Jason Huf, a transactional attorney with a specialty in Middle East law and client in Law Firm Suites’ NYC shared office space, offers his secrets to structuring billing arrangements that even the stingiest clients will pay.
A colleague in my NYC shared office space and fellow transactional practitioner, Stephen Furnari, was bold enough to initiate a public discussion on why attorneys should take action, after exhausting remedial measures, when clients refuse to pay legal bills for spurious reasons.
I could not agree more, and further assert that both the clients and their professional representatives are better off when, from the very beginning, the structure of the engagement mitigates the possibility of billing disputes down the road.
Like Steve, I have a transactional practice. My practice does differ in that I have a particular specialty in Gulf Cooperation Council jurisdictions (and, all of the challenges that come with doing business in those legal systems).
Over the years, I have developed a reticence to taking on local clients, particularly in Saudi Arabia: It would conflict me out of potentially representing Western companies doing business there. And, just as fundamentally, far too many Saudi businessmen simply don’t pay their bills. To make matters worse, mechanisms for collection under Saudi law are relatively inadequate.
My billable hour has zero’s at the end, not in the beginning . . .
It continues to amaze me that some clients are surprised to learn that I did not work nights to pay my way through school, earn two degrees over seven years, pass bar exams in three states, and decide – over twelve (12) years ago to begin my career at an office located in a dangerous place (during a very dangerous time) — for the thrilling possibility of someday working for free.
I am a dedicated, responsible, ethical and (dare I say) very good transactional attorney, and one with rather uncommon specializations. Like everyone else on planet earth, I expect to be paid for my work.
That said, clients have to be reasonably certain that they are receiving value for their money. If my colleagues think our reputation as a profession in the US is unfair, try practicing in countries where the legal system is only, say, fifty (50) years old.
The law is still somewhat undeveloped in the Middle East and this leads to an erroneous lack of appreciation for what we transactional lawyers do for our clients. When people have trouble seeing the necessity of your work, it can be even more troublesome to get them to pay you for it.
Collections issues aside, when clients feel they haven’t received value for their money, it adds to the profession’s (sometimes) unfair impression, especially in developing jurisdictions. I am particularly sensitive to that.
So, on one occasion when I was successfully talked into making a presentation to a potential local client in the Kingdom of Saudi Arabia, my thoughts during the trip revolved around two obvious questions:
1. If this company retains my services, how do I best ensure the client remains aware of the value of our work? And,
2. How the heck are we going to get paid for this???
The answers to both questions rested, it seemed to me, on the structure of the engagement. The terms and conditions under which the work was performed would be vital to the long-term success of the relationship.
By the time of the presentation, I did not have a detailed formula set in concrete. I felt it wise to know more about the potential client’s needs and expectations before gluing myself to a detailed structure of pricing.
After the presentation itself, the final particular (it always comes last) was raised by an executive for the potential client. How much would my services cost? What are my rates?
The executives expressed their desire to “establish a long-term relationship” with me (meaning, they don’t want to pay me – that I should work in exchange for the possibility of being assigned more work in the future). This is a common starting point for fee negotiation in the KSA, and what we contracts lawyers call an “illusory promise”.
I must have shot them an unhappy look at that point, because they quickly asked if I would do all the work for a “flat fee”.
Flat fee work did not really “work” in the KSA.
I had performed flat fee work as a young associate in Jeddah, and it never worked. Local clients, especially, love to take advantage of it. After you’ve performed a certain amount of work, you’re effectively working for free (well, the firm I worked for at the time wasn’t getting paid for the work anymore). Then, your phone never stops ringing.
The mere sound of the client’s voice becomes an audio window into hell itself – some of them can be really obnoxious about it.
I immediately said, “No”. However, I had previously invested some thought into how to craft a billing arrangement along these lines. Instead, I recommended what I have since taken to calling my “Menu System.”
What is the “Menu System” method of billing?
Once I have an understanding of the client’s needs, as I did by that point in the discussion, I know the various action items that are likely to be performed during the lifetime of the client’s particular project.
Being somewhat experienced, I have a general idea of how much each item typically costs in attorney time. And, because the work is steady, I am happy to reasonably discount the cost of each action item.
I provide the client with an overview of the items I think will be necessary (and, why), with a cost for each item. Fees must be paid before the work on any item commences.
If the client refuses to have certain items performed against my best advice, that’s the client’s call. And, there are certain items that can be farmed out to local counsel at a lesser cost, if the client wishes.
This enables a business client to reliably budget, while ensuring the attorney is paid for his work.
Also, I can’t simply “take the money and run” without facing consequences at home (not to mention guaranteeing I’m forever out of business in the KSA and, likely, throughout the whole of the GCC region).
By the by, if you’ve ever had an attorney who was willing to pull off such a clumsy, risky and just plain dumb rip-off, then you probably should’ve ignored that billboard that said “Better call SAUL!”, instead of calling Saul…
Now, some matters are time sensitive and simply cannot wait the month or two it sometimes takes for a Saudi businessman to develop the muscle required to lift his pen and write a check. If a lawyer does the needful, and then is not compensated for that item, then he can end the relationship without having wasted too much of his valuable time. Conversely, if the client feels it is not receiving value for money, it can suspend the work and find another attorney (or, not) without getting in too deep.
Long story short, the potential client never executed the engagement letter. My best guess is they probably took the overview of the company’s legal needs to a local attorney, told him to perform certain items and, if the work was good, they would “establish a long-term relationship”… ).
But, the trip was not an entire waste. When I returned to my NYC shared office space, it inspired me to craft several billing structures that clients have found attractive, including a “monthly flat fee”; the aforementioned “menu system” and a “part-time in-house counsel”; arrangements that I promise to share with you in the second half of this article.
Jason Huf is a New York-based transactional business attorney with law offices in NYC and Jeddah, KSA. Through his firm, Jason Huf International, pc, Mr. Huf focuses on commercial, corporate, banking and energy law, with years of experience working in Middle Eastern legal systems. He also has interests in alternative education solutions, contractual matters for certain classes of individuals and trusts and estates law. For more about Mr. Huf and his practice, please visit www.huflaw.com.
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photo credit: Erik Daugaard Photography – Copenhagen via photopin cc
