Small Law Firms

Clients Are More Likely To Stiff Lawyers On Their Last Invoice

Some clients have a blind spot about how attorneys want to be paid promptly for work performed.

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past due stamp bills collection bill collectionsOne of the basic facts about the legal profession is that clients often do not pay their lawyers for the work attorneys perform. Even in law school, professors of mine who had experience in practice would tell students stories about how clients had stiffed them over the years, and one professor said the most important thing you might learn in law school from that professor was to always get your fee up front. From my own experience, clients are most likely to not pay their last invoices, and attorneys can take a few steps to minimize the chance that their last invoice or two will be left unpaid.

Final invoices are the most likely to remain unpaid for a few reasons. Clients may believe that they do not need a lawyer after a matter resolves, and accordingly, feel empowered to forgo paying that final invoice without consequences. Moreover, clients may not be satisfied with how a matter resolved, and this may convince the client not to pay remaining balances owed to lawyers. Some clients need to make payments as part of the settlement of a matter and might not have too much money left over afterward to pay their counsel.

The biggest way lawyers can prevent clients from stiffing them at the end of a matter is to stay current on billing throughout a representation. Some lawyers do not bill clients as regularly as they should, and other lawyers do not insist on regular payments as often as they should. As a result, clients may rack up huge balances at the end of a representation. From my own experience, the bigger the invoice, the less likely it will be paid.

I once heard about a lawyer who had a client who insisted he could not pay his bills but related that he would pay the bill after the matter settled or once the client received money at a later time. The client racked up hundreds of thousands of dollars’ worth of legal fees, and the client ended up losing at trial. The client never paid his attorney, and the lawyer was left in the lurch with outstanding invoices worth hundreds of thousands of dollars. If the lawyer had demanded payment earlier, or withdrew from the representation, it is likely that the lawyer would have taken less of a hit from the client.

Another way lawyers can safeguard themselves from being stiffed at the end of a matter is by asking the client to pay them out of settlement funds. Oftentimes, settlements require one party to make payment to the attorney trust account of another party, and once receipt of the funds is confirmed, the litigation is discontinued. For the sake of convenience, settlement agreements can be written such that the lawyer will take outstanding legal fees from this settlement amount and disburse the rest to the client. This process is especially favored when the lawyer needs to disburse settlement money to pay off liens or other items incidental to the settlement of a case. Of course, lawyers should check their local ethics rules about this approach. However, with the consent of all parties involved in the settlement, this can be the easiest approach to ensure that a lawyer gets paid.

Another way to ensure lawyers are paid from their final invoices on a matter is to maintain a connection to the client and keep performing legal work for the client. In general, clients are less likely to stiff lawyers if they know they are going to rely on the lawyer in the future for other legal matters. Of course, this approach only works for some kinds of clients, and lawyers may want to dump clients after a legal representation concluded for a variety of reasons. However, clients are far less likely to stiff lawyers they have a deeper connection to because they would probably feel guilty about not paying invoices to people they know on a more meaningful level that they expect to rely on more in the future.

In the end, being stiffed by clients is probably unavoidable, and every lawyer has horror stories about their invoices remaining unpaid. However, a few strategies can help lawyers get paid on their final invoices.

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Rothman Larger HeadshotJordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at [email protected].

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