Law Practice
Management
Class #9
Billing
Billing Essentials
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Fee Contract
Fee Sharing
Setting Fees
Credit Card Payments
Creating and Sending Invoices
Keeping Clients Satisfied
Withdrawing for Non-Payment
Handling Client Costs
Fee contract
• Must be in writing
• Define the matter involved
• Amount of the fee
– if non-refundable, cite the relevant ethical
requirements
• Payment terms
• What the fee covers
• What the fee does not cover
Fee contract (cont.)
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Out-of-Pocket costs
Right to terminate services
Client signature on agreement
Many other possible clauses
– See Foonberg, pp 255-260 for examples
Private Practice FL Attorneys
Using Written Fee Agreements
Non-engagement/disengagement
• Need contact info for all potential clients
– Name, mailing address (street address
preferred), email address, fax number
• Confirm in writing if you will not be taking
case
• Confirm in writing when representation is
completed
– Useful to trigger running of statute of limitation
on possible malpractice action
Non-engagement letter
• Protects both lawyer and non-client
• Important because you can be responsible
for both malpractice and ethics violations
for even minimal contact:
– No money asked for or received
– Single telephone consultation
– Casual conversation with friend or relative
– Pro bono consultation or bar assoc project
– Response to email inquiry
Content of non-engagement letter
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Specify nature of contact(s) with non-client
Refer to the nature of the matter discussed
Give a reason why you are not taking the case
Don’t give advice on statute of limitation
problems
• Encourage non-client to seek advice from other
lawyers (include number of local lawyer referral
service)
• Return client papers (and mention that in letter)
• Make it clear that you are not taking case and
will take no further action
Fee Sharing
• Division of Fee
– Usually requires some sharing of work and
responsibility
• Referral Fee
– Generally no requirement of shared work or
responsibility
• Sharing Fees with Non-Lawyers Prohibited
– Except bonus plans within firms
– Out-of-jurisdiction lawyers are often deemed
non-lawyers
General conditions for fee sharing
• Fee must be no higher than if only one
lawyer were being compensated
• Client must be notified in writing or
consent in writing to the fee sharing
arrangement
FL rule on fee division
• Rule 4-1.5(G)
– Division between lawyers in different firms
must be:
• Proportionate to the services performed
by each lawyer
• With client’s written consent
FL rule on referral fees
• Rule 4-1.5(F)
– 25% referral fee permitted in personal
injury cases
– Must be a written agreement to
assume joint responsibility and be
available for consultation
– Can’t collect referral fee if you referred
the matter out due to your own conflict
of interest
Setting type and amount of fees
• Easy to make a mistake, must learn from
those mistakes
• Read surveys on law office economics
sponsored by local or state bar
associations
• Talk to other lawyers in your community
and/or doing similar work
Some clients are willing to pay
more for good advice – others not
Types of Fees
• Hourly – remains most common
• Contingent fee – mainstay in personal
injury work
• Flat or fixed fee – becoming more popular
• Value – also increasing in popularity, may
include bonus for good result
• Blended – combining one or all of above
Primary Billing Method
for FL Firms
2012 Survey
Hourly fees
• May not be appropriate for brand new
lawyers
– Hours devoted in first few cases will be high
as you learn, then drop with each successive
case
– High hourly rates can scare away working
class clients who want to know what the cap
will be
FL hourly rates
2012 survey
Breakdown of hourly rates
2012 Survey
Comparison of hourly rates
2010 to 2012 Survey
Hourly Rates by Region
2012 Survey
Billable hours
2012 Survey
Private Practice Attorneys Who
Keep Time Records (%)
Attorney Salaries
2012 Survey
Salary Trends
2012 compared with prior surveys
Contingent fees
• Know state limitations on percentage
– See FL Rule 4-1.5 which specifies varying %
depending on:
• Stage proceedings at which case is settled or resolved
• Amount of recovery
• Contingent fees prohibited in some practice
areas such as criminal and domestic relations
Contingent Fees
% of Firm’s Cases Handled on Contingency
Contingent Fees Prohibited
– FL Rule 4-1.5(f)(3) says that a lawyer shall not enter
into an arrangement for, charge, or collect:
• (A) any fee in a domestic relations matter, the
payment or amount of which is contingent upon the
securing of a divorce or upon the amount of
alimony or support, or property settlement in lieu
thereof; or
• (B) a contingent fee for representing a defendant in
a criminal case.
Flat or Fixed Fees
Foonberg calls them “lump sum”
• Fixed fee no matter how much or how
little work is done
– More common in criminal and domestic
relations
– Many clients like to know that they have a
fixed fee
– Starting to penetrate into business and
commercial law firms
• Fixed range of fees with a minimum and a
maximum
Value Billing
• Lawyer and the client determine the fee
together
– Focus on client needs, wants, expectations,
and values
– Focus not on lawyer’s time or specific
services provided
– Must define scope of the engagement, the
results the client wants to accomplish, and
establish value with the client up front
• The fee, or a substantial portion of it, is
paid up front
Bonuses
• Fees related to results
– Increase fee for unusually good result
– Reduce fee for unexpectedly bad result
• Requires client’s agreement in advance
• FL does not permit result-based fees in
domestic relations, but other states do
Consultation charges?
• Foonberg does not
– Thinks it creates wrong impression
– Lawyers concerned only about money
• I did (in my trial court divorce practice)
– Clients don’t appreciate what is free
– Consumes otherwise billable time (assuming
you have a full case load)
– Small compensation for being conflicted out of
representing other party
Unbundling legal work
• Report by Florida Bar on 2003 rule for
unbundling of legal services in family law
cases (860 So 2d 394)
• Florida Family Law Rule of Procedure
12.040 permits limited appearances for
only specific matters or proceedings in
family law matters
• Designed to make legal services more
available and affordable
Quoting fees
• Don’t quote fees over phone or by email
• Don’t give legal advice over the phone or
by email
• Get potential client into the office
– Impress them over phone only enough to get
them to come in
– Save your efforts to impress for the face-toface consultation
Fee “bedside manner”
• Be firm
• Use phrases such as “my standard fee in
matters like this” to instill confidence
• Don’t ask client what the fee should be
• Distinguish between uncertainty in the final
amount of the fee and uncertainty n the manner
of setting the fee
• Don’t back down
• Don’t be swayed by client reports of what other
lawyers are charging
Fee “bedside manner” (cont)
• Don’t reduce fee on promise of future
referrals (they never materialize from
clients who use this tactic)
• Discuss fees at initial conference
• Use “5” in quoting fees (i.e. $195 rather
than $200 per hour)
• Suggest the client borrow the funds or use
a credit card to pay fee
Cash up front
Foonberg’s rule
• Client who won’t pay cash up front likely
won’t pay later
• Your choice
– Do the work and not get paid
– Don’t do the work and not get paid
• Hint: The latter is better for you
• You, not the client, should decide when
you do pro bono work
FL Lawyer Receivables
Getting the cash
• Consider “evergreen” retainers
– Client expected to keep a certain balance in trust
account to be used for costs/fees
– Time/billing software can make this easy to manage
• Make it clear to clients that you are not a banker
• Let them find another source for financing the
fees
• Always discuss fees at the initial meeting
– Clients need the relatively certainty of knowing what
the legal services will cost
Handling cash fees payments
• Call in a staff person to count the money and
give receipt to client
• Deposit the cash intact in the bank, with the
deposit ticket indicating the source of the fee
• Make sure the client knows that cash payments
are recorded in your books and will be reported
on your tax return
• May need to report to IRS large cash* payment
(over $10,000 in single or series of transactions)
on Form 8300
*includes cashier’s checks in some circumstances, money orders, etc.
Alternative fee/billing arrangements
• Credit cards
• Client borrows
– from family, friends, financial institutions,
credit card cash advances, etc.
• Client refinances assets
• Client sells assets
• You offer a contingent fee arrangement
– Whole, or in part
Alternative fee/billing arrangements
(cont.)
• Sharing work with client
– Outsourcing clerical or other work
• Flat or fixed fee
• Outsourcing some work to lower-priced
persons
– Law students, underemployed lawyers, etc.
• Matching payments to client cash flow
(installment payments)
Credit card payments
• No longer considered unprofessional
– Florida Bar Approved Credit Card Processing
(LawPay)
• New lawyers should be especially eager to
accept credit card payments
• Look for state or local credit card merchant
arrangements or ISO’s (Independent Service
Organization)
• Client paid for honeymoon trip to Hawaii with
second wife from miles earned using credit
card to pay fees in divorce from his first wife
Credit Card Requirements
• LOMAS article on requirements:
– No commingling of client and firm funds
• Requires multiple Merchant Service Accounts
(MSA’s)
– One tied to General or Operating account
– Another tied to Trust (IOTA) account
– Firm must absorb merchant fees or
“discounts” charged by merchant service
provider – can’t charge back to client
Credit card options
• Web-based
– PayPal – works, but fees are on high side
– Virtual Payments Systems (formerly ePayOps) –
client pays “convenience fee” for using system
• Integrated with software
– PCLaw – time/billing/accounting software includes
credit card processing
• Traditional merchant accounts (swipe
terminal)
– Bar-approved member benefit (LawPay)
– Independent services for lawyers
• Chard.Net
– Your bank
• Mobile
Credit card options
– PayPal Here
– Square
– Intuit GoPayment
FL Lawyers Accepting Credit Cards
Preparing invoices
• List every document you prepared or
reviewed
• Include all drafts and revisions
• Vary wording for similar service to avoid
client mistakenly thinking you are doublecharging for same work
• List dates, services, and time in detail
(depending on client needs/desires)
Preparing invoices (cont.)
• Clients hate being billed for telephone calls
– Include something tangible that resulted from call,
such as a letter or memo (which should be sent
memorializing every call – even if by email only)
• Make reference to court and case number in
litigation billings
– Clients know litigation is expensive
• Proofread carefully
– Invoice errors (accounting and grammar) create bad
impression, clients then doubt accuracy of entire bill
Preparing invoices (cont.)
• Ask clients where they want bills sent
• Ask clients how much detail they want
– Some prefer simply “Professional Services
Rendered” with detail in separate document
– Bills often not within attorney-client
privilege, so may not want to tip off other side
concerning strategy
– Redact (black-out) description of legal
services rendered if you must produce
invoices in discovery process or a fee request
FL Private Practice Attorneys
What is Included on Invoice?
Billing frequency
• Bill at least monthly
– Need constant cash flow to pay your bills
– Serves as a status report to client on what has (or
hasn’t) been done on case
– Tells you early in representation which clients cannot
or will not pay so you can alter fee arrangement or
withdraw
• Consider billing one-quarter of clients each
week
• For problem-pay clients (or if client requests it),
may want to bill weekly or twice/month
Final billing
• Final bill often large due to amount of
work needed to conclude matter
• Get it out immediately
– Client is about to pay or receive a large
amount of money – be first in line either way
– Clients “curve of gratitude” will decline quickly
after case is done. See Foonberg, p 309
Client’s Curve of Gratitude
Making clients happy to pay the bill
• Foonberg’s rule #1: Bombard clients with
paper (or emails if client is tech savvy)
– Get an “FYI – No reply necessary” stamp or
create standard enclosure letter or card
• Foonberg’s rule #2: “cc” means “client
copy”
Attorney-Client Disconnect
• What you think you are selling isn’t what
clients think they are buying
– You may think you are selling your advice and
counsel
– Clients think you are selling a product
(paperwork)
• Client who gripes about $35 telephone call
charge will gladly pay $95 for letter that
memorializes info from that call
Key to client satisfaction
(and prompt payment)
• Related to how well client thought he/she
was informed about pending matters
• ABA survey
– 84% of satisfied clients say lawyer kept them
well-informed
– 66% of dissatisfied clients say lawyer failed to
keep them well-informed.
Leverage keeping current on the
law into dollars for your practice
• If you find something (new case, statute,
article) that will help a current or former
client, let them know
• Foonberg thinks snail mail makes a better
impression for this type of communication,
but may depend on client
Withdrawing for non-payment
• Don’t let a drowning client take you under
too
• Psychologically hard to zealously
represent client who isn’t paying
• Get out as soon as a client gives indication
that she/he will not live up to fee
agreement
Rule governing withdrawal for nonpayment
• FL Rule 4-1.6(b) says a lawyer may withdraw
from representing a client if:
– (3) the client fails substantially to fulfill an
obligation to the lawyer regarding the lawyer's
services and has been given reasonable
warning that the lawyer will withdraw unless
the obligation is fulfilled;
– (4) the representation will result in an
unreasonable financial burden on the lawyer
or has been rendered unreasonably difficult
by the client
How to withdraw
• Cleanly and honestly
• Sufficient advance warning to client in
writing
• Letters serve as basis of motion to
withdraw
Client costs
• Don’t go broke advancing client costs
• Have client pay estimated costs in
advance (into trust until used)
• May need to ask experienced lawyer what
costs to expect for certain types of cases
• If case is meritorious, but neither you nor
client can afford to advance costs,
consider referral and accepting lesser fee
Typical client costs
• Litigation
– Filing fees
– Police reports
– Court reporter appearance and transcript fees
– Medical examinations
– Investigators
– Expert witnesses
– Lay witnesses
– Process servers
Typical client costs (cont.)
• Business
– Advance payment of franchise fees
– Taxes
– Filing fees for administrative agencies
– Permit fees
– Transfer taxes
– Recording costs
– Travel
– Title searches