If you’re in Biglaw, unless you’re representing Donald Trump or Rudy Giuliani, you generally don’t have to worry too much about getting paid. Huge corporate clients don’t run away from their legal bills.
It’s a different story at a small or midsize law firm. Longtime readers might recall the story of how I got stiffed out of $40,000 after my first trial — hilarious, given that I wasn’t an equity partner and I could easily point out how it was 100 percent the fault of someone who was.
When you’re running your own shop, though, or are (understandably) more worried than I was about getting into trouble, you can’t take a $40k hit. Fortunately there is a reasonable solution to this problem, and it is easier to implement than you might think.
There is an almost infinite supply of potential clients out there who want to sue someone and mistakenly think a few thousand bucks is enough to get somewhere with that. A large number of these folks cannot be convinced that litigation is actually a bad idea — I’ve lost count of how many people I’ve failed to talk out of hiring a lawyer — and they almost throw their little war chest in your direction at the outset.
Now, that’s fine, it’s a free country. Those who have more money than sense may certainly fund a donation to their local law firm should that be their desire. The big problem for the lawyer, however, doesn’t take long to surface.
Your relatively small bills for the first couple months might get paid. You may even be holding a large enough retainer deposit to feel comfortable with the first few monthly bills going unpaid. But at some point the other side is going to hire one of those firms whose sole strategy is to spend the other side into the dirt, or someone’s going to file a big dispositive motion, or one of the million other things that can turn a case into your whole life for a month is going to take place. When that happens, if you don’t have a tremendous retainer deposit comfortably squirreled away in your trust account, you’re screwed.
Ethical rules about when and how you can legitimately withdraw from a case vary widely by jurisdiction, of course. Almost everywhere nonpayment is a good enough justification for an attorney to hit the bricks. Yet, you can’t just abandon a client on the intuition that they are probably not going to pay the current month’s humongous bill when it eventually gets sent out, even if you’ve lived through that scenario again and again.
The financial management of the aforementioned firm where I failed to collect on $40,000 was not what I would describe as “responsible.” When I was new there, I can’t tell you how many times I participated in cases in which we had to harangue former clients over unpaid legal bills. We were almost never made fully whole, tons of firm resources that could have been better applied elsewhere were dedicated to collections, and it’s not exactly a marketing win to be seen seeking judgments against your own former clients.
As soon as I got enough power at that place to be managing my own caseload, I tripled the minimum retainer deposit I’d accept in order to open a new file. I didn’t bill against it, just held it to cover future unpaid balances, and the moment monthly bills were going unpaid reminder letters went out. A huge weight fell from my shoulders. I never had to deal with this problem again.
Sure, if you turn away potential clients who only have a few thousands dollars to spend on what looks to you like an ultimately expensive case, you are leaving a lot of money on the cutting room floor. That’s a good place for it though. It will never be worth the extra time and expense of all the free work you’re going to put into these cases, and you’re not really helping underrepresented indigent people by spending down their meager savings only to have to leave them in the lurch when they’ve run dry.
Government lawyers, contingency litigators, in-house counsels: my congratulations on never having to deal with this. But if you’re the kind of lawyer who bills by the hour and handles cases that can get very expensive very fast, trust me on this. Should you have any doubts whatsoever about a potential client’s ability to pay, think of what the bill would be for the most wildly expensive month you can conceive of, then at least double that amount. The resulting figure is your minimum retainer deposit.
.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.
The post Never Take A Case Billed Out On An Hourly Basis Without A Retainer Big Enough To Easily Cover A Month’s Fees appeared first on Above the Law.
If you’re in Biglaw, unless you’re representing Donald Trump or Rudy Giuliani, you generally don’t have to worry too much about getting paid. Huge corporate clients don’t run away from their legal bills.
It’s a different story at a small or midsize law firm. Longtime readers might recall the story of how I got stiffed out of $40,000 after my first trial — hilarious, given that I wasn’t an equity partner and I could easily point out how it was 100 percent the fault of someone who was.
When you’re running your own shop, though, or are (understandably) more worried than I was about getting into trouble, you can’t take a $40k hit. Fortunately there is a reasonable solution to this problem, and it is easier to implement than you might think.
There is an almost infinite supply of potential clients out there who want to sue someone and mistakenly think a few thousand bucks is enough to get somewhere with that. A large number of these folks cannot be convinced that litigation is actually a bad idea — I’ve lost count of how many people I’ve failed to talk out of hiring a lawyer — and they almost throw their little war chest in your direction at the outset.
Now, that’s fine, it’s a free country. Those who have more money than sense may certainly fund a donation to their local law firm should that be their desire. The big problem for the lawyer, however, doesn’t take long to surface.
Your relatively small bills for the first couple months might get paid. You may even be holding a large enough retainer deposit to feel comfortable with the first few monthly bills going unpaid. But at some point the other side is going to hire one of those firms whose sole strategy is to spend the other side into the dirt, or someone’s going to file a big dispositive motion, or one of the million other things that can turn a case into your whole life for a month is going to take place. When that happens, if you don’t have a tremendous retainer deposit comfortably squirreled away in your trust account, you’re screwed.
Ethical rules about when and how you can legitimately withdraw from a case vary widely by jurisdiction, of course. Almost everywhere nonpayment is a good enough justification for an attorney to hit the bricks. Yet, you can’t just abandon a client on the intuition that they are probably not going to pay the current month’s humongous bill when it eventually gets sent out, even if you’ve lived through that scenario again and again.
The financial management of the aforementioned firm where I failed to collect on $40,000 was not what I would describe as “responsible.” When I was new there, I can’t tell you how many times I participated in cases in which we had to harangue former clients over unpaid legal bills. We were almost never made fully whole, tons of firm resources that could have been better applied elsewhere were dedicated to collections, and it’s not exactly a marketing win to be seen seeking judgments against your own former clients.
As soon as I got enough power at that place to be managing my own caseload, I tripled the minimum retainer deposit I’d accept in order to open a new file. I didn’t bill against it, just held it to cover future unpaid balances, and the moment monthly bills were going unpaid reminder letters went out. A huge weight fell from my shoulders. I never had to deal with this problem again.
Sure, if you turn away potential clients who only have a few thousands dollars to spend on what looks to you like an ultimately expensive case, you are leaving a lot of money on the cutting room floor. That’s a good place for it though. It will never be worth the extra time and expense of all the free work you’re going to put into these cases, and you’re not really helping underrepresented indigent people by spending down their meager savings only to have to leave them in the lurch when they’ve run dry.
Government lawyers, contingency litigators, in-house counsels: my congratulations on never having to deal with this. But if you’re the kind of lawyer who bills by the hour and handles cases that can get very expensive very fast, trust me on this. Should you have any doubts whatsoever about a potential client’s ability to pay, think of what the bill would be for the most wildly expensive month you can conceive of, then at least double that amount. The resulting figure is your minimum retainer deposit.
.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at [email protected].
