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Eight Suggestions for Avoiding
Fee Disputes The Fee Dispute Committee of the Houston Bar Association assists lawyers and their clients in resolving disputes that may arise over legal fees. The Committee provides a free, confidential and expeditious forum for resolving fee disputes. If a lawyer and client mutually agree to do so, they may submit a fee dispute to the Committee, which will assign a panel of three of its members (two lawyers and a non-lawyer) to arbitrate the dispute. The decisions of such a panel are final and binding on the parties. A lawyer or client interested in the services of the Fee Dispute Committee may obtain further information, including the rules and procedures for fee dispute arbitrations, from the Houston Bar Association website: www.hba.org. The Fee Dispute Committee has resolved hundreds of fee disputes since its formation in 1985. Many of these disputes have arisen essentially from the same basic underlying problem: a lack of effective communication between the lawyer and client. Based on its experience in resolving fee disputes, the Committee offers eight simple suggestions which, although no guarantee against a dispute, may go a long way toward eliminating the type of misunderstanding or miscommunication that could foster a disagreement between a lawyer and client over legal fees: 1. Get a Written Fee Agreement With the Client. Under Texas law, a contingency fee agreement must be in writing.1 Although Texas law does not require that an hourly fee agreement be in writing, a written agreement is nonetheless a prudent means of memorializing the terms of an attorney-client relationship even for an hourly fee case. Many lawyers, however, represent clients either without any written agreement at all or with only a cursory letter agreement specifying their hourly rate. Representing a client without an adequate written agreement — even an existing client with whom a lawyer has shared a long history — is akin to walking a tightrope without a safety net. A lawyer bears the burden “to inform a client of the basis or rate of the fee at the outset of the matter.”2 Absent a written agreement confirming the intent of the parties, a court (or panel of the Fee Dispute Committee) will likely give the benefit of the doubt to the client in any dispute over the terms of an oral fee agreement.3 2. Discuss and Memorialize the Parties’ Expectations. Even when the parties enter into a written fee agreement, the lawyer “bears the burden of ensuring that the agreement states any terms diverging from a reasonable client’s expectations.”4 Likewise, the lawyer bears the burden of explaining the “contract’s implications for the client.”5 Therefore, a prudent lawyer should anticipate any aspects of the representation that may deviate from a reasonable client’s expectations, address and resolve them with the client, and as appropriate, memorialize their understanding in their written fee agreement. Examples:
At the outset of a matter, a prudent lawyer should also advise the client of the potential costs of the representation.10 In particular, a lawyer may wish to prepare a non-binding budget that gives the client a realistic idea of the likely fees and expenses that the client may have to incur over the life of the representation. 3. Make No Guarantees. Not only may an oral promise in some instances rise to the level of an enforceable contract, but it may also potentially provide the basis for a fraud claim.11 Because even seemingly routine matters may involve hidden risks,12 a lawyer should avoid making careless promises or guarantees of future results to a client — e.g., “We can at least get $1 million out of the other side, if not more.” In fact, a lawyer may wish to add a provision to the parties’ fee agreement disclaiming any promises or guarantees of future results. In a case involving litigation, such a provision might state: “You acknowledge that we have not made any promise, representation, or guarantee concerning the outcome or settlement value of this case. You acknowledge that litigation is an uncertain process based upon unpredictable future events beyond anyone’s control and that promises, representations or guarantees of outcome or settlement value are impossible and unreliable.” 4. Communicate Regularly With the Client During the Course of the Representation. A lawyer’s duty to communicate with the client about fee-related matters continues even after the parties have signed a written fee agreement. In particular, “[a] lawyer must keep a client reasonably informed about the status of a matter entrusted to the lawyer, including the progress, prospects, problems, and costs of the representation.”13 Events frequently may occur during the course of a representation that might alter a client’s willingness to pay a lawyer’s fee or authorize a lawyer’s continued work. Regular communication is essential to enable the client, as appropriate, to adjust the allocation of authority to the lawyer or even to terminate the representation.14 Moreover, copying the client on every document gives the client a better sense of the work involved so that the client has an appropriate awareness of the volume of work necessary to reach a certain point. “A lawyer should not necessarily assume that a client wishes to press all of the client’s rights, regardless of cost or impact on others.”15 5. Be Efficient. In cases in which a party seeks the recovery of attorneys’ fees, courts routinely caution that they will not award attorneys’ fees for work that is “excessive, redundant or otherwise unnecessary.”16 Clients similarly expect that they should not have to pay for excessive or inefficient work. The classic example of excessive work is overstaffing — e.g., assigning two or more attorneys to attend a deposition or hearing where only one attorney will actually be speaking.17 Other examples that may offend a client:
In hourly fee matters, a lawyer should carefully review invoices before sending them to a client and ensure that they do not include any excessive time entries.18 If necessary, the lawyer should be prepared to write off any inefficient or unnecessary work, possibly identifying the work with the notation “No Charge” to alert a client that the lawyer is sensitive to its financial interests. 6. In an Hourly Matter, Bill Often and With Detail. Many fee disputes arise when a lawyer bills one lump sum at the end of a matter or offers vague billing descriptions in invoices, without adequately outlining the nature of the work performed on each task. Gone are the days when a lawyer could submit a bill stating “Fees for Services Rendered” with a hefty amount beside it.19 Now, with technology that can document a lawyer’s activities to the tenth of an hour, clients expect to see exactly what their lawyers have been doing and billing. Not only is it important for a lawyer, by detailed billing, to show all of the work and time that he has put into a matter,20 but it is also important that the lawyer bill often. When a lawyer waits until the end of a matter to submit an invoice for payment, a client may tend to see only a large, lump sum amount being diverted from its bank account, especially in cases of settlement. It may be hard for the client to remember all of the work and time that went into obtaining the finished product. 7. In an Hourly Matter, Bill Contemporaneously. Some fee disputes have occasionally arisen in cases where lawyers did not bill contemporaneously. This issue usually goes hand in glove with the issue of billing often and in detail. While some courts have approved attorney’s fees that were not contemporaneously recorded and billed,21 lawyers should not depend on either the mercy of the courts or the “kindness of strangers” to ensure that they receive appropriate compensation for their work. Instead, lawyers should record and bill their time at or near the time of the activities that they performed. By failing to record and bill time contemporaneously, lawyers may “lose time” on a matter if they forget all of the work that they performed on a task. Some lawyers may try to rectify their error by giving themselves a generous benefit of the doubt on how much time they spent on a matter. In those instances, not only may the fee become a subject of dispute, but the lawyers may become the subjects of disciplinary proceedings.22 8. In an Hourly Matter, Bill in Reasonable Increments. Many lawyers bill their time in quarter-hour increments. Courts, however, have frequently criticized this practice, arguing that it is inherently imprecise and, over the course of a representation, could “add up to tens of thousands of dollars in unearned legal fees.”23 A better practice arguably is for lawyers to bill in six-minute increments.24 But even where a firm has an established policy of billing in quarter-hour increments, a prudent lawyer should at least scrutinize his invoices to ensure that they accurately reflect the actual time that he devoted to a matter — even if it means writing off some time for work that took less than a quarter of an hour. A client understandably and justifiably will balk at paying an invoice that charges a quarter-hour of time for a telephone call that the client knows to have taken only a few minutes.25 Most, if not all, of these eight suggestions are intuitive. They each represent a slightly different iteration of the same basic concept: a lawyer should communicate effectively with clients to ensure that they know what the lawyer expects to do during the representation, what the lawyer actually does, and how much it will cost. Fee disputes generally arise simply as a result of ineffective communication — in particular, where the client’s understanding of the anticipated cost of the representation differs from the amount of the lawyer’s invoices or billings. With these eight simple suggestions, a lawyer can better ensure a good working relationship with clients because, both at the outset and during the course of their relationship, the lawyer’s clients will have a reasonable expectation of the likely costs of the lawyer’s services. Endnotes 1.Tex. Gov’t Code Ann. § 82.065 (Vernon Supp. 2006). 2.Levine v. Bayne, Snell & Krause, Ltd., 40 S.W.3d 92, 96 (Tex. 2001). See Restatement (Third) of the Law Governing Lawyers § 38 (1998); Tex. Disciplinary R. Prof. Conduct 1.04(c) & cmts. 1 & 2, reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G app. A (Vernon Supp. 2006) (State Bar Rules art. X, § 9). 3.See Levine, 40 S.W.3d at 96. 4.Restatement (Third) of the Law Governing Lawyers § 18 cmt. c (1998). See id. (“[L]awyers are more able than most clients to detect and clarify omissions in client-lawyer contracts.”). 5.Hoover Slovacek LLP v. Walton, No. 04-1004, 2006 WL 3110595, *6 (Tex. Nov. 3, 2006) (citing Levine, 40 S.W.3d at 96). See also Restatement (Third) of the Law Governing Lawyers § 18 cmt. c (1998). 6.Restatement (Third) of the Law Governing Lawyers § 38 cmt. e (1998). 7.Id. 8.Levine, 40 S.W.3d at 95-96. 9.Restatement (Third) of the Law Governing Lawyers § 38 cmts. b & e (1998). 10.Tex. Disciplinary R. Prof. Conduct 1.04 cmts. 2 & 8. 11.See, e.g., Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 597 (Tex. 1992) (noting that a party commits fraud by making a false promise of future performance with no intent to perform); Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 343-35 (Tex. 1986) (same). 12.See, e.g., Aldrich v. Aldrich, 261 Ill. App. 333, 1931 WL 1668, *12 (1931) (“Few things in this world are more uncertain or dubious than the result of a lawsuit.”). 13.Restatement (Third) of the Law Governing Lawyers § 20 cmt. c (1998). See Tex. Disciplinary R. Prof. Conduct 1.03 (“A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.”). 14.Restatement (Third) of the Law Governing Lawyers § 20 cmt. b (1998). 15.Id. cmt. c. 16.Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). See Leroy v. City of Houston, 906 F.2d 1068, 1079 (5th Cir. 1990); Cohen v. Sims, 830 S.W.2d 285, 290 (Tex. App.—Houston [14th Dist.] 1992, writ denied); Armstrong Forest Prods. v. Redempco, Inc., 818 S.W.2d 446, 452-53 (Tex. App.—Texarkana 1991, writ denied); see also Scott A. Brister, Proof of Attorney’s Fees in Texas, 24 St. Mary’s L.J. 313, 332 (1993) (“[A] fee may be cut based upon evidence that the case was overprepared, overtried, or overbriefed.”). 17.See Lipsett v. Blanco, 975 F.2d 934, 938 (1st Cir. 1992) (“A trial court should ordinarily greet a claim that several lawyers were required to perform a single set of tasks with healthy skepticism.”); see also Flowers v. Wiley, 675 F.2d 704, 706 (5th Cir. 1982); Lewis v. Hurst Orthodontics, 292 F. Supp. 2d 908, 910 (W.D. Tex. 2003); Schofield v. Trustees of the Univ. of Pa., 919 F. Supp. 821, 829 (E.D. Pa. 1996); Goodyear Dunlop Tires N. Am., Ltd. v. Gamez, 151 S.W.3d 574, 588 (Tex. App.— San Antonio 2004, no pet.). But cf. Hernandez v. Miranda-Velez, 132 F.3d 848, 860 (1st Cir. 1998) (“Time spent by two attorneys on the same general task is not, however, per se duplicative. . . . [P]reparation often requires collaboration and rehearsal.”). 18.See Ralph I. Miller & Angela C. Wennihan, Resolving Attorneys’ Fees in Texas Business Litigation, 56 SMU L. Rev. 1115, 1141 (2003). 19.See Role Models Am., Inc. v. Brownlee, 353 F.3d 962, 970 (D.C. Cir. 2004) (noting that billing information for the recovery of attorney’s fees in federal court “must be of sufficient detail and probative value to enable a court to determine with a high degree of certainty that such hours were actually and reasonably expended”); Does I, II & III v. District of Columbia, 448 F. Supp. 2d 137, 143 (D.D.C. 2006) (criticizing time records containing inadequately detailed descriptions such as “research”); see also Jensen v. Lawler, 338 F. Supp. 2d 739, 745 (S.D. Tex. 2004). 20.The first factor in determining the reasonableness of attorney’s fees is the “time and labor required.” Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). 21.See Land Rover U.K., Ltd. v. Hinojosa, 210 S.W.3d 604, 608-09 (Tex. 2006). 22.SeeTex. R. Disciplinary Prof. Conduct 1.04(a) (noting that lawyers shall not enter into an arrangement for or charge or collect an illegal or unconscionable fee). 23.Zucker v. Occidental Petroleum Corp., 968 F. Supp. 1396, 1403 (C.D. Cal. 1997). See Republican Party v. White, 456 F.3d 912, 920 (8th Cir. 2006); Lopez v. San Francisco Unified School Dist., 385 F. Supp. 2d 981, 993 (N.D. Cal. 2005); George v. GTE Directories Corp., 114 F. Supp. 2d 1281, 1292 (M.D. Fla. 2000); Double “S” Truck Line, Inc. v. Frozen Food Express, 171 F.R.D. 251, 254 (D. Minn. 1997). But cf. Branham v. Snow, No. 1:01-CV-0152-JDT-WTL, 2006 WL 1750443, *5 (S.D. Ind. 2006) (declining to adjust an attorney’s fee award based on quarter-hour time billings where it was “the regular practice of the firm to bill in quarter-hour increments”). 24.See, e.g., Echols v. Nimmo, 586 F. Supp. 467, 477 (W.D. Mich. 1984) (“A charge of 1/4 hour for each telephone call, regardless of the brevity of the call, is imprecise. A more precise method is to divide the hour into 10 6-minute segments, for example, and charge accordingly for each phone call. This method is distinctly preferable to billing 1/4 hour for a 2-3 minute phone call.”). 25.Id. See Jocson v. Crabb, 196 S.W.3d 302, 309 (Tex. App.—Houston [1st Dist.] 2006, no pet. h.) (criticizing the practice of billing a quarter of an hour for each document that ad litem reviewed, “even if it was only for a notice of a deposition, a certificate from a court reporter, or a letter containing a single sentence”); see also Gamez, 151 S.W.3d at 589.
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