Bad Billing: Lawyer Breaches Fiduciary Duty By Failing To Bill In Accordance With Provisions of The Fee Agreement

On November 12, 2021, the Tennessee Court of Appeals held that a lawyer breached his fiduciary duty to his client by failing to bill in accordance with the provisions of his fee agreement. See Harris v. McMichael, No. E2020-00817-COA-R3-CV (Tenn. Ct. App. Nov. 12, 2021). As a result, the court disgorged the lawyer of most of the fees received from his clients. In the Harris case, the lawyer sued his clients for alleged unpaid fees. The clients answered the suit and also filed counter-claims against the lawyer. The clients claimed the fees were not justified and that the lawyer failed to properly document the earned sums.

Rule 1.5(b) requires that the basis or rate of the lawyer’s fee must be communicated to the client and “any changes in the basis or rate of the fee or expenses shall also be communicated to the client.” See La. Rules of Prof’l Conduct, r. 1.5. Moreover, the Harris court noted that lawyers have the duty to “be competent, prompt, and diligent . . . [and to] maintain communication with a client concerning the representation.” Harris, No. E2020-00817 at 11. As to billing clients, the Harris court cited the Florida Bar’s recommendations concerning billing

Billing should be done promptly after the work for which the bill is sent is completed, and should be detailed. The client is entitled to know what items are covered by the bill and to have current billing so that the cost of the litigation can be overseen as it progresses.

When billing a client, the lawyer should detail the legal services performed in the matter and the expenses incurred for each legal service. The “narrative” statements assist the client in understanding the reason for the amount of the bill.

The Fla. Bar, Florida Civil Practice Before Trial, ch.3 (13th ed. 2020), available at Westlaw CIVPRAC FL-CLE 1-1.

Here, the Tennessee court found that the lawyer failed to bill his clients in accordance with the retainer agreement. In doing so, the lawyer breached his fiduciary duty to his clients under the rules of professional conduct. Specifically, the retainer agreement provided that the lawyer would bill the clients in quarter-hour itemization. Instead, the lawyer “block billed” the clients for “20 hours@$250.00=$5,000” in connection with opposing a motion for summary judgment. At the hearing, the lawyer testified that he did compile detailed billing statements that billed the clients in quarter-hour increments. However, he did not prepare these statements until shortly before the hearing in the trial court in this contested litigation. According to the court, “[t]his belated and ad hoc compliance with the billing provisions of the parties’ agreements simply does not reflect the promptness, diligence or appropriate communication required of a Florida attorney, or any other attorney.” Harris, No. E2020-00817 at 12. The court affirmed that disgorging the lawyer of the remainder of the fees paid by the clients was an appropriate remedy under the circumstances. The court allowed the lawyer to keep $5,000 of the legal fees.

As to fee agreements, the Louisiana State Bar Association provides similar guidance as the Florida Bar. See Louisiana State Bar Association, Practice Aids Guides: The Essentials of Law Office Management, Section 3 – Fees, Billing and Trust Accounts. The LSBA recommends that for hourly fee agreements, detailed records should be kept concerning the time spent on the matter. Further, the lawyer should invoice the client at regular intervals, preferably every month. The client has the right to know the exact amount of the hourly rate and, if possible, an estimate of the hours the lawyer expects are necessary to handle the matter. Finally, after the attorney-client relationship has commenced, the lawyer should inform the client preferably in writing of the status of the case on a periodic, preferably monthly, basis and the work the lawyer performs to earn the fee.

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