Don't let your billable turn into write-offs

By Jacob Kahn
BridgeTower Media Newswires

It’s a safe bet that if you’re reading this piece, you’ve purchased a car at some point in your life. Maybe you even bought it new. Perhaps you’ve also taken out a mortgage, or a small business loan.

Assuming you borrowed this money post-2008, it’s an even safer bet that the lender from whom you obtained the funds subjected you to intense scrutiny based on your credit report, repayment history, income, and stated expenses. These folks certainly are not inclined to just let you waltz into their office, sign a piece of paper, and walk out with a $20,000 liability.

They want to protect themselves, to make sure that doing business with you is not going to be an irrecoverable waste of their time and money. The professional term for this type of careful behavior is known as “covering your behind,” and it is a term lawyers tend to live by.

As members of the legal profession, we are taught to constantly check, and re-check, that we are exercising caution against any rash or hasty decisions. Unless you have an unnatural affinity for your carrier — maybe your Daniels-Head rep. just has a lovely smile — you’re going to want to proceed in all areas of your practice with the utmost prudence, so as to avoid any blunders which might harm your clients, your reputation, or your bottom line.

I have watched attorneys of all practice areas spend hours upon hours draft and re-draft pleadings, agonize over the slightest change in verbiage in an email, and triple-check that their citations haven’t received any negative treatment since they last referenced them just days ago. Clearly, applying one’s self to a field in which the difference between “and” and “or” in a contract can be the deciding factor in a multimillion dollar case has led attorneys to become highly circumspect.

Why then, I am frequently left to wonder, does this abiding caution fly out the window when it comes to taking on new clients? The creditors’ rights firm I work for deals primarily with other attorneys whose clients have skipped out on their fees. In fact, we have come to represent nearly 250 Southeast Michigan attorneys — all of whom I can comfortably describe as deliberate, forward-thinking individuals.

Nonetheless, for some reason beyond my conception, countless attorneys seem perfectly satisfied to extend substantial credit to clients who have simply wandered in off the street. The banks, the car lots, even phone carriers will run a hard inquiry on their customers’ credit reports, in order to protect themselves against individuals with a penchant for skipping out on their bills. These various industries are not known for their extreme caution — far from it; yet, they still see fit to perform even the most perfunctory investigations into the individuals who come knocking for a loan.

Of course, a client who skips out on their attorney’s invoices is altogether a horse of a different color compared to a customer who misses a car payment. An attorney must often apply for leave from the court to terminate the representation, and this request is often denied. However, there is nothing stopping a firm from preemptively looking into a client’s propensity to fail to pay. Even the Gramm-Leach-Bliley Act allows for an attorney to conduct appropriate skip-tracing of a potential client to protect themselves (signed authorization from the consumer never hurts).

When an attorney allows an individual to retain their services, a serious bond, with a litany of associated rights and privileges, has been created. Some might even think it a more serious professional relationship than that of a man and his barber. The point is, neither party should go in with their eyes closed.

Taken from a composite of all the cases turned over to our firm in August 2019, for unpaid legal fees, the average outstanding balance was approximately $14,000. Some months the figure is considerably higher, others it may wane. Regardless, is there truly any amount of risk which is acceptable to take on blindly, especially when those in the legal field are so uniquely suited to avail themselves of powerful remedies?

Even small steps such as checking a client’s history of bankruptcies, a soft pull on their credit, or a thoughtful conversation about their income and expenses could all serve as useful tools in crafting a well-suited retainer agreement, which compensates for increased risk.

When a client steps into your office and asks that you handle their divorce, criminal defense, or any other multitude of issues, what they are genuinely asking of you is an advance of your time; ergo, an advance of your money.

If you would not readily loan your client ten grand to renovate their kitchen, why would you be so quick to loan them ten grand worth of your billable hours and work product? It’s 2019: If you want to get taken for a ride, call an Uber — don’t turn your back on engines of risk-mitigation.
Jacob Kahn is a student at Wayne State University Law School who has worked as a law clerk for three years.