Billable Hours, Money

Clients, Could You Please Pay Your Bills This Year? Thanks.

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It’s December, and the bills are due. But many firms are finding clients reluctant to pay up. The American Lawyer reports that firms are having a tough time recovering any money from the graveyard of busted 2008 deals:

Firms that were working on one of the many deals or financings that have been postponed or terminated may never get paid for the significant hours they did log. That’s because in most instances, law firms don’t get paid until a deal closes….

When a deal fails, the law firms generally don’t have a contractual right to any money. And that can make for messy negotiations. These days most firms don’t want to drive too hard a bargain with clients they want to hold on to.

“If it’s an ongoing client we may be a bit more generous,” says one partner. “We’ll ask them to pay us a fraction of the fees, but there’s an understanding that when the market turns around they owe us.”

While the broken-deal fee will always be subject the dance between rainmakers and their clients, fees for litigation and general corporate work should be freely flowing. Right?

For matters billed on a regular basis, like standard corporate work and litigation, firms stand on firmer ground, although payment isn’t assured this year. September was particularly scary, says Jay Zimmerman, the chairman of Bingham McCutchen.

“Even the best clients were holding payment,” he says. “Everybody was sitting on cash and we had a build-up in receivables.” Since then, he says, the money has been flowing in fairly normally. “The September bills did get paid. October turned out to be very good and November is looking very good.”

The “stuff” flows downhill. Clients stiff firms, management stiffs associates, associates stiff… law school loan officers? Why not? We can’t be that far away from the “Fight Club scenario,” in which everybody gets their credit rating set back to zero.

Whoops. I’m not supposed to talk about Project Mayhem.

Collecting, but Hardly Calm and Cool [American Lawyer via Law.com]

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