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The Art of Getting Paid

Ethical Dilemma: How to Deal With an Unconventional Billing Arrangement

Whenever you are dealing with an unconventional billing situation, things can unravel unless you take precautions.

By Frederick Hertz  |  February 2, 2016

One of my favorite assignments to my students when I was teaching a small firm and solo practice course at a local law school was to have them read the summaries of the disbarment reports in the monthly California Lawyer magazine. Every suspension or disbarment has a lesson for young lawyers—and old ones as well. But rather than focus on the punishment meted out to these flawed souls, I would encourage my students to try to understand why they got into the messes that led to their discipline. In so many cases, the problem started out with a billing mistake.

Art: Ethical Dilemma Non-Client

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Mistake is probably too kind of a term. All too often, lawyers are trying to avoid dealing with an ethical problem or professional responsibility challenge, cutting corners or bending the rules to avoid a blatant violation. This can take many forms. Sometimes it’s a matter of wanting to conceal the “real” client, in a corporate or partnership dispute where the person seeking legal help prefers to hide behind a less controversial partner or employee. Sometimes there’s a new boyfriend involved with a married spouse, where the spouse wants to keep the new relationship a secret. And sometimes there are questions about how the money was earned, and the client doesn’t want to implicate his or her lawyer in the receipt of ill-gotten gains. In each of these types of situations, the lawyer may be tempted to mask who is the real client, and obfuscate who is really paying the bill.

My favorite example comes from my own family. In the early 1930s—a decade when many immigrant sons were barely getting through college—one of my great-uncles was disbarred as an attorney. It turns out that he was getting paid by one person who was involved in illegal liquor distribution, but was supposed to be the lawyer representing another defendant. Allegedly, he persuaded the “client” to plead guilty, only to have the client discover later on (after he went to jail) that the crony who was paying the legal fees got off in exchange for testifying against the client. This was a blatant example of a lawyer taking directions from the one paying the bills, to the extreme detriment of his own client.

So long as there are no major problems, misstating who is the client or taking directions from a non-client might be OK, and probably won’t result in a lawsuit or, like my great-uncle’s story, disbarment. But whenever you are dealing with the unconventional billing situation that includes a serious ethical challenge, having things unravel is a very real possibility. Trust me, no client’s case (or fee) is so large that it is worth risking your life savings or career in a malpractice suit or disbarment proceeding. Don’t be so arrogant as to assume that you can weather this sort of entanglement without getting burned.

It’s best to have very clear rules and protocols here. The client is the person who owns the property or has the legal claim, and that’s the person who should be liable for the fees. Without exception, the client is the person you speak with confidentially and who gives you direction about the legal decisions. Anyone else starts out as a non-client, and you should only speak with them at your client’s express direction. You should confirm in the fee agreement these protocols. If there are crucial confidentiality issues and the non-client needs to be involved in the discussions, you will need to add them as a client—but you can only do when you have resolved any conflicts of interest issues, in writing.

When in doubt, work with the assumption that you aren’t getting paid, and that you need to appear in front of a judge to explain the arrangement in order to enforce your agreement. If you don’t think the judge will be OK with the arrangement, then don’t set it up that way. And if there is no “legitimate” way to handle the matter, decline the representation. It is really that simple.


Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.

The art of getting paid

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