Is suing your client for fees ever a good idea?

By Sylvia Hsieh

The Daily Record Newswire

As the economy remains stuck in a rut, more clients are unable to pay their legal bills - and more lawyers are suing them for unpaid fees.

The number of lawsuits for fees is going up across the board for law firms of all sizes, according to Michele Wade, executive vice president of Lockton Companies in Dallas, which insures law firms ranging in size from solos to 150 lawyers.

Despite the trend, carriers almost always advise against filing such suits.

A lawsuit against a client practically guarantees a counterclaim for malpractice, ''pretty much in the return e-mail,'' said Wade, who recently spoke at a conference of the Professional Liability Underwriting Society.

And when all is said and done, the cost of defending a malpractice claim can exceed the amount of the unrecovered fees, said Henry S. Bryans, senior vice president of Aon Risk Services, a liability insurer in Radnor, Pa.

Suing a client could have consequences for lawyers' coverage as well.

Every malpractice insurance application will ask how many times you have sued a client for fees.

''If you have an inordinate number - probably three or four times in the last two years - that is seriously taken into consideration when the company decides whether to underwrite you,'' said Wade.

If you are certain the client doesn't have even a colorable malpractice claim against you, that may be one of the few times when suing is advisable.

Many lawyers, especially in small firms, don't have a system in place to make that appraisal, and may lack the objectivity to decide themselves whether a client could make out a valid complaint about his or her representation, Bryans said.

Bryans recommends that solo lawyers ask a colleague whose judgment they trust for a second opinion on whether a suit for fees would be vulnerable to a viable counterclaim for malpractice, keeping in mind confidentiality obligations to the former client.

Some lawyers are lessening the problem of a counterclaim in jurisdictions where statutes of limitations play in their favor.

If the time-bar is shorter for a client's malpractice claim, say three years, than for a lawyer's claim to collect fees, say four years, then lawyers are waiting to sue until after the statute on a malpractice claim against them has run.

''The trail may be getting a little cold by then, but if you can still find your former client - and he or she is likely to be good for the fees - you may well have diffused [the counterclaim] concern,'' Bryans said.

Published: Mon, Jun 27, 2011

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