Claim of the Quarter

Our Claim of the Quarter focuses on what can go wrong when a lawyer tries to maintain and keep a powerful client happy. Contrary to the client enhancing the firm's image and bringing in needed revenue, the client can instead leave the firm struggling to obtain payment and defending a legal malpractice claim, as the following Claim of the Quarter illustrates:

Client, CEO of a Fortune 500 company, retained the law firm to defend him against a white-collar criminal charge. The trial attorney was thrilled to represent such a high-profile client. At intake, the CEO explained that while he had immediate access to a seven-figure account, the remainder of his money would be available only after the trial. The CEO desired to clear his name and instructed the trial attorney to "spare no expense" in his defense. The CEO attended strategy sessions and demanded that the trial attorney retain an expensive London-based expert. While the trial attorney questioned the expert's jury appeal, at the CEO's strong insistence, he acquiesced. The case proceeded to trial where the expert fell apart on cross-examination. The client was convicted. Further, the jury informed defense counsel that they found the expert unbelievable and "in it for the money". The CEO hired appellate counsel.

Unbeknownst to the remaining partners, the law firm had been carrying an accounts receivable balance for several months after the CEO suddenly stopped paying his bills, explaining that further money would be available after he was cleared. After the verdict, the trial attorney sent a seven-figure final bill to the CEO marked "Past Due".

The law firm then received a two-count malpractice complaint. The complaint's first count alleged that the law firm failed to obtain a credible expert and instead retained a "foreign" academic with no practical experience. The second count charged the firm with excessive billing, such as retaining the unreasonably priced expert who charged items like first-class airfare from London.

What could the trial attorney have done differently?

The law firm's management committee met to dissect this engagement and came to the following conclusions:

1. The trial attorney afforded far too much deference to the CEO. By focusing on pleasing him in the short term, the trial attorney lost focus of his strategy, allowed a bad decision, and lost the case.
2. There was no documentation in the file to evidence the CEO's insistence on retaining the London expert. Documenting the file with letters, emails, detailed billing records and memos would have helped the law firm establish that the CEO had an appreciation for the cost of the expert, his credentials, and that, regardless, he had insisted on his retention.
3. The trial attorney should never have carried an outstanding accounts receivable without informing his partners, and it was against law firm procedure to do so. While the trial attorney believed that the client would ultimately pay the bill, he was wrong. The firm was left with seven figures in uncollectible billable hours and expenses, in addition to the lawsuit.

In summary, always remember respective roles regardless of the impressive nature of the client and always document, document, document! Further, regardless of the client, if they stop paying the bill, take action! Whether an intervention, discussion, payment plan, withdrawal, or some other action is warranted, the issue should be discussed within the firm.

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