess of $1,000 will be charged, the agreement is required to be in writing pursuant to Business and Professions Code § 6148.

Like any other agreement, the fee agreement should be written in plain English and should cover all of the essential terms of the financial arrangements to be made with the client.  The agreement should also anticipate areas that might result in financial problems for both the client and the lawyer, in advance, with a resolution method proposed.

Scope of Services

The fee agreement should contain a section which accurately describes the scope of the attorney’s employment.  For instance, the agreement should specifically state that representation, if it is a litigation matter, is limited to the trial court in which the proceeding is pending and does not include appellate matters such as writs or appeals to higher courts.  The agreement should further state that if appellate action will be taken, it will require a separate and specific retainer agreement to be executed between the attorney and the client or that such services are not available.  The agreement should state that collateral matters will not be covered by the agreement, as well.

Best Efforts; Opinions

The fee agreement should state that the attorney will use his or her best efforts consistent with the Canons of Professional Ethics and the Rules of Professional Conduct for California attorneys to obtain a favorable result for the client.  It should also state that even though opinions may be expressed concerning the possible outcome of the engagement, the client acknowledges that these attorney-expressed opinions are opinions only and no guarantee is made at any time about the result of any litigation or any other aspect of the case over which the parties do not have any control.

Charges/Billing

The fee agreement should set forth very plainly the manner in which fees for legal services are charged.  If there are other lawyers or paraprofessionals in the firm, there should be an exhibit setting forth the schedule of fees and charges for each individual and for all costs.  These costs might include copy charges, postage, toll calls, travel expenses, messenger service, deposition and court reporters, process servers and online record searches.  If it is your practice to increase billing rates periodically, it should be stated clearly in the agreement.  The agreement should clearly state at which intervals billing rates may be increased (i.e., annually) and the amount of notice a client will be given prior to the effective date of the new billing rate.  In the absence of such a notice, it is not likely that the increase in the rate would be enforceable.  The fee agreement should require a retainer payment as well as periodic replenishment of a specified amount or an “evergreen retainer.”  The best and simplest practice is to require the client to make a “deposit” which is maintained in the client trust account and is never tapped for fees.  Explain this to clients as akin to a security deposit or the payment for last month’s rent in advance in a commercial or residential lease.  The agreement should state clearly that the unused portion of the retainer will be returned to the client upon the completion of services or if the attorney is discharged.  It is good practice, as well, to disclose that the interest earned on the attorney’s trust account will be paid to the State Bar consistent with Business and Professions Code § 6211.

Since the attorney-client agreement is a contract of adhesion, it is wise to reserve the right, in the agreement, to require an additional retainer or deposit against fees in anticipation of a trial of the client’s case.  The additional retainer is based on projected future costs.  The fee agreement should state that a trial retainer shall be calculated when it is known the matter is likely to proceed to trial.  The trial retainer should be a significant portion of the fees that an attorney anticipates will be spent through trial.  It is important to present to the client a budget projecting and estimating the number of hours that will be spent on various activities and tasks to bring the case to trial, as well as costs.  How much of that total amount is requested as a retainer depends on the level of trust and confidence the attorney has in the client and the cash available from him.

Bills should be sent on a monthly basis.  Every activity in which the attorney engages should be described and should include a time description.  If numerous tasks are performed on a given day, it is not good practice to total the amount of time and enter it at the end of the description.  This process is known as “block billing” and it will bite you if there is a fee dispute and the matter is referred to mediation.  The ABA disapproves of block billing and fee arbitrators tend to mark those charges down.

If you are able to obtain a guarantor for payment of your attorney’s fees and costs, he or she should execute the fee agreement on a signature line contained in the agreement.

Withdrawal/Discharge

The agreement should make it clear that a client may discharge the attorney for any reason at any time.  The attorney’s ability to withdraw from representation must be consistent with the Rules of Professional Conduct.  Failure to make payments in accordance with the agreement is a valid basis for withdrawal so long as it does not occur at a time that will prejudice the client.  The agreement should state that if the client wishes to retain the case file after the attorney is discharged or withdraws, counsel has a right to retain a duplicate of the case file at the attorney’s own cost and expense.   Under all circumstances, invest in a copy of the file.

Remedies

Consider whether to limit the remedies under the agreement for any claim or action, under the Rules of Arbitration.  The arbitration agreement should be referred to in the fee agreement and there should also be a separate agreement covering the terms of the arbitration agreement.  Arbitration agreements signed at the outset of representation are now valid and enforceable.

Execution of the Agreement

The attorney should have the client initial every single page of the agreement.  In addition, there should be a space for initialing in the margin next to any provision which may become controversial.  For instance, consider having the client initial the provision confirming “opinions are not guarantees” and the provisions for additional retainers.  If the relationship breaks down and the attorney ends up in a dispute with a client, this would be some proof that the particular provisions, specifically, were read by the client (even though the law presumes people read the contracts they sign).  Having given the client time to review the agreement independently prior to signing, along with offering not to charge for time associated with a client’s questions about the agreement, are further evidence of the client’s knowing and voluntary execution of the agreement.

The final and perhaps most critical point of this article is to stress the importance of not allowing a client to build arrears.  A colleague once told me that a client owed him $30,000 in unpaid fees.  The attorney’s wife asked him why he was so distracted and he responded that he was thinking of withdrawing from the case.  When she asked him why he would walk away from $30,000, he answered “better now than when he owes me $100,000.”

And there you have it.


Andy Ross, managing partner of the law firm Whiting, Fallon, Ross & Abel, LLP, is a Certified Family Law Specialist, certified by The State Bar of California Board of Legal Specialization. He has acted as Judge Pro Tem for the Santa Clara County Municipal Court 1980-1984; and for the Contra Costa County Superior Court 1997-2009.

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