Category: Legal Profession

Contingent Fees: The Good, The Bad, and The Reason Many Lawyers Don’t Handle Them

Generally, a client pays a lawyer for his services by the hour, which is exactly what it sounds like. If a lawyer with an hourly rate of $250 does an hour’s worth of work, then the client owes the lawyer $250.

In some instances, a lawyer will handle a matter on a contingency fee basis, which means that the fee is paid only if there is a favorable result (i.e. “I don’t get paid unless YOU win”). The exact fee is calculated as a percentage of the amount of money recovered in the case.

Because I do creditor’s rights law, I’m sometimes asked to handle matters on a contingent fee. With the economy being where it is, however, I’m far less likely to accept creditor cases on this agreement. With so many people broke, the possibility of payment is lower than ever and the fight to get that money is harder than ever.

Proponents of contingency fees argue that they provide access to lawyers and the justice system for people who, otherwise, couldn’t afford lawyers (and that expensive hourly rate). That’s true.

My experience with accepting clients on a contingency fee billing is that those clients–i.e. the ones who are not paying for every phone call, every email, every step of the litigation–are the ones who have the most unreasonable demands of my time. Paying good money for an hour long phone call has a good way of discouraging any unnecessary hour long phone calls. If a nasty fight on an inconsequential issue doesn’t cost them anything, well, of course, they want you to fight on that issue.

When a client asks me to take a collections case on a contingent fee basis, I’m generally pretty frank with them in response. I explain the factors I consider: (a) how much actual work will  be required; (b) whether the defendant has lots of assets;  and (c) whether payment of the claim will be very quick. In short, it’s only a good deal for  the lawyer if it’s going to be a windfall involving not much work and a quick payment.

In this economy, it’s rare to find the collections referral that pays quickly and without much effort. In a contingency fee case, the risk of nonpayment rests entirely on the lawyer’s shoulders. From a client’s perspective, the risk is that a lawyer is going to lose motivation to work on a case over a long duration when it doesn’t produce results (i.e. money).

My advice to lawyers is to be careful on these types of cases; my advice to the clients would be the same.

Last Chance to Learn: Creditors’ Rights in Tennessee: 10 Collection Strategies

A quick reminder: Tomorrow, June 6, 2013, I’ll be teaching the CLE  presented by M. Lee Smith Legal Publishers called Creditors’Rights in Tennessee: 10 Collection Strategies.

This is a one hour audio seminar, that will cover the usual Tennessee collections lawyer song and dance. Things like:

  • Things to consider prior to declaring a loan in default and filing a collections lawsuit
  • Issues in deciding between Chancery Court and General Sessions Court
  • Importance of knowing your Statute of Limitations
  • Making sure you Sue the Right Party
  • Judgment Liens and why they work
  • Fraudulent Transfers
  • Overview of bankruptcy issues, including preferences and Trustee avoidance actions
  • Common roadblocks to collecting money, including domestication of foreign judgments

It’s one hour of CLE credit, and, hopefully, what I teach you during seminar will put some money in your clients’ pockets.

Mark Your Calendars: Tennessee Bar Association to host Creditors Rights 101 Webcast on April 17, 2013

On April 17, 2013, the Tennessee Bar Association has asked me to present a webcast CLE called “Creditor Rights 101: 10 Collection Strategies Every Lawyer Should Know.”

This is part of the TennBarU series, designed to give Tennessee general practitioner attorneys an overview of issues in Tennessee creditor rights. Discussion will include:

• Pre-Lawsuit Considerations
• Statute of Limitations Issues
• Jurisdiction and Venue Selection
• Judgment Enforcement Options
• Basic Bankruptcy Issues
• Common Roadblocks to Collecting Money

And, don’t forget, your Tennessee Bar Association membership gets you 3 hours of free CLE.

Collection Advice for Lawyers: Get Your Bills Out on Time

Here we are, at the end of the year, and I’m worried about getting all my collection work done for my clients…as well as my collection work on my legal invoices. Yep, it’s the year end cash rush. Trees are being shaken. Happy Holiday emails have invoice reminders at the end. And, yes, unbilled time is being discovered and rushed out the door.

I’ve talked about the best practices for legal invoices to get lawyer bills paid.

This morning, I saw a tweet by @rocketmatter titled  Legal Billing Rule # 1: The Longer You Wait The Less You’ll Get Paid. 

This is great advice. The longer you sit on a bill, particularly on a complex matter, the less likely it is that the invoice will be paid in full.

If you don’t invoice time as you go, you run the risk of shocking the client when you send them 2-3 months of billable time. It is not good to shock a client with your bill. Clients are far more likely to pay bills as the case progresses, in manageable amounts.

Plus, if a client is going to object to the cost to litigate a complex matter, wouldn’t you rather they see the bills for work after one month of litigation? Even the most eagerly litigious client gets back to reality in the face of a zealous lawyer’s bill. Give them this information early, rather than after you’re neck-deep in depositions, Motions, and unbilled expenses. Yikes.

Lawyers aren’t cheap, and the practice of law is not the type of work that lawyers are willing to do for free. If you want to get your bills paid on a timely basis, get them to your client on a timely basis. If you sit on the bills for months and put a low priority on the invoices, then your client will put a similarly low priority on paying them.

Read the Davidson County General Sessions Court Local Rules Before You Go There

Many lawyers (or pro se) litigants are uncomfortable in Davidson County General Sessions Court (where the jurisdiction/amounts at issue are below $25,000, with some exceptions).  Justice moves really fast in small claims court, and that’s the general complaint, that the 50-100 cases on each docket make practice there difficult.

That having been said, before you step into that fast paced world, take a moment to read the Davidson County General Sessions Court Local Rules.

Those Local Rules have answers to the following issues that come up every day:

  1. Do I need a lawyer to represent me in General Sessions?  A person can represent himself, but a non-attorney “will not be permitted to represent anyone other than him or herself in the General Sessions Courts.” See Rule 2.01. This means that a non-lawyer cannot appear and defend a case for a corporation or other business entity.
  2. Can I get a continuance on the first court date setting? Maybe. “In civil actions the Court may liberally grant a continuance on the first setting of a case or on the first setting after an indefinite continuance.” See Rule 5.01.  But, you should always call the other side and tell them you want or plan on asking for a continuance. See my # 4 advice from last year.
  3. Can cases be continued “indefinitely”?  No.  You have one year to resolve the case, and you only get three continuances. Rules 6.01 and 6.02.
  4. If I’m the Plaintiff and I don’t show, what happens to my case?  “When a case is dismissed without a trial for want of prosecution, said dismissal shall be without prejudice to either party’s right to re-file.” Rule 4.01.

That’s just a sampling of the 4 most common “rules” that everybody cites, but not everybody knows where to find the rules. If you have a sticky issue in small claims court (or if you don’t go there much), be sure to read the Local Rules before you go.

One final piece of advice: There aren’t enough elevators for the crowds that show up for Court. To be sure get into the courtroom on time, get there at least thirty minutes early for your docket.

Davidson County Chancery Court Case and Pleading Access Online

Last year, I noted that the Davidson County Chancery Court had started a service that showed case dockets online. This Chancery Court Public Records Access site provided the names and dates of filings, but not copies of the actual pleadings. Last year, I predicted that electronic copies of pleadings can’t be far behind.

I was right. Now, the Chancery Court has a second site, called Chancery Information Access, on which you can actually view copies of pleadings. It is a subscription service. Here is information on how to register.

It costs $15 a month. If you think that’s expensive, well, wait until you need a copy of pleading and have to walk to the Courthouse to get it.

Now, I’m hoping that the next step will be for Chancery Court to accept remote electronic filing of pleadings.

Erin Andrews files Lawsuit for Invasion of Privacy in Nashville Circuit Court

If you’re a sports fan, you know Erin Andrews. You’ve probably also heard that a stalker allegedly followed her across the country, asked to be placed in the room next to her in various hotels, and took unauthorized video footage of her in her room.

One of these instances occurred while Ms. Andrews was in Nashville, covering a Vanderbilt Commodores football game in September 2008.

On Thursday, December 1, 2011, Ms. Andrews filed a lawsuit against the hotel and others for invasion of privacy, negligence, and negligent infliction of emotional distress.

Attached is a copy of the Complaint filed by Erin Andrews in Davidson County Circuit Court. See Erin Andrews Complaint.

Collection Advice for Lawyers: Use Detailed Invoices as a Way to Justify your Fees and Get Paid

I received a collection notice in the mail last week, from a Georgia law firm that domesticated a judgment for one of my Tennessee bank clients. I had subconsciously sat on their invoice for a month, mainly because I hated their invoice and didn’t want to forward it to my client.

It wasn’t for a lot of money, but I hated it because it didn’t tell a compelling story showing the value my client received.

The invoice didn’t have the hourly rate of the person providing services. The time spent for each task wasn’t itemized. The invoice provided only minimal details about the work provided. In short, it didn’t prove that value was given, and it didn’t tell a story.

If a lawyer is ever going to advocate, the time is when he’s asking to be paid. When I send out a bill, I always keep in mind:

  • Always provide (too much) detailed information about the work you do for a client on a bill.  Leave the client no question that they are getting lots of great legal work.
  • Include all the “technical” information on the invoice, showing how much time is spent on each task, who performed it, and how much was charged for the task.
  • Most important, craft your time entries in a matter that tells a story, which will show the client the value of your time.

Compare:  the below one (1.0) hour billing entries:

                       “Legal Research on jurisdiction”

                       “Legal Research in Tennessee statutes and cases on issues related to Delaware corporation doing business in Tennessee and whether internet website justifies lawsuit filed in Tennessee”

                        Which one is more likely to be paid?

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.)

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?