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Category: Fee Collection

Nevada High Court Upholds Gordon & Rees Win in Fee Dispute Case

November 2, 2018

A recent Law 360 story by Aebra Coe, “Nevada High Court Affirms Gordon & Rees Win in Fee Dispute” reports that the Nevada Supreme Court has upheld a jury verdict awarding Gordon & Rees LLP more than $250,000 in a fight with a former radio station client over thousands in unpaid legal fees.  The state's highest court affirmed a unanimous verdict in favor of Gordon & Rees in its battle to ward off a legal malpractice counterclaim and recoup $106,500 in unpaid legal fees as well as other litigation expenses totaling $251,600 from its former client, Edward Stolz, who owns several radio stations and other businesses.  It is believed to be the first time in Nevada a court has awarded fees and costs to a self-represented litigant. 

The court rejected Stolz’s assertion that the lower court should have applied California, not Nevada, law because the underlying lawsuit — in which Stolz was accused of not paying for the rights to the music his radio stations broadcasted — was filed in California and because Gordon & Rees is headquartered in the state.

Instead, the appeals court agreed with the law firm’s assertion that Nevada law applies because several of Stolz’s businesses are in the state, because his initial consultation was in the Las Vegas office of the firm with a Nevada bar-licensed attorney, and because it was in the state that the conduct Stolz takes issue with occurred.

The legal malpractice counterclaims stem from Stolz’s allegation that Gordon & Rees failed to disclose to him, in writing, that it represented his insurer and thus could not represent him in the lawsuit over his radio stations’ use of music if the insurer, Hartford, refused to assume his defense in the lawsuit, which it did.  Instead, that information was conveyed verbally, according to court documents.

“We conclude that the district court correctly applied Nevada law. The incident in question — whether Gordon & Rees should have disclosed the Hartford conflict in writing before representing Stolz — occurred in Nevada.  The fee agreement, in fact, was signed by the managing partner in Gordon & Rees's Las Vegas office,” the high court’s opinion said.  Additionally, the appeals court found that the lower court did the right thing when it awarded Gordon & Rees attorneys' fees and costs in the case, despite the fact that the law firm represented itself, something that is often a disqualifying factor for obtaining fees and costs in Nevada.

The reason the court came to that conclusion is because Stolz signed a contract with the firm stating outright that Gordon & Rees could collect fees and costs if litigation were to occur over its representation of the business owner.  “Here, the district court found that there was a contract between the Stolz companies and Gordon & Rees providing that Gordon & Rees could obtain attorney fees in the event there was a dispute to enforce the agreement.  Thus, the district court awarded fees because Stolz agreed to pay those fees, even if Gordon & Rees was representing itself," the opinion said.

The cases are Royce International Broadcasting Corp. et al. v. Gordon & Rees LLP, case numbers 72148 and 74272, in the Supreme Court of the State of Nevada.

Consumer Can Recover Attorney Fees in Florida Debt Collection Action

September 17, 2018

A recent Law 360 story by Carolina Bolado, “Consumer Can Get Fees for Winning Debt Collection Suit,” reports that a Florida appeals court ruled that a consumer who fends off an "account stated" lawsuit seeking to collect on an unpaid credit card balance can collect attorneys' fees under Florida law.  Florida's Second District Court of Appeal reversed a trial court's order denying Katrina Bushnell's request for attorneys' fees after debt buying company Portfolio Recovery Associates LLC voluntarily dismissed its suit over an unpaid credit card bill.

Bushnell had asked for attorneys' fees under the credit card agreement, which contains a provision authorizing the creditor to recover its attorneys' fees as part of its collection costs.  Under Florida Statute 57.105(7), if a contract has a provision allowing attorneys' fees to a party that has to take action to enforce the contract, the court can also allow attorneys' fees to the other party if it prevails in the dispute.

The trial court ruled against Bushnell but asked the appellate court to address the issue and answer the question of whether an "account stated" action that seeks to collect an unpaid debt is considered an action to enforce a contract.  The Second District said that it is such an action and ruled that the account stated lawsuit could not have happened if the credit card contract did not exist.  "Simply put, if there had been no credit card contract, the amount due would not have accrued in the first place," the appeals court said.  "The credit card contract and the account stated cause of action are therefore inextricably intertwined such that the account stated cause of action is an action 'with respect to the contract' under section 57.105(7)."

The appeals court relied on the Florida Supreme Court's 2002 decision in Caufield v. Cantele, in which the court concluded that the prevailing party in a lawsuit for fraudulent misrepresentation was entitled to fees under the state's reciprocity provision.  The Supreme Court reasoned that the existence of the contract and the misrepresentation claims in the case were "inextricably" linked.  The Second District applied this reasoning to the case against Bushnell and concluded that the reciprocity provision in 57.105(7) applies.  The appeals court reversed the order denying Bushnell's fees and remanded it to the trial court to determine a reasonable fee award for her counsel.

Bushnell’s attorney Jennifer Jones of McIntyre Thanasides Bringgold Elliott Grimaldi Guito & Matthew PA called the decision “a big win for the little guy in Florida.”  She said the litigation tactic used against Bushnell is common among debt buyers, who often buy charged-off credit cards accounts for pennies on the dollar and then sue without proper documentation.  The customers often cannot secure legal representation to defend themselves against these lawsuits, according to Jones.

The case is Bushnell v. Portfolio Recovery Associates LLC, case number 2D17-429, in the Second District Court of Appeal of Florida.

Article: Deal with Billing Issues Mid-Year to Avoid Year-End Rush

August 29, 2018

A recent Daily Report article by Shari L. Klevens and Alanna Clair, “Yes, It’s Still Only August, But You Can Avoid the Year-End Rush on Billing Issues, reports on the fundamentals of effective fee collections.  This article was posted with permission.  The article reads:

Issuing bills and collecting fees can be a challenging task for many attorneys.  Some find it difficult to give billing issues the attention they need, given the demands of their law practice.  Often, attorneys may feel tempted to ignore billing issues until the year-end collections push.  However, by only focusing on billing at one time during the year, attorneys (and firms) may end up leaving earned fees on the table or could otherwise miss red flags that could indicate other problems with the representation.

Thus, many firms will encourage their attorneys to take a serious look at outstanding invoices, work in progress fees and overdue accounts prior to the year-end push.  Although December may be the appropriate time for the final push, summer can be the time to reinforce the fundamentals for effective fee collections.

Are Bills Being Paid?

Assuming that bills are sent regularly, if a client is not paying its invoices regularly or in full, this time of year can be a helpful time to investigate.  Waiting until December may leave the firm with fewer options and little time to deal with unpaid bills.  Clients have many options for how and when they pay bills.  Some clients review amounts or even appeal the invoices before paying.  Others may regularly let bills accumulate and pay them in full quarterly.  However, the failure of a client to pay over an extended period of time can indicate a problem, either with the client’s ability to pay, or, in some circumstances, with the relationship.

If bills are remaining unpaid, many attorneys will investigate to try to identify the source of the delay.  For example, the bills might have been sent to the wrong person or, it could be that the firm or the invoices are not in the client’s system.  On the other hand, it could be that a client is receiving the bills, but nonetheless is refusing to pay some or all of them.  When this happens, there are several potential explanations.

Some clients refuse to pay because they dispute the amount of the bill.  In such a circumstance, the attorney may choose to engage in some frank discussions regarding the work performed and anticipated future work and billings.  Getting everyone on the same page about both the amount of work a matter requires and the cost of that work is important to avoid even bigger disputes down the road.  The attorney may choose to discount or write-off amounts—as a client service issue—if the amounts exceed what was expected.

However, if the client is refusing to pay because the client is dissatisfied with the quality of work, then additional steps may be helpful.  Typically, ignoring such dissatisfaction does not make the issue go away and can get worse with time.  Most firms in this situation will confront the issues directly to determine whether the client is unfairly refusing to pay or if there is a more serious quality issue.

Most often, fee disputes reflect misunderstanding about what work the attorneys are doing and what costs are associated with that work.  If a client does not understand a bill or thinks they are being overcharged, it might be because the bill does not provide enough detail or because it is hard to read.  The solution could be as simple as revising billing entries so they provide more information.  Unfortunately, sometimes nonpayment means the client simply does not have the financial resources to pay.  It is always better to find that out sooner rather than later.

Are Bills Being Sent?

In taking inventory of accounts receivable and work in progress fees, law practices can also review whether their invoices are being sent on a regular basis.  Whether fees are being paid can be directly impacted by whether attorneys are getting their bills out with regularity.

Failing to send bills regularly can have direct and practical impact on the attorney-client relationship.  If bills are not sent regularly, sending an invoice that encompasses several months of work can come as an unpleasant surprise to a client.  A client may even begin to question the work that has already been completed if irregular bills suggest that the representation is unusually expensive.  Typically, an effective way to avoid that surprise is to ensure invoicing is timely.  Monthly, digestible bills reduce the risk of a fee dispute and increase the chances of prompt payment.  Regular invoices also help educate and confirm for clients what tasks are being completed in the matter.

In addition to ensuring good client relations, regular bills avoid the risk that the firm or practice has a substantial amount of fees invested before learning that it has a client problem or an objection to payment.  With frequent, regular bills, nonpayment or fee disputes typically involve a much smaller amount than disputes resulting from a single bill covering six months or a year of legal fees and expenses.  Issuing bills in regular (and therefore smaller) amounts reduce the risk of a dramatic hit to the bottom line if there is a dispute.

With all that said, one of the most important reasons for monthly or regular billing is to address one of the most common reasons why clients do not pay: they never received an invoice.  Systematic billing in regular intervals ensures that crucial step for getting paid by ensuring that bills are sent.

Billing is one way of informing the client of the work being done and the time being spent on their case.  By assessing billing issues at mid-year, attorneys can reduce the stress of the year-end collections crunch.

Article by Shari Klevens and Alanna Clair of Dentons US LLP, reprinted with permission of ALM Media Properties, LLC.  Shari L. Klevens is a partner at Dentons US in Atlanta and Washington and serves on the firm’s U.S. board of directors.  She represents and advises lawyers and insurers on complex claims and is co-chair of Dentons’ global insurance sector team.

Alanna Clair is a partner at Dentons US in Washington and focuses on professional liability and insurance defense.  Shari and Alanna are co-authors of “The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance” and the upcoming 2019 edition of “Georgia Legal Malpractice Law.”

In California, Did You Know You Can Collect Fees for Time Spent Collecting Fees?

February 12, 2018

A recent CEBblog articles by Judy Brook, “Did You Know You Can Collect Fees for Time Spent Collecting Fees?reports on collecting on attorney fee awards and enforcing judgments.  This article was posted with permission.  The article reads:

Collecting attorney fee awards and enforcing judgments can be very time-consuming. Don’t forget to collect attorney fees for time spent chasing down your fees in collection efforts.

Under California law, attorney fees incurred in enforcing a judgment are compensable post-judgment enforcement costs when the judgment includes a fee award based on a contract (see, e.g., Chelios v Kaye (1990) 219 CA3d 75) or a fee-shifting statute (see, e.g., Ketchum v Moses (2001) 24 C4th 1122, 1141 n6). CCP §685.040. This is consistent with the general principle that “reasonable” attorney fees include compensation for time litigating the fee portion of the judgment (see Serrano v Unruh (1982) 32 C3d 621).

Here are a few finer points to know:

  1. Seek collections fees within two years. Fee motions must be filed within two years after the enforcement fees have been incurred. CCP §685.080(a). Keep in mind that the Enforcement of Judgments Law generally doesn’t apply to enforcement actions against governmental entities (CCP §§680.010–724.260).
  2. Consider seeking collections fees from nonsignators. In Cardinale v Miller (2014) 222 CA4th 1020, the court held that under the plain language of CCP §685.040, enforcement fees could be awarded against nonsignator brokers who conspired with the judgment debtor to avoid collection because the judgment included an award of contractual fees. Under this interpretation, the fact that the fees couldn’t have been awarded against the nonsignators under the contractual fee clause was irrelevant; CCP §685.040 authorized fees to the judgment creditor for expenses incurred in enforcing the judgment. 222 CA4th at 1026.
  3. Don’t limit collection fees to trial court activities. In Downen’s Inc. v City of Hawaiian Gardens Redev. Agency (2001) 86 CA4th 856, the court held that the plaintiffs’ entitlement to fees in an inverse condemnation action included fees for bringing a petition for writ of mandate to collect the judgment.
  4. Consider including collection fees for separate actions. In Globalist Internet Technols., Inc. v Reda (2008) 167 CA4th 1267, 1276, the court held that under CCP §685.040, plaintiff was entitled to recover the fees incurred in defending a separate action filed by the defendant/judgment debtor because, if that action had been successful, it would have reduced the judgment collectible by the plaintiff. In Slates v Gorabi (2010) 189 CA4th 1210, 1214, however, the court refused to extend Globalist to defending attacks on a judgment by third parties unrelated to the judgment debtor.
  5. Include collection efforts in bankruptcy court. Actions taken in bankruptcy court to collect a judgment also may be recovered under CCP §685.040. See Chinese Yellow Pages Co. v Chinese Overseas Mktg. Serv. Corp. (2008) 170 CA4th 868, 885; Jaffe v Pacelli (2008) 165 CA4th 927, 929.

The procedure for claiming collection fees is stated in CCP §685.080. You’ll need to file a noticed motion no more than two years after the costs were incurred, supported by a declaration stating, among other things, that the costs were “reasonable and necessary.” CCP §685.080.

Bitcoin for Legal Fees?

December 21, 2017

A recent Law.com story, by Ben Hancock, “What’s Next: Blockchain and Justice; Net Neutrality Fights Brews; Bitcoin for Legal Fees,” reports that the skyrocketing prices for crypto-currencies are making for some interesting legal battles, but they also present another novel question to lawyers: What if my client wants to pay my legal fees in Bitcoin?  In an op-ed, Kaufman Dolowich & Voluck attorney Ian Anderson walks through the ethical and practical considerations of that question — and notes that Bitcoin isn’t treated by the IRS as legal tender.

“Like the country lawyer accepting a bushel of apples for drafting a will, payment in Bitcoin is payment in property,” Anderson writes.  He also notes that payment in crypto-currency raises money laundering concerns, and that if the value of the token goes to zero, it could put the client and attorney in conflict.

Takeaway: “Some attorneys believe … that such flexible payment models attract new clients.  But for cases with minimal fees or attorneys who are not tech-savvy, receiving payment in Bitcoin may be more trouble than it’s worth.”