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August 17, 2009 5:17 PM

Law Firms Become Tougher on Past Due Bills

Posted by Drew Combs

Throughout the economic downturn, law firms have talked about being more sympathetic to the challenges their clients are facing and more understanding of the burden legal fees are putting on clients suffering from declining revenues and profits.

But that sympathy and understanding has a limit, according to an article (subscription required) in today’s Los Angeles Daily Journal that says some law firms (much like credit card companies) are becoming more aggressive about collecting on past due bills.

The article refers anecdotally to a spate of breach of contract lawsuits filed by law firms seeking to recover on past due amounts owed by onetime clients, particularly Quinn Emanuel Urquhart Oliver & Hedges and Manatt Phelps & Phillips.

“We try to work with people so that they can meet their obligations, but sometimes that breaks down and we have to resort to collecting,”  Manatt Phelps general counsel Monte Lemann tells the L.A. Daily Journal.

Although the firm’s rate of pursing collections isn’t dramatically greater because of the recession, the firm is “more carefully” monitoring outstanding bills, he says.

According to lawyers and legal industry observers quoted in the article, law firms may have ignored clients’ past due bills (especially for smaller figures) during flush times but the recession has brought more attention to the issue as firms watch profits drop off.

In the article, legal industry observers also point out that some law firms have increased the frequency they send out bills to avoid past due situations or to target problematic clients early on. Another indication of new realities is that law firms are asking some vendors to send bills directly to their clients to avoid getting stuck with expenses that are reimbursed slowly or not reimbursed at all.

Of course, as the article highlights, when a law firm files a lawsuit against a former client seeking to collect on a past due bill, the response is usually not a check in the mail but a malpractice counterclaim.

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