Law Practice Law Practice ManagementManagement

Class #9Class #9

BillingBilling

Billing EssentialsBilling Essentials

• Fee ContractFee Contract• Fee SharingFee Sharing• Setting FeesSetting Fees• Credit Card PaymentsCredit Card Payments• Creating and Sending InvoicesCreating and Sending Invoices• Keeping Clients SatisfiedKeeping Clients Satisfied• Withdrawing for Non-PaymentWithdrawing for Non-Payment• Handling Client CostsHandling Client Costs

Fee contractFee contract

• Must be in writingMust be in writing

• Define the matter involvedDefine the matter involved

• Amount of the feeAmount of the fee– if non-refundable, cite the relevant ethical if non-refundable, cite the relevant ethical

requirementsrequirements

• Payment termsPayment terms

• What the fee coversWhat the fee covers

• What the fee does What the fee does notnot cover cover

Fee contract (cont.)Fee contract (cont.)

• Out-of-Pocket costsOut-of-Pocket costs

• Right to terminate servicesRight to terminate services

• Client signature on agreementClient signature on agreement

• Many other possible clausesMany other possible clauses– See See FoonbergFoonberg, pp 255-260 for examples, pp 255-260 for examples

Private Practice FL Attorneys Private Practice FL Attorneys Using Written Fee AgreementsUsing Written Fee Agreements

Non-engagement/disengagementNon-engagement/disengagement

• Need Need contact infocontact info for all potential clients for all potential clients– Name, mailing address (street address Name, mailing address (street address

preferred), email address, fax numberpreferred), email address, fax number

• Confirm Confirm in writingin writing if you will not be taking if you will not be taking casecase

• Confirm Confirm in writingin writing when representation is when representation is completedcompleted– Useful to trigger running of statute of limitation Useful to trigger running of statute of limitation

on possible malpractice actionon possible malpractice action

Non-engagement letterNon-engagement letter

• Protects Protects bothboth lawyer and non-client lawyer and non-client• Important because you can be responsible Important because you can be responsible

for both malpractice and ethics violations for both malpractice and ethics violations for even for even minimalminimal contact: contact:– No moneyNo money asked for or received asked for or received– SingleSingle telephone telephone consultation consultation– Casual Casual conversation with friend or relativeconversation with friend or relative– Pro bonoPro bono consultation or bar assoc project consultation or bar assoc project– Response to Response to email inquiryemail inquiry

Content of non-engagement letterContent of non-engagement letter

• Specify Specify nature of contact(s)nature of contact(s) with non-client with non-client• Refer to the Refer to the nature of the matternature of the matter discussed discussed• Give a reason Give a reason why you are not taking the casewhy you are not taking the case• Don’t give adviceDon’t give advice on statute of limitation on statute of limitation

problemsproblems• Encourage non-client to seek advice fromEncourage non-client to seek advice from other other

lawyerslawyers (include number of local lawyer referral (include number of local lawyer referral service)service)

• Return client papersReturn client papers (and mention that in letter) (and mention that in letter)• Make it clear that you are not taking case and Make it clear that you are not taking case and

will take will take no further actionno further action

Fee SharingFee Sharing

• Division of FeeDivision of Fee– Usually requires some sharing of work and Usually requires some sharing of work and

responsibilityresponsibility

• Referral FeeReferral Fee– Generally no requirement of shared work or Generally no requirement of shared work or

responsibilityresponsibility

• Sharing Fees with Non-Lawyers ProhibitedSharing Fees with Non-Lawyers Prohibited– Except bonus plans within firmsExcept bonus plans within firms– Out-of-jurisdiction lawyers are often deemed Out-of-jurisdiction lawyers are often deemed

non-lawyersnon-lawyers

General conditions for fee sharingGeneral conditions for fee sharing

• Fee must be Fee must be no higherno higher than if only one than if only one lawyer were being compensatedlawyer were being compensated

• Client must be Client must be notified in writingnotified in writing or or consent in writingconsent in writing to the fee sharing to the fee sharing arrangementarrangement

FL rule on fee divisionFL rule on fee division

• Rule 4-1.5(G)Rule 4-1.5(G)– Division between lawyers in different firms Division between lawyers in different firms

must be:must be:• ProportionateProportionate to the services performed to the services performed

by each lawyerby each lawyer• With client’s With client’s written consentwritten consent

FL rule on referral feesFL rule on referral fees

• Rule 4-1.5(F)Rule 4-1.5(F)– 25%25% referral fee permitted in referral fee permitted in personal personal

injuryinjury cases cases– Must be a Must be a written agreementwritten agreement to to

assume assume joint responsibilityjoint responsibility and be and be available for consultationavailable for consultation

– Can’t collect referral fee if you referred Can’t collect referral fee if you referred the matter out due to your own the matter out due to your own conflict conflict of interestof interest

Setting type and amount of feesSetting type and amount of fees

• Easy to make a Easy to make a mistakemistake, must learn from , must learn from those mistakesthose mistakes

• ReadRead surveys on law office economics on law office economics sponsored by local or state bar sponsored by local or state bar associationsassociations

• TalkTalk to other lawyers in your community to other lawyers in your community and/or doing similar workand/or doing similar work

Some clients are willing to pay Some clients are willing to pay more for good advice – others notmore for good advice – others not

Types of FeesTypes of Fees

• Hourly – remains most commonHourly – remains most common

• Contingent fee – mainstay in personal Contingent fee – mainstay in personal injury workinjury work

• Flat or fixed fee – becoming more popularFlat or fixed fee – becoming more popular

• Value – also increasing in popularity, may Value – also increasing in popularity, may include bonus for good resultinclude bonus for good result

• Blended – combining one or all of aboveBlended – combining one or all of above

Primary Billing MethodPrimary Billing Methodfor FL Firmsfor FL Firms

2012 Survey2012 Survey

Hourly feesHourly fees

• May not be appropriate for brand new May not be appropriate for brand new lawyerslawyers– Hours devoted in first few cases will be high Hours devoted in first few cases will be high

as you learn, then drop with each successive as you learn, then drop with each successive casecase

– High hourly rates can scare away working High hourly rates can scare away working class clients who want to know what the cap class clients who want to know what the cap will bewill be

FL hourly ratesFL hourly rates2012 survey2012 survey

Breakdown of hourly ratesBreakdown of hourly rates2012 Survey2012 Survey

Comparison of hourly ratesComparison of hourly rates2010 to 2012 Survey2010 to 2012 Survey

Hourly Rates by RegionHourly Rates by Region2012 Survey2012 Survey

Billable hoursBillable hours2012 Survey2012 Survey

Private Practice Attorneys Who Private Practice Attorneys Who Keep Time Records (%)Keep Time Records (%)

Attorney SalariesAttorney Salaries2012 Survey2012 Survey

Salary TrendsSalary Trends2012 compared with prior surveys2012 compared with prior surveys

Contingent feesContingent fees

• Know state limitations on percentageKnow state limitations on percentage– See FL Rule 4-1.5 which specifies varying % See FL Rule 4-1.5 which specifies varying %

depending on:depending on:• Stage proceedings at which case is settled or resolvedStage proceedings at which case is settled or resolved• Amount of recoveryAmount of recovery

• Contingent fees Contingent fees prohibitedprohibited in some practice in some practice areas such as criminal and domestic relationsareas such as criminal and domestic relations

Contingent FeesContingent Fees% of Firm’s Cases Handled on Contingency% of Firm’s Cases Handled on Contingency

Contingent Fees ProhibitedContingent Fees Prohibited

– FL Rule 4-1.5(f)(3)FL Rule 4-1.5(f)(3) says that a lawyer shall not enter says that a lawyer shall not enter into an arrangement for, charge, or collect:into an arrangement for, charge, or collect:• (A) any fee in a (A) any fee in a domestic relations matterdomestic relations matter, the , the

payment or amount of which is contingent upon the payment or amount of which is contingent upon the securing of a divorce or upon the amount of securing of a divorce or upon the amount of alimony or support, or property settlement in lieu alimony or support, or property settlement in lieu thereof; orthereof; or

• (B) a contingent fee for representing a defendant in (B) a contingent fee for representing a defendant in a a criminal casecriminal case..

Flat or Fixed FeesFlat or Fixed FeesFoonbergFoonberg calls them “lump sum” calls them “lump sum”

• Fixed feeFixed fee no matter how much or how no matter how much or how little work is donelittle work is done– More common in criminal and domestic More common in criminal and domestic

relationsrelations– Many clients like to know that they have a Many clients like to know that they have a

fixed feefixed fee– Starting to penetrate into business and Starting to penetrate into business and

commercial law firmscommercial law firms

• Fixed Fixed range of feesrange of fees with a minimum and a with a minimum and a maximummaximum

Value BillingValue Billing

• Lawyer and the client determine the fee Lawyer and the client determine the fee togethertogether– Focus on client needs, wants, expectations, Focus on client needs, wants, expectations,

and valuesand values– Focus not on lawyer’s time or specific Focus not on lawyer’s time or specific

services providedservices provided– Must define scope of the engagement, the Must define scope of the engagement, the

results the client wants to accomplish, and results the client wants to accomplish, and establish value with the client up frontestablish value with the client up front

• The fee, or a substantial portion of it, is The fee, or a substantial portion of it, is paid up frontpaid up front

BonusesBonuses

• Fees related to resultsFees related to results– Increase fee for unusually good resultIncrease fee for unusually good result– Reduce fee for unexpectedly bad resultReduce fee for unexpectedly bad result

• Requires client’s agreement in advanceRequires client’s agreement in advance

• FL does not permit result-based fees in FL does not permit result-based fees in domestic relations, but other states dodomestic relations, but other states do

Consultation charges?Consultation charges?

• FoonbergFoonberg does not does not– Thinks it creates wrong impressionThinks it creates wrong impression– Lawyers concerned only about moneyLawyers concerned only about money

• I did (in my trial court divorce practice)I did (in my trial court divorce practice)– Clients don’t appreciate what is freeClients don’t appreciate what is free– Consumes otherwise billable time (assuming Consumes otherwise billable time (assuming

you have a full case load)you have a full case load)– Small compensation for being conflicted out of Small compensation for being conflicted out of

representing other partyrepresenting other party

Unbundling legal workUnbundling legal work

• Report by Florida Bar on 2003 rule for Report by Florida Bar on 2003 rule for unbundling of legal services in family law unbundling of legal services in family law cases (860 So 2d 394)cases (860 So 2d 394)

• Florida Family Law Rule of Procedure Florida Family Law Rule of Procedure 12.040 permits limited appearances for 12.040 permits limited appearances for only specific matters or proceedings in only specific matters or proceedings in family law mattersfamily law matters

• Designed to make legal services more Designed to make legal services more available and affordableavailable and affordable

Quoting feesQuoting fees

• Don’t quote fees over phone or by emailDon’t quote fees over phone or by email

• Don’t give legal advice over the phone or Don’t give legal advice over the phone or by emailby email

• Get potential client into the officeGet potential client into the office– Impress them over phone only enough to get Impress them over phone only enough to get

them to come inthem to come in– Save your efforts to impress for the face-to-Save your efforts to impress for the face-to-

face consultationface consultation

Fee “bedside manner”Fee “bedside manner”

• Be firmBe firm• Use phrases such as “my standard fee in Use phrases such as “my standard fee in

matters like this” to instill confidencematters like this” to instill confidence• Don’t ask client what the fee should beDon’t ask client what the fee should be• Distinguish between uncertainty in the final Distinguish between uncertainty in the final

amount of the fee and uncertainty n the manner amount of the fee and uncertainty n the manner of setting the feeof setting the fee

• Don’t back downDon’t back down• Don’t be swayed by client reports of what other Don’t be swayed by client reports of what other

lawyers are charginglawyers are charging

Fee “bedside manner” (cont)Fee “bedside manner” (cont)

• Don’t reduce fee on promise of future Don’t reduce fee on promise of future referrals (they never materialize from referrals (they never materialize from clients who use this tactic)clients who use this tactic)

• Discuss fees at initial conferenceDiscuss fees at initial conference

• Use “5” in quoting fees (i.e. $195 rather Use “5” in quoting fees (i.e. $195 rather than $200 per hour)than $200 per hour)

• Suggest the client borrow the funds or use Suggest the client borrow the funds or use a credit card to pay feea credit card to pay fee

Cash up frontCash up frontFoonberg’sFoonberg’s rule rule

• Client who won’t pay cash up front likely Client who won’t pay cash up front likely won’t pay laterwon’t pay later

• Your choiceYour choice– Do the work and not get paidDo the work and not get paid– Don’t do the work and not get paidDon’t do the work and not get paid

• Hint: The latter is better for youHint: The latter is better for you

• You, not the client, should decide when You, not the client, should decide when you do you do pro bonopro bono work work

FL Lawyer ReceivablesFL Lawyer Receivables

Getting the cashGetting the cash

• Consider “evergreen” retainersConsider “evergreen” retainers– Client expected to keep a certain balance in trust Client expected to keep a certain balance in trust

account to be used for costs/feesaccount to be used for costs/fees– Time/billing software can make this easy to manageTime/billing software can make this easy to manage

• Make it clear to clients that you are not a bankerMake it clear to clients that you are not a banker• Let them find another source for financing the Let them find another source for financing the

feesfees• Always discuss fees at the initial meetingAlways discuss fees at the initial meeting

– Clients need the relatively certainty of knowing what Clients need the relatively certainty of knowing what the legal services will costthe legal services will cost

Handling cash fees paymentsHandling cash fees payments

• Call in a staff person to count the money and Call in a staff person to count the money and give receipt to clientgive receipt to client

• Deposit the cash intact in the bank, with the Deposit the cash intact in the bank, with the deposit ticket indicating the source of the feedeposit ticket indicating the source of the fee

• Make sure the client knows that cash payments Make sure the client knows that cash payments are recorded in your books and will be reported are recorded in your books and will be reported on your tax returnon your tax return

• May need to report to IRS large cash* payment May need to report to IRS large cash* payment (over $10,000 in single or series of transactions) (over $10,000 in single or series of transactions) on Form 8300on Form 8300

*includes cashier’s checks in some circumstances, money orders, etc.*includes cashier’s checks in some circumstances, money orders, etc.

Alternative fee/billing arrangementsAlternative fee/billing arrangements

• Credit cardsCredit cards

• Client borrowsClient borrows– from family, friends, financial institutions, from family, friends, financial institutions,

credit card cash advances, etc.credit card cash advances, etc.

• Client refinances assetsClient refinances assets

• Client sells assetsClient sells assets

• You offer a contingent fee arrangementYou offer a contingent fee arrangement– Whole, or in partWhole, or in part

Alternative fee/billing arrangements Alternative fee/billing arrangements (cont.)(cont.)

• Sharing work with clientSharing work with client– Outsourcing clerical or other workOutsourcing clerical or other work

• Flat or fixed feeFlat or fixed fee

• Outsourcing some work to lower-priced Outsourcing some work to lower-priced personspersons– Law students, underemployed lawyers, etc.Law students, underemployed lawyers, etc.

• Matching payments to client cash flow Matching payments to client cash flow (installment payments)(installment payments)

Credit card paymentsCredit card payments

• No longer considered unprofessionalNo longer considered unprofessional– Florida Bar Approved Credit Card Processing Florida Bar Approved Credit Card Processing

(LawPay)(LawPay)

• New lawyers should be especially eager to New lawyers should be especially eager to accept credit card paymentsaccept credit card payments

• Look for state or local credit card merchant Look for state or local credit card merchant arrangements or ISO’s (Independent Service arrangements or ISO’s (Independent Service Organization)Organization)

• Client paid for honeymoon trip to Hawaii with Client paid for honeymoon trip to Hawaii with second wife from miles earned using credit second wife from miles earned using credit card to pay fees in divorce from his first wifecard to pay fees in divorce from his first wife

Credit Card RequirementsCredit Card Requirements

• LOMAS article on requirements:LOMAS article on requirements:– No commingling of client and firm fundsNo commingling of client and firm funds

• Requires multiple Merchant Service Accounts Requires multiple Merchant Service Accounts (MSA’s)(MSA’s)

– One tied to General or Operating accountOne tied to General or Operating account– Another tied to Trust (IOTA) accountAnother tied to Trust (IOTA) account

– Firm must absorb merchant fees or Firm must absorb merchant fees or “discounts” charged by merchant service “discounts” charged by merchant service provider – can’t charge back to clientprovider – can’t charge back to client

Credit card optionsCredit card options• Web-basedWeb-based

– PayPal – works, but fees are on high sidePayPal – works, but fees are on high side– Virtual Payments Systems (formerly ePayOps) – Virtual Payments Systems (formerly ePayOps) –

client pays “convenience fee” for using systemclient pays “convenience fee” for using system

• Integrated with softwareIntegrated with software– PCLaw – time/billing/accounting software includes PCLaw – time/billing/accounting software includes

credit card processingcredit card processing

• Traditional merchant accounts (swipe terminal)Traditional merchant accounts (swipe terminal)– Bar-approved member benefit (LawPay)Bar-approved member benefit (LawPay)– Independent services for lawyersIndependent services for lawyers

• Chard.NetChard.Net

– Your bankYour bank

Credit card optionsCredit card options• MobileMobile

– PayPal HerePayPal Here– SquareSquare– Intuit GoPaymentIntuit GoPayment

FL Lawyers Accepting Credit CardsFL Lawyers Accepting Credit Cards

Preparing invoicesPreparing invoices

• List List everyevery document you prepared or document you prepared or reviewedreviewed

• IncludeInclude all all drafts and revisions drafts and revisions

• Vary wordingVary wording for similar service to avoid for similar service to avoid client mistakenly thinking you are double-client mistakenly thinking you are double-charging for same workcharging for same work

• List dates, services, and time List dates, services, and time in detail in detail (depending on client needs/desires)(depending on client needs/desires)

Preparing invoices (cont.)Preparing invoices (cont.)

• Clients Clients hatehate being billed for telephone calls being billed for telephone calls– Include something Include something tangibletangible that resulted from call, that resulted from call,

such as a letter or memo (which should be sent such as a letter or memo (which should be sent memorializing every call – even if by email only)memorializing every call – even if by email only)

• Make reference to court and case number in Make reference to court and case number in litigation billingslitigation billings– Clients know Clients know litigation is expensivelitigation is expensive

• ProofreadProofread carefully carefully– Invoice errors (accounting and grammar) create bad Invoice errors (accounting and grammar) create bad

impression, clients then doubt accuracy of entire billimpression, clients then doubt accuracy of entire bill

Preparing invoices (cont.)Preparing invoices (cont.)

• Ask clients Ask clients wherewhere they want bills sent they want bills sent• Ask clients Ask clients how much detailhow much detail they want they want

– Some prefer simply “Professional Services Some prefer simply “Professional Services Rendered” with detail in separate documentRendered” with detail in separate document

– Bills often Bills often not within attorney-client not within attorney-client privilegeprivilege, so may not want to tip off other side , so may not want to tip off other side concerning strategyconcerning strategy

– RedactRedact (black-out) (black-out) descriptiondescription of legal of legal services rendered if you must produce services rendered if you must produce invoices in discovery process or a fee requestinvoices in discovery process or a fee request

FL Private Practice Attorneys FL Private Practice Attorneys What is Included on Invoice?What is Included on Invoice?

Billing frequencyBilling frequency

• Bill Bill at leastat least monthly monthly– Need constant Need constant cash flowcash flow to pay your bills to pay your bills– Serves as a Serves as a status reportstatus report to client on what has (or to client on what has (or

hasn’t) been done on casehasn’t) been done on case– Tells you Tells you earlyearly in representation which clients cannot in representation which clients cannot

or will not pay so you can alter fee arrangement or or will not pay so you can alter fee arrangement or withdrawwithdraw

• Consider billing one-quarter of clients Consider billing one-quarter of clients each each weekweek

• For For problem-pay clientsproblem-pay clients (or if client requests it), (or if client requests it), may want to bill may want to bill weekly or twice/monthweekly or twice/month

Final billingFinal billing

• Final bill often Final bill often largelarge due to amount of due to amount of work needed to conclude matterwork needed to conclude matter

• Get it out Get it out immediatelyimmediately– Client is about to pay or receive a large Client is about to pay or receive a large

amount of money – be first in line either wayamount of money – be first in line either way– Clients “curve of gratitude” will decline quickly Clients “curve of gratitude” will decline quickly

after case is done. See after case is done. See FoonbergFoonberg, p 309, p 309

Client’s Curve of GratitudeClient’s Curve of Gratitude

Making clients happy to pay the billMaking clients happy to pay the bill

• Foonberg’sFoonberg’s rule #1: Bombard clients with rule #1: Bombard clients with paper (or emails if client is tech savvy)paper (or emails if client is tech savvy)– Get an “FYI – No reply necessary” stamp or Get an “FYI – No reply necessary” stamp or

create standard enclosure letter or cardcreate standard enclosure letter or card

• Foonberg’sFoonberg’s rule #2: “cc” means “client rule #2: “cc” means “client copy”copy”

Attorney-Client DisconnectAttorney-Client Disconnect

• What you think you are selling isn’t what What you think you are selling isn’t what clients think they are buyingclients think they are buying– You may think you are selling your advice and You may think you are selling your advice and

counselcounsel– Clients think you are selling a product Clients think you are selling a product

(paperwork)(paperwork)

• Client who gripes about $35 telephone call Client who gripes about $35 telephone call charge will gladly pay $95 for letter that charge will gladly pay $95 for letter that memorializes info from that callmemorializes info from that call

Key to client satisfactionKey to client satisfaction(and prompt payment)(and prompt payment)

• Related to how well client thought he/she Related to how well client thought he/she was informed about pending matterswas informed about pending matters

• ABA surveyABA survey– 84% of satisfied clients say lawyer kept them 84% of satisfied clients say lawyer kept them

well-informedwell-informed– 66% of dissatisfied clients say lawyer failed to 66% of dissatisfied clients say lawyer failed to

keep them well-informed.keep them well-informed.

Leverage keeping current on the Leverage keeping current on the law into dollars for your practicelaw into dollars for your practice

• If you find something (new case, statute, If you find something (new case, statute, article) that will help a current or former article) that will help a current or former client, let them knowclient, let them know

• FoonbergFoonberg thinks snail mail makes a better thinks snail mail makes a better impression for this type of communication, impression for this type of communication, but may depend on clientbut may depend on client

Withdrawing for non-paymentWithdrawing for non-payment

• Don’t let a drowning client take you under Don’t let a drowning client take you under tootoo

• Psychologically hard to Psychologically hard to zealously zealously representrepresent client who isn’t paying client who isn’t paying

• Get out as soon as a client gives indication Get out as soon as a client gives indication that she/he will not live up to fee that she/he will not live up to fee agreementagreement

Rule governing withdrawal for non-Rule governing withdrawal for non-paymentpayment

• FL Rule 4-1.6(b) says a lawyer may withdraw FL Rule 4-1.6(b) says a lawyer may withdraw from representing a client if:from representing a client if:– (3) the client fails substantially to fulfill an (3) the client fails substantially to fulfill an

obligation to the lawyer regarding the lawyer's obligation to the lawyer regarding the lawyer's services and has been given reasonable services and has been given reasonable warning that the lawyer will withdraw unless warning that the lawyer will withdraw unless the obligation is fulfilled;the obligation is fulfilled;

– (4) the representation will result in an (4) the representation will result in an unreasonable financial burden on the lawyer unreasonable financial burden on the lawyer or has been rendered unreasonably difficult or has been rendered unreasonably difficult by the clientby the client

How to withdrawHow to withdraw

• Cleanly and honestlyCleanly and honestly

• Sufficient advance warning to client Sufficient advance warning to client in in writingwriting

• Letters serve as basis of motion to Letters serve as basis of motion to withdrawwithdraw

Client costsClient costs

• Don’t go broke advancing client costsDon’t go broke advancing client costs

• Have client pay estimated costs in Have client pay estimated costs in advance (into trust until used)advance (into trust until used)

• May need to ask experienced lawyer what May need to ask experienced lawyer what costs to expect for certain types of casescosts to expect for certain types of cases

• If case is meritorious, but neither you nor If case is meritorious, but neither you nor client can afford to advance costs, client can afford to advance costs, consider referral and accepting lesser feeconsider referral and accepting lesser fee

Typical client costsTypical client costs

• LitigationLitigation– Filing feesFiling fees– Police reportsPolice reports– Court reporter appearance and transcript feesCourt reporter appearance and transcript fees– Medical examinationsMedical examinations– InvestigatorsInvestigators– Expert witnessesExpert witnesses– Lay witnessesLay witnesses– Process serversProcess servers

Typical client costs (cont.)Typical client costs (cont.)

• BusinessBusiness– Advance payment of franchise feesAdvance payment of franchise fees– TaxesTaxes– Filing fees for administrative agenciesFiling fees for administrative agencies– Permit feesPermit fees– Transfer taxesTransfer taxes– Recording costsRecording costs– TravelTravel– Title searchesTitle searches