Law Firms
Suits for Unpaid Legal Fees in Top 10 for Stupidity, Lawyer Says
Posted Sep 30, 2009 6:06 AM CST
By Debra Cassens Weiss
A lawyer who represents a company sued for unpaid legal fees says such claims aren’t a good idea.
Lawyer Warren Trazenfeld represents Whitney Information Network, sued by the Florida law firm Rothstein Rosenfeldt Adler, allegedly for failing to pay more than $400,000 in legal bills, the Daily Business Review reports.
Trazenfeld told the publication he is planning to file a malpractice counterclaim. Suing a client is "one of the top 10 stupidest things a lawyer can do,” he said.
The story asserts the case is one of a growing number of instances in which law firms are suing clients for unpaid bills. "Most clients think the best defense is a good offense, and there's no better offense than a counterclaim for legal malpractice," Trazenfeld told the Daily Business Review.
Another law firm that recently filed suit for unpaid fees is Ruden McClosky, the story says. Last week the firm filed suit claiming nearly $40,000 in unpaid legal bills by the father of retired pro quarterback Bernie Kosar.
Ruden managing director Carl Schuster acknowledged that some malpractice claims have merit, but said clients often file them as a settlement tool in fee cases. "They obviously haven't paid the bill so that's not a defense, so they have to think up a defense," he told the Daily Business Review.
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Comments
B. McLeod
Sep 30, 2009 6:27 AM CST
Back in the days before lawyer advertising and such, there was kind of an unwritten rule against this. Now it does seem to be a frequent occurrence, but in the last few I saw in the news, there were no counterclaims. It may be that some clients have just shifted to being so abusive with inexcusable non-payment that the firms have to sue or starve.
beentheredonethat
Sep 30, 2009 7:45 AM CST
This phenomenon continues to mystify me. A client refuses to pay Lawyer #1, but he/she then hires Lawyer #2 to counterclaim for malpractice. Doesn’t Lawyer #2 worry about getting his/her bills paid? Wouldn’t it make more sense for client to pay what is due to Lawyer #1 instead of potentially paying two lawyers?
R. Rogers
Sep 30, 2009 8:00 AM CST
How could you let a bill for legal services climb to $400,000.00?
joe
Sep 30, 2009 8:00 AM CST
so the lawyer representing the alleged deadbeat client sez that suing for unpaid legal bills is really stupid.
And then the ABA journal prints that as the headline.
Umm….ABA Journal? That is a self serving comment. And your headline is biased.
M. Bressler
Sep 30, 2009 8:17 AM CST
I disagree with Trazenfeld and am surprised that he made this statement. If a client owes his attorney a fee then they are contractually obligated to pay. A baseless counterclaim filed as a debt reduction negotiating tactic is unethical and is an abuse of the courts. Lawyers who advise their clients to do this should be disciplined.
Eric
Sep 30, 2009 8:22 AM CST
Lawyer Trazenfeld’s comments are self-serving and he must be very fortunate to have nothing but clients who pay. In the real world, client non-payment has become worse in the last 5-10 years. Clients are becoming more sophisticated and many know and understand that attorneys can’t just stop representing them without leave of court. By the time it becomes obvious that the client isn’t going to pay, and then by the time the attorney gets to court for leave to withdraw, much time and fees have gone under the bridge. This is particularly true in divorce work.
tim
Sep 30, 2009 8:54 AM CST
Why is it stupid for a law firm to sue a client who doesn’t pay? What other service can you rack up a $10,000 bill and then say screw you, I am not paying.
I know lots of firms in town who have a reputation of not suing their clients - guess what, people go their for free legal work.
If i know a firm is not going to sue me for the work, I wouldn’t pay them either. Use up the retainer and the rest is on you.
Every law firm should sue every deadbeat client. If they don’t pay, they aren’t worth having as a client anyway.
SUE THEM!
Esq.
Sep 30, 2009 9:05 AM CST
I agree with #7. It’s stupid for a law firm NOT to sue clients who don’t pay. Plus, even if a client files a baseless malpractice counterclaim as a “settlement tool”, the client is still racking up fees in bringing the counterclaim, and runs the risk of having to reimburse the original lawyer’s costs in defending the claim.
The Doc
Sep 30, 2009 9:11 AM CST
Okay, let’s see now, Commenter 2 has a good point. Let’s say the court rules for the law firm and client refuses to pay the defending lawyer. Does that lawyer now sue because his dead-beat client thinks he did malpractice? If lawyers weren’t being cranked out that are as dumb as some of the clients who get themselves into the trouble that they have, we might not have this problem. If a lawyer who was approached by a dead-beat just said “Pay your bill!” instead of quoting a retainer, then maybe this world would be a happier place. After all, the client should have expected to pay a bill. Or do people think that lawyers should work for free? You try working for no pay and see how far that gets you and how you like it!
Phillylawyer
Sep 30, 2009 9:17 AM CST
While I do not condone clients using baseless claims of malpractice to receive a discount on a legal bill, in some cases, the blame truly lies with the lawyer. It is not unheard of that an attorney unnecessarily overworks a file, not to service the client, but only to run up the fees, all while not focusing on the client’s goals or keeping the client informed of the work that was being performed. Just as clients shouldn’t make baseless claims of malpractice to unfairly discount their bills, lawyers should not view their clients as cash-cows who should pay padded invoices without question.
Divlaw
Sep 30, 2009 9:53 AM CST
Wow. I couldnt be more confused about the logic behind Mr. Trazenfeld’s statements then if a group of mechanics got togeather to lobby against mechanics leins. Or if mortgage companies stopped foreclosing on and suing defaulting owners. Well, I can only hope that Mr. Trazenfeld is not reduced to dumpster diving to survive when his client’s inevitably stiff him too.
Lee
Sep 30, 2009 10:24 AM CST
Suing a client for unpaid fees = bar complaint and/or malpractice suit by said client against suing attorney. It’s an immutable law of physics. But it still sucks.
pontius
Sep 30, 2009 10:34 AM CST
How ‘bout we send this article down to Whitney Information Network - so they realize that they don’t need to pay Mr Trazenfeld either. Lets see if Mr. Trazenfeld just eats his loss.
Not every client can pay a large retainer to offset attorneys concerns of non-payment. Sometimes a lawyer needs to work on the understanding that his work will be paid as per contract.
As to #10, what you refer to is not necessarily malpractice, it is an issue that could be brought up as a basis for a reduction of the fee but not as the basis for an affirmative claim against the lawyer - unless the churning was not picked up until after the bill was paid. But that’s an entirely different kettle of fish.
Gonzolaw
Sep 30, 2009 11:20 AM CST
First, hire someone to sue for your fees. Why spend even more time on a deadbeat client. Second, using a collection firm insulates these counterclaims for fear of sanction: if malpractice has actually occurred it will honestly come out and not be a “negotiation tactic”. Third, you can move on to doing the work you do, and not get bogged down in pay-backs.
HP
Sep 30, 2009 11:49 AM CST
Like any other debt collection action, it’s a balance of the expected return versus the expected costs. The likelihood of a malpractice counterclaim, the costs of defending it, and the risk of having to pay a judgment all factor into the costs. But if the debt is large enough and you think you have a good case that you’re entitled to it, the expected returns will outweigh these expected costs.
And, as others have pointed out, keep in mind that the expected return includes deterrence to future non-payments by other clients, who will know from this suit that you enforce your contract rights.
associate
Sep 30, 2009 12:10 PM CST
You know, back when this was America, people did tons of stupid stuff like believe in God, be self reliant, and did the right thing. Accordingly, they honored their obligations.
Whew, it’s a good thing we’ve progressed past that, right?
Joe
Sep 30, 2009 12:58 PM CST
Is Warren Trazenfeld accepting new clients. My corporation needs legal work done and I will be a good client. I sure as hell wont pay him if he isn’t going to sue me to collect on it.
How do I get ahold of this free legal work from his firm?
Steven
Sep 30, 2009 1:02 PM CST
Does an attorney have an ethical obligation to a keep secret the fact that a client hasn’t paid you?
Can we start a website that lists the people and company’s and the amount they owe that do not pay their legal bill so that other law firms can look them up before taking them on as a client? I know I would use a site like that.
Old Lawyer
Sep 30, 2009 1:09 PM CST
Commentor #4 makes a good point. The Journal headline gives one the impression this is wisdom from an expert on law office management rather than counsel for the defendant.
Esq.
Sep 30, 2009 4:23 PM CST
@ #18: It’s called a Lexis Search for court filings. Pop in a client’s name, and each and every case in which he’s either been a plaintiff or named defendant will pop up. You need not even use Lexis. Court filings are generally public records, and most courts provide free access to their lists of filings by caption.
Honestly, the stupidest part of the article is that Trazenfeld is essentially biting the hand that feeds him. If everyone followed his advice, he’d be out of a job.
Paul the Magyar
Sep 30, 2009 5:29 PM CST
“If a client owes his attorney a fee then they are contractually obligated to pay. A baseless counterclaim filed as a debt reduction negotiating tactic is unethical and is an abuse of the courts. Lawyers who advise their clients to do this should be disciplined.”
Lawyers who participate in such shenanigans should be disciplined, too.
Sometimes the fees owed are as a result of a victory and good service rendered—and the refusal to pay is “just doing business” in a society which elevates economic success above all morals, honor, ethics and values.
For an example, read about Maxxam, Inc.‘s (mis-)management of Pacific Lumber in the October 2009 issue of National Geographic.
Mark Rouleau
Sep 30, 2009 5:42 PM CST
The organized bar should place mandatory arbitration clauses in their fee contracts with forum selection clauses designating the entity to conduct the arbitration. As long as the same rules of law apply without limiting defenses I have to believe that such clauses would hold up under scrutiny. At a minimum they would keep the matter out of the public record and would likewise protect the discovery (if any) from being placed in/on the record.
Eugene Keefe
Sep 30, 2009 9:41 PM CST
I remain mystified at how ill-protected lawyers are from clients and the second lawyer who will fight to stop the first lawyer from being paid.
I feel civil practice should be fundamentally changed so you couldn’t file a counterclaim for malpractice until 100% of all legal fees are paid.
I also feel there should be a rule clients can’t be more than 90 days late in paying hourly bills or the attorney has to withdraw from representation due to the obvious conflict.
Robert Buege
Oct 1, 2009 7:51 AM CST
Try not paying your doctor, your plumber and for your car repairs. You won’t have a doctor, you will have a lien on your home and you won’t get your car back until you pay. The problem is that as lawyers once we provide the service there is no way to take it back.
pedro
Oct 1, 2009 2:17 PM CST
1st years get the sue the deadbeat client cases here. It’s good practice for them to go through the steps of litigation.
#24. Good point. We should change the law to allow liens to be placed on homes for unpaid professional services (lawyers, accountant, banking, etc.)
Attorney
Oct 1, 2009 6:07 PM CST
The attorneys and law firms are at fault here. That’s why you have evergreen retainers and flat fees or true retainers and accept credit card payments and the like. Stop acting like bank and providing clients with credit.
Sandy
Oct 2, 2009 4:42 AM CST
The name I give to a client who fails to pay his fees is “Defendant”.
Sam Mecum
Oct 2, 2009 5:42 AM CST
Despite the fact that professional liability carriers and Mr Trazenfeld fear malpractice counterclaims in suits for legal fees, I have never heard of such a thing being done in my 36 years of practice in our county of 750 lawyers and 500,000 people. I doubt we have lawyers who would file malpractice counterclaims—who would do that? It’s such an obvious tit for tat
Luis
Oct 2, 2009 6:27 AM CST
Knowing Warren Trazenfeldt, he does not file claims without merit.
Einstein
Oct 2, 2009 6:53 AM CST
News flash! The old rules do not work. There is nothing wrong with a law firm suing a former client for money owed. That’s the law firm’s money. This will not affect the firm’s ability to practice law one bit. This is the USA. People have no memory. This is a “what have you done for me in the past 15 minutes” country. Clients will not care if you sued another client. All they care about was did you help them today.
Ronnie
Oct 2, 2009 6:57 AM CST
A #6, very true. I’m in the divorce field and it’s a nightmare. Second, our malpractice carrier has specifically told us that we can’t sue our clients for non-payment, else our coverage will be dropped Third, we are permitted to place liens on houses or other items if the client fails to pay; in this economy, that’s a crapshoot.
Mick
Oct 2, 2009 7:11 AM CST
The best course to avoid the defensive malpractice claim in a fee collection case is to wait until the statute of limitations passes for a malpractice claim and to then initiate the fee collection action. In many states, the statute for malpractice is shorter than the statute for collection of a debt.
memphis
Oct 2, 2009 7:19 AM CST
I learned nothing from this “article.”
Cowdogs
Oct 2, 2009 7:20 AM CST
One can only hope that there is merit to Trazenfeld’s claim. Otherwise, all his representation amounts to is abetting the client’s theft from the original attorney. If such is the case, both he and the client should be called to the carpet-financially and otherwise.
MichaelAngelo
Oct 2, 2009 7:23 AM CST
We sue clients who don’t pay all the time, and we collect. To avoid baseless malpractice counterclaims, we put arbitration clauses in our engagement letters. In arbitration, you get to a quick hearing, present your evidence, and get a decision. We can always prove we did the work and did not get paid. People who bring meritless malpractice claims quickly learn that phony allegations don’t cut the mustard.
Phil
Oct 2, 2009 7:40 AM CST
This article is racist.
Robert W. Smith
Oct 2, 2009 7:47 AM CST
I agree with number 32. Just calendar fee suites to a date when the malpractice SOL has expired.
Robert
Oct 2, 2009 7:54 AM CST
This isn’t really new. In 1993, as a 2d year clerk, the firm’s E/O carrier had an “avoiding malpractice claims” suit, during which we were advised that 90% of such claims started as a suit for legal fees.
So, there are nine OTHER stupid things lawyers can do?
Peter Lauricella
Oct 2, 2009 8:10 AM CST
How about changing your Headline to:
“Baseless Counterclaims for Legal Malpractice in a Suit for Unpaid Legal Fees are the Top 10 for Unethical Behavior.”?
This is a disgrace. Did you even as Mr. Trazenfeld if he had a legitimate basis for his counterclaim?
Joe
Oct 2, 2009 8:10 AM CST
Many years ago I was given an estimate by a senior partner of a law firm that my litigation would cost $30,000. The bills quickly ran up to $120,000 (which I paid) with no end in sight. A review of the files show they were grossly overworked. I did not pay the additional billing that came after I said stop. I keep that in mind today while on the other side of the billing issue.
denverlawyer
Oct 2, 2009 8:13 AM CST
Throughout law school, we were taught to never ever sue for nonpayment. The reasons were basically because you will get a complaint lodged against you and your malpractice insurance may have a clause that prohibits this activity.
Has anyone had their malpractice carrier refuse to provide a defense to malpractice because they sued for nonpayment?
R Mason
Oct 2, 2009 8:29 AM CST
The problem here is simply a failure of our system that allows bogus “malpractice” claims to be filed or, even worse, if a malpractice claim is time barred, to allow the former client to now argue for a set off against fees for malpractice. The whole thing is a crock.
cls
Oct 2, 2009 8:33 AM CST
I agree that there is some real unfairness that abounds towards lawyers around this topic. If clients only knew the circumstances under which they do not have to pay for legal services…! For example, under the circumstances described in this article, or if they are represented during litigation and cease payment during the litigation, how difficult it is for the attorney to withdraw from the case for non-payment. (Actually strikes me as unconstitutional that lawyers would be *required* to continue rendering services to a non-paying customer.)
But it’s true that the best defense is a good offense, and not just for clients. While we have the right to sue our clients for unpaid fees, I try to take the same advice I give in terms of avoiding litigation (if and when possible). My own approach is to collect the largest retainer deposit I can, and this stands me in good stead 99% of the time. The other option is to screen clients carefully; there are *lots* of clients I turn away after assessing them as bad payment/malpractice risks. For example I do not provide a free initial consultation—this screens out lots of clients who have no ability or intent to pay (and is also appropriate for the nature of my practice). I also screen out clients who are difficult to communicate with, as such difficulties will translate into the same re: discussions about fees and invoices. And yes, despite such screenings, my practice is financially sound, and generally satisfying. As a practical matter, I simply can not afford to provide services for free (i.e. to permit a bill to escalate to $400,000, or even to $4000!), and I’ve never understood how large firms can operate this way. Perhaps making up the difference with exorbitant hourly rates and/or excessive billing; whatever business model works…
Ultimately, the right to litigate over fees remains, for those circumstances when all else fails (and the bill is substantial). And there are circumstances under which I would sue for non-payment. But as an ongoing way to conduct a business, I prefer an ounce or two of prevention, so that I GET PAID without unnecessary hassle.
Pete
Oct 2, 2009 8:59 AM CST
The author of the article should have asked Trazenfeld why—if there was a valid malpractice claim—it wasn’t brought prior to the lawsuit for fees? It may be that the client simply felt not paying was an appropriate settlement, but also it strikes me as fishy that when someone becomes disatisfied upon being asked to pay.
Kalifornia Arnold
Oct 2, 2009 9:01 AM CST
Anyone who files a frivolous malpractice suit to avoid paying a legitimate legal bill should be turned over to the state bar.
SJS
Oct 2, 2009 9:01 AM CST
One of the top 10 stupid things a lawyer can do is to get upside down on legal fees with a client to the tune of $400k! Or even $40k! Don’t extend more credit than you can afford to lose. Retainer agreement. And don’t tell me you might lose out on taking a great case when the client can’t put up a retainer - I bet the lawyers that are out the $400k and $40k would rethink taking the case if they knew then what they know now about the client not paying.
Rockville
Oct 2, 2009 9:12 AM CST
I’ve only had to do this once, and it was only because the billing partner got soft in the head and didn’t worry about the mounting bill because our clients were “such good people.” Here’s the sweet part: not only did we get summary judgment against the deadbeat client, but we showed that the lawyer who took their case and accused us of malpractice was HIMSELF guilty of malpractice.
What's the purpose of this article
Oct 2, 2009 9:35 AM CST
$400,000 is not chump change, and a firm’s interest to collect such fees is certainly understandable.
What I am at a loss about is why this article’s headline states that it’s stupid to sue clients for a $400,000 fee? What is their source, or was it by ABA fiat that they deem it stupid?
Suing for $400 is clearly stupid, as it’s bad business. Going after a client for a fee may trouble waters for other current or future clients, and may hinder marketing efforts. But wouldn’t it be stupid NOT to go after the deadbeat who doesn’t pay $400,000? Aren’t you telling your other clients: “Hey, it’s okay if you don’t pay me…. I won’t do anything to you or to protect/assert my own rights”. Ultimately, the legal business is just that…. business.
This ABA article is of poor, poor quality. Shame on you ABA. This is yet another reason why I go months without reading it. Shame on me for not learning my lesson.
By the way…. I’m with #36.
Raleigh
Oct 2, 2009 9:40 AM CST
We’ll never hear about it, but in the end I would bet money that Trazenfeld doesn’t get paid in full. Getting upside down on a case happens despite best efforts, when the Client has been good client for two or three years throughout litigation and suddenly runs out of money three months before trial. In the current economy, we have 20 year clients who were always slow pay. but never no pay, clients; what are we going to do, drop them now that they are down, after a two decade relationship?
Smart Guy
Oct 2, 2009 9:44 AM CST
What lawyer says to himself, “I think it’ll be a good idea to do legal work for a company being sued for not paying for the legal work some other attorney has already performed on their behalf. They’ll pay me though.”
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