By Lorraine M. Walsh
After spending countless hours, months and even years working on a case, the last thing you want to worry about is not getting paid. You also do not want to risk State Bar discipline for violating ethical rules in making inappropriate financial arrangements with clients. A carefully drafted attorney fee agreement and adherence to ethical billing practices will help avoid these problems and ensure your client pays your fees.
Rules for Fee Contracts
As with all contractual agreements, you should always enter into a written fee agreement with your client. Under Business and Professions Code Section 6148(a), lawyers must have a written and signed fee contract anytime it is reasonably foreseeable that the cost to the client will exceed $1,000. Although the code does not mandate that all fee contracts be in writing (there are certain exceptions outlined in subdivision 6148(d)(1-4)), the best practice is to get an agreement in writing to avoid future disputes. Section 6148(a)(1) also requires the agreement to explain the basis of compensation. This means you should state what the fee percentages are and whether the agreement includes an hourly rate component, statutory fees or any other expenses the client will be expected to pay.
Section 6148(a)(2) requires you to disclose the nature of the legal services that will be provided as well as the responsibilities of both parties to perform under the contract. This is called the "scope of services." It is a good practice to describe the scope in detail so there is no misunderstanding.
If a dispute arises, any ambiguity in a fee agreement will be interpreted in favor of the client, not the attorney. Alderman v. Hamilton, 205 Cal. App. 3d 1033 (1988). Failure to comply with the statutory requirements for a fee agreement permits a client to void the contract. If the contract is voided, you will only be entitled to collect reasonable attorney fees, which may be significantly less than the contract rate.
Rules for Bills
Section 6148(b) provides that if the services rendered are more than $1,000, all bills "shall clearly state the basis thereof. Bills for the fee portion of the bill shall include the amount, rate, basis for calculation, or other method of determination of the attorney's fees and costs."
In an hourly fee arrangement, this means your bills should disclose which attorneys are working on the client matter, their billing rate, a detailed entry concerning the work performed, and the total fees and costs. Failure to comply with the statutory requirements for your bills permits a client to void the contract and, under Section 6148(c), you will only be entitled to collect reasonable attorney fees.
Your failure to comply with statutory billing requirements may also subject you to civil liability and State Bar discipline. See In the Matter of Berg, 3 Cal. State Bar Ct. Rptr. 725 (1997).
Common Improper Billing Practices to Avoid
The most common improper billing practices which may lead to your inability to get paid include block billing, charging an unconscionable interest rate on unpaid balances, and changing your billing rate without providing advance notice to the client.
Block billing. Although "block billing" (billing multiple tasks in a single entry on a bill) is not prohibited, it still may be objectionable because the client is unable to understand the time prescribed for each discrete task. Attorneys have a professional responsibility to make sure their clients understand their billing practices and rates, and therefore the better practice is to separately list the service performed with the applicable time spent on the task. See Severson & Werson v. Bolinger, 235 Cal. App. 3d 1569 (1991).
Interest charges on unpaid balances. It is permissible to charge a reasonable interest rate on unpaid fees and costs as long as you communicate it to the client and it does not violate the unconscionable standards provided in California Rule of Professional Conduct 4-200(A). You should include a paragraph in your fee contract which lists the applicable interest rate and how it is calculated.
Increase in billing rate. An attorney may increase the billing rate quoted in a fee agreement as long as they provide advance notice in writing. See Severson. In cases that last several years, this requirement is important to ensure the attorney is paid at their current rate.
Dispute Waiver Provision
A provision in your fee agreement that attempts to shorten the time that your client can dispute your fees and costs, or requires your client to object to charges within a certain period of time after receipt of your bill, is improper and unenforceable. Charnay v. Cobert, 145 Cal. App. 4th 170 (2006).
The time you take at the beginning of representation to prepare a compliant fee agreement and adherence to all the billing requirements will help you to get paid. It will also prevent your client from electing to void your fee agreement and bills and reduce your fee.
Lorraine M. Walsh, a State Bar certified specialist in legal malpractice law, currently serves as vice-chair of the State Bar Committee on Mandatory Fee Arbitration. She focuses her practice on controversies involving attorneys and clients which includes representation in legal malpractice actions, fee disputes and expert witness consultation and testimony on the standard of care and conduct.