Collection on Unpaid Legal Invoices in Tennessee: One Really Good Reason to Wait One Year

The Tennessee Court of Appeals issued a recent opinion discussing the elements of legal malpractice claims. The case is Tucker v. Finch,No. E2010-01704-COA-R3-CV, Slip. Op. (Tenn. Ct. App., Aug. 30, 2011).

The case provides a good summary of the statute of limitations on legal malpractice actions, which must be “commenced within one (1) year after the cause of action accrued.” Tenn. Code Ann. § 28-3-104(a)(2). The one year clock starts ticking “pursuant to the discovery rule “when (1) the client suffers an actual or legally cognizable injury, and (2) the client knows, or in the exercise of reasonable diligence should know, that the injury was caused by the attorney’s negligence.”

How is this relevant to collections? According to the ABA, most attorney malpractice claims are filed in response to attorneys taking collection actions against clients. Once you sue or threaten to sue a client for unpaid bills, it’s exponentially more likely that that client is going to attack the value of your legal services.

But, don’t forget, the statute of limitations for collection on unpaid debt–including unpaid legal invoices–is six years in Tennessee.  Malpractice actions must be filed in one year.

As I’ve written before, this is why lawyers wait at least a year to collect on unpaid invoices.

If the underlying lesson to aggrieved clients in the Tucker case is “don’t sit on your malpractice claim rights,” the flip side of the coin may be “let sleeping dogs lie, at least for a year.”

(Side-note: I’m not condoning malpractice or encouraging attorneys to avoid responsibility. But, I know from experience, you can provide world-class services and, faced with a bill for world-class services, some clients are going to allege you did something wrong. On those clients, wait a year.)

Write the Wrong Defendant’s Name on Your Judgment? General Sessions Litigants Can Correct Clerical Errors in Judgments in Tennessee

Davidson County General Sessions Court (also known as “small claims” court) is the wild, wild west of our local courts. Things move fast, many parties are not represented by lawyers, and there are dozens of cases on each docket.  Because the jurisdiction of General Sessions goes up to $25,000 (sometimes more) and a creditor can get a judgment in as little as a month, I file a number of my Nashville creditor lawsuits there.

The prevailing party usually writes up his own judgment, and, in the rush of cases, the judgment may sometimes include a clerical error, either in the name of the parties, the computation of the amount of the judgment, or other terms.  When there’s an error, the party has the right to appeal the whole thing under Tenn. Code Ann. § 27-5-108, but the best practice is to move to correct the “clerical error” in the judgment under Tenn. Code Ann. § 16-15-727.

The application of that statute was discussed  in a Tennessee Attorney General Opinion (No. 04-090, May 10, 2044), applying Rule 60.01 of the Tennessee Rules of Civil Procedure applies in Sessions Courts.

Interestingly, the Opinion says that a litigant can only “correct” a “clerical error” in a judgment, and expressly stops short of any relief that a litigant might have under Rule 59 to “alter or amend” a judgment.  This means that alleged errors on a point of law are not in the same category as clerical errors and cannot be changed.

So, if you get back to your office and realize you’ve written the wrong amount on the Judgment–or the wrong responsible party–you’ve got relief. Rule 60.01 does not contain a time limitation, and corrections may be made at any time upon the court’s initiative or upon motion of either party. Parties whose rights may be modified by the correction must be given notice of the Motion. Decisions to correct are within the discretion of the Judge. Obvious errors are usually corrected.

New CLE Speaking Engagement: The Essentials of Foreclosure Defense, September 22, 2011

My law partner, Tucker Herndon, and I have been invited by LawReviewCLE to speak at their upcoming seminar The Essentials of Foreclosure Defense. This seminar will be on September 22, 2011, in Nashville at the DoubleTree Hilton.

While we generally represent foreclosing creditors in the foreclosure process, the seminar organizers recognized that “bank lawyers” are probably some of the most knowledgeable about avenues to attack, stop, or stay a foreclosure. They’re right: after probably 500 foreclosures over the past 4 years, we’ve seen it all.

As a result, we’ll be speaking about trends in foreclosure litigation, including lawsuits to stay or enjoin foreclosures, as well as well consensual agreements to avoid foreclosures, like loan modifications, short sales, and deeds in lieu of foreclosure.

Finally, we’ll review the powers of Bankruptcy Courts to stop a foreclosure and, in some cases, attack a creditor’s lien rights.

This should be a lively seminar on an obviously topical area of law. We hope you’ll consider signing up. There will be a Q & A session at the end, and, if you ever wanted to ask a bank lawyer about foreclosures, this is your chance.

How Small are the “Small Claims” in General Sessions Court in Tennessee?

In Tennessee, you hear lots of talk of General Sessions Court, which is Tennessee’s version of small claims court. Of course, “small” is a relative term–General Sessions Courts in Tennessee have jurisdiction to hear civil cases with as much as $25,000.00 in controversy. See Tenn. Code Ann. § 16-15-501.

Trivia Time: In what three situations can a creditor obtain a judgment that exceeds the $25,000 jurisdictional limit in General Sessions Court? The Answer is after the jump.

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Even Lawyers Have to Collect Their Bills: Best Practices for Increasing Realization

Once upon a time, when money grew on trees, unpaid invoices and aged accounts receivable were nothing more than a casual nuisance.  Then, of course, the economy turned, and businesses re-examined their books to search for any income source they could find. This includes law firms (see my tweet from yesterday).

Here are a few billing tips for increasing law firm collections on invoices:

1) Tell a story in your invoices. Craft time entries in a manner that tells a story and shows the client the value of your time.  Don’t say: “Legal Research on jurisdiction.” Instead, say: “Legal Research on issues related to Delaware corporation doing business in Tennessee and whether internet website justifies lawsuit filed in Tennessee.”  Which one looks like it took an hour of legal time?

2) Advise clients in advance of costly new developments. “No surprises” is the rule. If a big Motion gets filed against the client, tell the client immediately, even if you have thirty days to respond. One, the client should know about case developments, but, two, they should know that the case is getting ready to get expensive—before they receive the bill for the expensive legal work. Better to know that the client is (or isn’t) financially ready for an expensive fight earlier, rather than later.

3) Effectively manage resources. This means assigning the right person to handle each task. Clients don’t want to pay for the time it takes an associate to type, organize files, and manage his or her calendar–an assistant does a better job of those things. Clients don’t want to pay top rate for basic tasks, and they’ll appreciate the efficiency you can create by having workers with lower rates handle routine matters. Spend the client’s money like it’s your own.

4) Don’t be afraid to give occasional discounts or time write-offs. Sometimes, you’ll do work on a task that takes far longer to complete than you can justify, whether it’s a simple pleading, a day of phone-tag, or anything else that you know a client wouldn’t pay for. Be fair on the easy tasks, and the client may remember that when faced with a $5,000 invoice for that huge brief.

5) Call the Clients who aren’t paying. In this economy, a late paid invoice is probably the result of issues with the client’s cash flow. But, it could be the result of the client being unhappy with your services and/or billing. Implement a standard system by which you routinely follow up with late invoices, whether it’s after 30, 45, or 60 days. If it’s a problem with your services, you need to know that immediately. If the client is having trouble paying for your services…well, you need to know that immediately too.

6) Review your own bills to remind yourself how expensive lawyers are. In many firms, younger lawyers never see a bill until they get a few years of practice under their belt. Bill review is for the older, established “rain-makers.” As a result, lawyers don’t realize that all the 0.3s and 1.7s are real billing events, that cost real money. Nothing puts those billing entries into the proper perspective like seeing the actual monetary amounts. Ask yourself, “Were the services that I provided worth $1,200.00?”

At my firm, one of my hobbies is being a back-seat driver on the invoicing and collection tasks. It’s my area of practice and what I do all day long, and, if my firm gets it right, it means more money for me. These best practices are easy ways to increase realization on invoices. Because, in the end, if we’re not going to get paid, wouldn’t we all have preferred to spend that time at the beach?