Tag Archives: billing practices

Avoid Ethics and Malpractice Pitfalls With Sound Business Practices

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Law firms must run like a real business to stay open, pay bills, and succeed financially. The lawyers who manage these firms and work in them have business responsibilities, too. Whether you’re a solo practitioner or a managing partner at a big law firm, you have to bill your clients, market your practice, grow your client base, and nurture relationships to thrive in the legal industry. Otherwise, you cannot meet clients’ needs and deliver services on a sustainable basis.

Law students are typically reminded that the practice of law is a profession, not a business. It is indeed a self-regulating profession that is bound by rules of professional conduct. But focusing on the business side of law practice doesn’t weaken professionalism. Rather, having sound business practices strengthens your ability to serve clients ethically and responsibly.

Good business practices go hand in hand with professionalism. The traditional notion that law firms are not businesses is outdated. Although law firms are not ordinary businesses and lawyers are not just business people, ignoring the business side of law practice does not benefit your clients or the legal profession.

Many ethics complaints and malpractice claims are based on issues related to how you manage your firm and practice, instead of on substantive legal errors. Failing to respond promptly to client inquiries, procrastinating, missing deadlines, and over-billing or billing inaccurately are some of the top ethics and malpractice traps.

Here are sound business practices to help you prevent (and defend against) ethics complaints and malpractice claims:

1. Screen your potential clients and accept cases deliberately 

Choosing your clients carefully is the first step to building a strong clientele that appreciates the work you do and will pay you accordingly.

Demanding and difficult clients are hard to please and often the slowest to pay. If a client has gone through several lawyers before they meet with you, be wary. If they unduly blame others without taking any responsibility for their predicament, chances are they will find you wholly at fault for any delays and negative results.

Take cases that really capitalize on your expertise and interest and choose clients you really want to help.  This is not only sound business practice, but will also make it easier for you to comply with Rules 1.1 (Competence) and 1.3 (Diligence) of the Minnesota Rules of Professional Conduct (MRPC).

You can certainly take cases that require more than what you normally bring to the table, but be sure to do the reasonably necessary preparation to meet the clients’ needs. This includes asking for guidance from your colleagues and more experienced attorneys.

Even when a client passes initial screening, there are some situations where continuing to represent the client does not make good business sense and leaves you open to ethics and malpractice pitfalls.

Except as stated in paragraph (c), paragraphs (b)(5) and (b)6) of Rule 1.16 (Declining or Terminating Representation), MPRC, allows lawyers to withdraw from representation when “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, or “the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client.” Be sure to surrender the client’s file and property when your representation is terminated.

2. Keep a written fee agreement that fully describes the fee and scope of services

While business deals can be made verbally, on a handshake, or through a simple “thank you” letter, lawyers have unique obligations when it comes to agreements with clients. New clients and new matters should have a written fee agreement. Having the agreement in writing clarifies the scope of representation, your fee structure, your billing practices, and the out-of-pocket charges the client needs to pay. A written fee agreement also helps set clear expectations on both sides.

Make sure your clients can pay your legal fee, unless you want to end up with “forced” pro bono work.  Ask for an initial/advanced payment or retainer fee before you begin to work. Let the client know this payment is refundable if the work is not performed. Rule 1.5 , MRPC allows for advanced payments as long as they are agreed to in writing by the client and they are subject to refund.

3. Compete on value 

Rule 1.15(a), MRPC, states the following are relevant factors in determining whether the attorney’s fee is reasonable:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent.

Charge reasonable fees, not rock-bottom fees. Set your fees based mostly on the value you bring, instead of what you think the client can pay. Low billing rates don’t necessarily attract more clients. Competing on price often results in less profitable work, additional stress, and the need to take on a huge volume of cases to make up for the financial loss. While many clients will shop around for the lowest fees, you are better off with clients who choose their lawyers based on the value they bring. These clients are more likely to stay with you and refer others to you.

4. Implement effective billing and collections practices

Fee disputes and collections suits to recover on delinquent accounts are a driving factor behind many ethics complaints and malpractice claims. To avoid this ethics and malpractice trap, you need to have effective billing and collections policies in place. Mistakes — such as double-billing for duplicative work, charging clients for filing fees that have already been paid, inconsistent invoicing, and failing to clearly describe the work performed — leads to client mistrust. Accurate billing and timely collections will reduce financial problems down the line and enhance your relationship with the client.

Avoid suing a client just because you believe you deserve to get paid for the work you did and the results you delivered. Consider whether the client has the ability to pay and whether the amount owed is worth the hassle of trying to collect it.

5. Communicate regularly and respond promptly

Rule 1.4 (a), MRPC, requires you to promptly inform the client of key decisions and circumstances and obtain informed consent; reasonably consult with the client about means to accomplish objectives; keep the client reasonably informed about the status of the matter; and promptly comply with reasonable requests for information. These ethics rules are also sound business practices.

Respond to your clients’ voice mails and emails within 24 hours, unless there are extenuating circumstances, such as your being ill or on vacation. Have a back-up plan for those circumstances. Even if you don’t have an immediate answer, let clients know you received their message and will follow up within a certain time frame. At the very least, inform your clients about your communications policy, such as your office hours and when and how they can expect a response from you.

Send your clients copies of all filings, correspondences and other materials relating to their matter.  This is a convenient way to keep them reasonably informed about the status of their case. Regular and prompt communication is not only ethical, but is also a good business policy that increases client loyalty and satisfaction.

6. Set up systems to handle client matters and run your firm

Systematizing your  law practice helps you provide high-quality service and effective representation to your clients. Systems are clearly defined, step-by-step plans, procedures, processes and policies to complete routine tasks and address common issues.

Documenting your processes and policies, as well as systematizing repetitive tasks, can help you streamline your practice and create more consistent, high-quality results (no matter how heavy your work load).

Systematization doesn’t mean you provide cookie-cutter solutions or drop the uniqueness of your brand. Rather, they help you automate routine activities and daily operations so your firm runs like a business instead of just as a practice that depends completely on you.

Two key systems that allow you to run your firm effectively and avoid ethics and malpractice traps are:

  •  Calendaring, scheduling and tickler system. e.g. recording important hearings and meetings and setting reminders for due dates and deadlines.
  • Client file management system. e.g. providing steps for running conflicts checks, opening new client files, closing files, and destroying old files.

Setting up systems can be a time-consuming, costly activity. When you’re busy, it can seem a like a low priority. But having systems in place is key to operating your law firm like a real business and meeting your obligations to clients.

7. Find the best, workable solution for the client

Although law firms are businesses, your responsibilities as a lawyer should always trump your roles as a business person. While filing a meritorious lawsuit is probably more lucrative than using informal channels, lawyers need to consider the best interest of the client. As professionals, lawyers also have a duty to avoid overburdening the courts and clogging up the judicial system.

In immigration practice, for instance, a lawyer should consider negotiating an agreement with the immigration authorities that will meet the client’s objectives, instead of filing a federal lawsuit to make case law (and more money). While using cost-effective methods to gain desired results  might not bring you fame and glory, it will enhance your reputation and add to the bottom line in the long run.

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This article provides general information only. Do not consider it as legal advice for any individual case or situation.   The sharing or receipt of this information does not create an attorney-client relationship.

The author, Dyan Williams, is admitted to the Minnesota state bar and focuses on the Minnesota Rules of Professional Conduct, which are subject to change. Check your individual state rules of professional conduct, regulations, ethics opinions and case precedents, instead of relying on this article for specific guidance. 

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Photo by:  Kevin Harber