Buyers’ Remorse

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In 1981’s Modern Romance, Albert Brooks decides to change his life after his girlfriend leaves him. So he decides to take up running. A slick sales clerk — a brilliant Bob (aka Super Dave Osborne) Einstein — convinces him to buy top dollar gear that he doesn’t really need, so he ends up spending far more than he planned with little to show for it (his running career lasts all of about four seconds).

Focused on trying to win back his girlfriend, Brooks apparently never tried to return his overpriced (and mostly unused) running gear. Unfortunately for lawyers, most clients aren’t preoccupied with girlfriends. Fee disputes between lawyers and clients are on the rise. And even if the time entries are valid and the work justified, disputes can arise where the amount of the bill exceeds, or is out of portion to, the amount involved in the underlying representation.

So here are some tips to help you avoid a billing dispute:

Be clear at the outset of the representation: Many clients, particularly those embarking on a litigation, are eager to for their lawyers to take a no holds-barred approach — that is, until the bills start to show up. It’s best to be clear at the outset what the client should expect in terms of fees and expenses. That said, make clear that any fee estimate is just that — an estimate — not a guaranty or a cap.

Know your client: Is your client a public company or a small family-owned business? Does it have a budget for legal fees or is this its first significant transaction or litigation? Is the amount at stake $1 million or $100 million? All of these factors should be taken into account as you chart a course of action for the representation. While it might be a good idea to travel cross-country to interview a witness in an eight-figure case, it makes little sense to do so when that expense represents a significant percentage of the amount of the dispute.

Communicate: A sure-fire way to invite a billing dispute is to undertake work without your client’s knowledge. Keep your client in the loop and don’t undertake any significant expense without first clearing it.

Look for warning signs: Growing A/R; repeated complaints about bills (and anything else); and unresponsive clients are all signs that a billing dispute is on the horizon.

If you follow these tips, both you and your client will be happier and you just might be able to avoid a billing dispute. After all, as Albert Brooks demonstrated in another movie, conversations about refunds never go well.

Trivia question — What do Albert Brooks and Bob “Super Dave” Einstein have in common? You can find the answer here.