I recently came across an article about an Atlanta solo-practitioner who has found a niche practice area. He has become the go-to guy for dog bite lawsuits. The article was interesting to me for two reasons. First, I love me a niche practice. Second, in the article, the attorney, Evan Kaine, discussed a problem common for many small-firm attorneys. That problem is the difficulty of collecting on judgments and getting one’s fees paid.
Kaine explained the reason for the difficulty as follows:
In June, Kaine’s clients were awarded $60,000 in one case and $700,000 in another, but he questions how much, if anything, they’ll ultimately collect. The problem, said Kaine, is that in these and many other dog bite cases the animals’ owners are renters who have no insurance and whose landlords’ homeowners policies cannot be tapped under Georgia law. Despite having clients who are in some cases grievously injured, Kaine’s recovery prospects are dim at best and constitute “small victories,” he said.
As sad as it is when a client does not get the award he is due, it is much worse when the lawyer does not obtain her fees for the work done to obtain that award, right?
Kaine’s story is, unfortunately, not unique. Indeed, I spent many hours in my small firm working on collection actions against delinquent firm clients. This was a new experience for me, and highlighted a problem that I had never thought about. In Biglaw, the clients were so large that there was no issue with their ability to pay fees. And, in those instances where a client did not pay, there was an unknown (at least to associates) group of outsourced lawyers whose job it was to fight for the fees.
In a small firm, on the other hand, many of the clients are small and may have issues with cash flow. And there is no secret group of collections attorneys to fight for the fees. Unfortunately for me, that responsibility fell to myself and a few other attorneys at the firm.
Collections actions are a sad reality for small firms. Yet, in my experience, it seems like a no-win proposition. Inevitably, my collections cases took one of two paths.
Path A: Client has no money and so all money (if one considers my hours billing work on that matter and associated fees) incurred to collect on the fees is essentially lost. This is what is commonly referred to as throwing good money at bad.
Path B: Client has money and does not want to pay, so counterclaims for malpractice or a similar cause of action. Even where this is baseless (and it was in all cases I worked on), the firm is required to spend even more money defending against a meritless claim.
And, yet, my firm and countless others go through the trouble of suing for fees. Kaine did not discuss what he was going to do to collect on his fees since this is a side of small-firm practice that is not often discussed. It is, after all, a little sleazy. It is implied, however, that this is something Kaine will have to resolve.
I understand that one does not want to set a precedent that firm clients can escape their fees. Further, a client and a lawyer enter into a contractual relationship wherein the client is obligated to pay fees incurred on his/her behalf. And I have heard that some lawyers are in it for the money.
So, I understand the rationale for collections actions. Yet, I have never seen it end well. What am I missing? Is there something preemptive that can be done? Let me know your views on what to do when a client does not pay. Please limit any references to “cement shoes.”
When not writing about small law firms for Above the Law, Valerie Katz (not her real name) works at a small firm in Chicago. You can reach her by email at Valerie.L.Katz@gmail.com and follow her on Twitter at @ValerieLKatz.