Collecting Legal Fees In the Age of COVID-19
Kristin Pawlik’s northwest Arkansas law firm realized early that the COVID-19 pandemic would require special consideration for how it and other law firms do business, she said.
A partner in Miller Butler Schneider Pawlik & Rozzell, which has offices in downtown Rogers and Fayetteville, Pawlik said the leadership of the 11-attorney firm met in March to discuss what the pandemic would mean. For the lawyers of the firm, that went beyond making sure their receptionist had a protective mask or that the offices were sanitized daily or legal documents were quarantined before being handled.
The attorneys at Miller Butler had to decide how to go about collecting fees for their work. There were outstanding bills from existing clients as well as new clients who would be expected to pay up-front retainers or flat fees for services.
Many of the clients were in new financial straits as the pandemic caused business upheaval and a sharp rise in unemployment in the state, as well as nationwide.
“We got together and started talking about that. We knew there were going to be people struggling, which means they are struggling to hire us,” Pawlik said. “Our current clients might have had a stream of income and suddenly lost that. While it varies from lawyer to lawyer and from law firm to law firm, what we decided to do is try to extend as much grace as we could. If the clients are able to make an effort to pay on their bill, then we are going to keep that relationship.”
Pawlik said, as an example, that if one of her clients of 10 years suddenly was furloughed because of the pandemic and couldn’t keep up with payments on her bill, then Pawlik wasn’t going to just drop her. She said there is some autonomy with each lawyer at the firm, allowing them to make adjustments according to the client relationship.
“We agreed that these are special times and we are going to do what we can to make sure our clients can still afford us and get the help they need,” Pawlik said. “Individually, each of us makes decisions. If I have a client for 10 years, I’m not going to drop her. She and I can trust each other to meet our obligations to each other.”
Different Schedules
It would be a mistake to place all attorney fees and their collection into one general category. There are different fields of practice, different tiers of clients and varying payment schedules depending on the services and law firm.
For instance, Pawlik practices criminal, domestic and employment law. Meredith Lowry, a partner with Wright Lindsey Jennings in Rogers does intellectual property law, and Lauren Hoover of LaCerra Dickson Hoover & Rogers in Little Rock focuses on family law issues such as divorce and child custody.
One of the steps that Wright Lindsey Jennings has taken is to give webinar presentations to help their clients navigate the pandemic world and survive it financially. Its clients may not be paycheck-to-paycheck hourly workers, but that doesn’t mean the pandemic hasn’t caused turmoil.
“It has been a big thing trying to educate our clients,” Lowry said. “We have spent a lot of non-billable time doing webinars just to talk about PPP and get information out. We have all of our financial aid information. How do businesses get the money they need to survive? We want our businesses to stay in business.”
At Hoover’s firm, clients pay an upfront retainer, but Hoover said the amount has been tweaked since the pandemic has caused furloughs and layoffs.
“We require retainers in order to file your divorce case, to do your child support modification, and we require those retainers to be paid up front,” Hoover said. “Having been through the recession in 2008, a retainer is probably the most important part of our business lives for our law firm. There may not be any additional funds after that retainer is paid. That’s important for any law firm that does this type of work.”
That said, there is flexibility. Hoover said she has a client who works in theater production who contacted her to say he wouldn’t be able to make payments for a while.
“There aren’t any plays being produced,” Hoover said. “He owes me a nominal amount, but it’s $300 I want to collect. My response was no problem. I get it.
“On a law firm side you want to be proactive with your clients that are not making payments and find out what is going on. We don’t live in a bubble either. Our business has been affected by COVID as well.”
Child Support
Pawlik and Hoover said the pandemic has actually delayed some potential divorce filings, not because the couple has decided they’re still bound together after being quarantined, but because of the financial strain of a filing.
“That’s OK because Arkansas could use a break in their divorce rate,” Pawlik said.
There is also the matter of a rise in domestic abuse because people are spending more time at home. Hoover said even when courts across the state closed for health reasons, there were exceptions for emergency domestic violence filings.
Those filings, Hoover stressed, are free by law. Anyone can seek relief by filling out a form at a court office, and usually a clerk can assist, although they are prevented from providing legal advice.
Kendall Lewellen, an attorney with the pro-bono Center for Arkansas Legal Services in Fort Smith, said the center has seven offices across the state and can refer clients in need to other pro-bono attorneys.
“During COVID, our program has seen a large increase in eviction cases and also a lot of domestic abuse cases,” Lewellen said. “There is a link that has been studied between unemployment and domestic abuse. Domestic abuse generally spikes as unemployment does.”
Hoover said child support payments have also been affected by the pandemic. Child support payments are based on the income of the payer, and someone whose income has been cut will have a bigger problem paying the court-ordered amount or affording an attorney to help get it reduced.
“Early in COVID, I had several folks who had financial obligations that were based on income they were no longer receiving, so we prophylactically filed a motion to reduce their child support, not knowing how long their income might be reduced,” Hoover said. “The courts are going to have to catch up with those filings. Any order from the court, whenever it is heard, will be retroactive from the time they filed the motion.
“You still have an obligation to pay child support and support your child. You have to make a good faith effort. If you say you got laid off but you’re still paying $400 a month for DirecTV and the NFL Ticket instead of paying child support, the court can hold you in contempt for that.”
“On a law firm side you want to be proactive with your clients that are not making payments and find out what is going on. We don’t live in a bubble either. Our business has been affected by COVID as well.”
LAUREN HOOVER – LaCerra Dickson Hoover & Rogers
Criminal Law
While Hoover’s law firm uses a retainer-based fee schedule, Pawlik and the other attorneys who handle criminal cases charge a flat fee.
A retainer account gives the lawyer a fund to pay for his or her services; when it gets low, it is replenished with another deposit. With a flat fee, the attorney takes the total payment up front.
Pawlik said that when she handles a felony drug case she charges $7,500, a significant amount for most people. Her firm has two primary criminal law practitioners and two more, including herself, who handle additional cases.
The cases against defendants run the gamut from federal charges to misdemeanor charges.
“The criminal law sector is going to be affected a lot because to hire a criminal lawyer, a client has to come up with a pretty hefty fee at the outset,” Pawlik said.
The luxury of a multi-attorney firm, Pawlik said, is that the multiple sources of income from attorneys working a variety of cases help bridge some of the financial gaps that may arise because of the pandemic.
“We have different receipts at different times,” Pawlik said. “We all work together as a firm to keep the firm running.”
Check out this featured article in the Arkansas Business Spotlight: https://www.arkansasbusiness.com/article/131600/collecting-legal-fees-in-the-age-of-covid-19
