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Hey everyone, Scott Benton here. How are you? I’m the host of the Classroom 2 Courtroom podcast where we help you easily transition from a law school student into your professional career as an attorney and that gap between the two and where we happen to make the practice of law fun. Now today we’re going to take a look at the fee arbitration risk question.
I know that’s a mouthful. The fee arbitration risk question.
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First, what is fee arbitration and why is it risky? Why do we need to discuss this? When a client hires you to achieve a legal goal and they engage your legal services, they’re paying you to come up with various case strategies to help provide an analysis on each strategy.
And then once the client decides on a direction they’d like your case to go, you begin to fill up your to do list. With tasks that are going to help move the case in that direction, which is the first part of the success cycle. And that’s a model that we use here on the Classroom 2 Courtroom podcast to help you learn how to practice law as quickly as possible.
Now, from there, you perform a series of legal [00:02:00] services for your client for which you bill them and get paid. And as you continue using this simple three part workflow model, the success cycle, until the case is closed, And hopefully you’ve been successful by then. But regardless of your relative success or failure on the case, Occasionally, a client decides for whatever reason that they’re not happy about something on the case.
They’re not happy about some work that was done, and they can decide that now they want their legal fees refunded. Now, maybe they felt that there was a certain case strategy, That they themselves might have even decided upon that was the wrong direction to go, or sometimes a client takes their case into a completely different direction altogether, that their attorney strongly disagrees with, but they do it anyway, and At that point it fails and even though the client was insistent, which let’s say you’re their attorney and you complied with it, the client decides that they’re going to take you [00:03:00] to fee arbitration and they’re going to do that anyway, even though it was a direction they decided on, even though it was a direction that you tried to talk them out of, they’re going to go to fee arbitration anyway, and they’re going to try and recover those legal fees that they paid out, and sometimes those legal fees that get paid out can Be in thousands of dollars.
So this is something that you really want to have on your radar. The fee arbitration question. Okay, let’s not worry about whether or not you’re right or wrong or whether the client was right or wrong or who wins what and what the likely outcome is of a fee arbitration hearing. Let’s simply focus a little more closely on whether you want to put yourself in a position where a fee arbitration hearing is a little more likely than not to take place.
Now sometimes, you’re never going to be able to control whether that happens or not. And it’s possible it might just come out of the blue anyway. It doesn’t happen often, but it could and you don’t always know what’s [00:04:00] motivating someone to seek fee arbitration in the first place. And truly, the billing you submitted and the time that you spent on these legal services that you provided, and the fees that you charged and that you got paid for, it could all be completely legitimate.
But more importantly, when you’re working with your client, and let’s say they decide to take some legal action That you’re probably not comfortable with and that you probably advise them against pursuing or that you just you don’t see any real legal argument for. You’re now putting yourself in a position of greater risk that the client eventually down the road will want their legal fees returned to them.
So here’s the problem with going to a fee arbitration hearing. If you lose, then you have to return either a portion or all the fees that you’ve collected from that client for the legal services that you provided, which sometimes is extensive. And that puts you, or your firm, or both, in a pretty difficult position.
[00:05:00] However, let’s say that you win the fee arbitration hearing. Let’s say you don’t have to pay back any of those fees. Then keep in mind that you’ve lost an entire day of productivity, which can include preparing your argument and your documentation for the fee arbitration hearing. That’s A lot of work that you need to do just to go into the fee arbitration hearing.
Now, you have to wait for the hearing to begin, which can take a while sometimes. And sometimes, you’re at a location that’s away from your office that really doesn’t provide much privacy for you to call clients, or to, work on your cases while you’re waiting for the fee arbitration hearing to start.
Either way, it’s going to be an interruption into your workflow. And when you have 30 cases and you can’t bill for delivering legal services for an entire day, ultimately that can set you back at least a full day’s worth of billable time. And that’s significant. It’s definitely something that you don’t want.
So now, Let’s do the [00:06:00] backwards math a little bit. And we’re going to go back just a few months when this first started, when this issue initially came up. And we’re going to take another look at the moment when your client asked you to do something that you advise them against doing, because as you’ve determined, there’s just really no real legal valid argument for it.
But your client insists that you do it anyway. They don’t care. Maybe they’re just really angry. Then you’ve got a choice to make. And sometimes these are called pound of flesh cases, by the way, and that’s a term that comes from Shakespeare. If you know the play, The Merchant of Venice, there’s this whole idea of a pound of flesh that gets used throughout the entire play.
And this is for our purposes. This is where the client wants to file a motion or maybe criminal charges, or it’s just something intended to bring some kind of harm to another person. In other words, they’re demanding their pound of flesh like in the Shakespeare play. At this point, you as the attorney have a choice to make. You can do what the client is asking you to do, even though it goes against your better [00:07:00] judgment, or you can let the client know that you can’t represent them any longer if this ill advised direction is pursued.
That way, not only are you maintaining your own level of professional integrity, but you also remove the risk that Doing so and following through with this request is going to end up eventually in a fee arbitration hearing where you would either need to pay the client back for all the time that you spent performing these legal services for them and then billing them for that time, or at the very least, you’re going to lose an entire day of your valuable work schedule, which means you lose an entire day of billing, which is costly, not only for you, but for the firm.
And this is why you want to keep the fee arbitration risk question alive as an important part of your consideration in case an unusual request comes along from your client that you just find you can’t support.
[00:07:55] Scott Benton: My name is Scott Benton. I’m the host of the Classroom 2 Courtroom podcast. Thank you so much for listening to this [00:08:00] episode. If this is material that you like and you want to receive an alert every time we put out a new episode, you can go to our website, which is classroom2courtroom.
[00:08:08] Scott Benton: com. That’s classroom, the number two. Courtroom. com. You can leave us your contact information. You’ll get an alert when we put out a new episode. So how cool is that? Additionally, if you like this material, don’t forget to share and subscribe. And by doing that, it’ll help you stay on top of our newest episodes as well.
[00:08:24] Scott Benton: Cause you’ll get an alert through the podcatcher that you’re on. So until next time, we hope you’ll join us in making the world a better place, one client at a time. Thank you so much.
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