A California personal injury attorney was sentenced to 12 years in prison for stealing roughly $5.5 million in settlement money from clients before fleeing to Costa Rica.
The evidence presented during the trial showed that the Coto de Caza-based attorney, Philip James Layfield, repeatedly stole money that should have been paid to his clients who suffered horrible personal injuries. His clients then had to hire other attorneys to try to recover the money from Layfield, only to learn that the money had been spent.
Although this extreme level of unethical behavior is rare, billing disputes are unfortunately relatively common.
How lawyers bill for their services
The most common type of fee arrangement in a personal injury case is a contingent fee arrangement.
In a contingent fee arrangement, your lawyer agrees to accept a fixed percentage (usually 33 to 40 percent) of the amount you recover. If you don’t recover any money, you don’t owe your lawyer anything for the work they performed on your case (although some attorneys may charge nominal fees).
The second most common type of fee arrangement in a personal injury case is an hourly rate arrangement.
In an hourly rate arrangement, your lawyer charges a per-hour rate and tracks their time in fractions of an hour (typically one-tenth-hour increments). A billing statement documenting the work completed by the lawyer and the time it took to complete the work is sent to you at the end of every month to be paid.
Regardless of the type of fee arrangement agreed upon, money that belongs to the client (advanced fee payments, settlement payments, etc.) must be placed in a client trust account. Lawyers are required to refrain from commingling personal funds with client funds to reduce the risk of misusing the funds.
Sample billing statement
Final statement for all services rendered in March in the matter of John Smith v. Bill’s Bowling Alley at the rate of $200 per hour.
Initial meeting with client.
Review of client medical records.
Telephone call with client to discuss medical records.
Legal research regarding premises liability issue.
Draft demand letter and attach exhibits.
Settlement discussions with opposing counsel.
Telephone call with client to discuss counteroffer.
Draft complaint and summons.
Total time spent on matter from 3/1/22 to 3/31/22
0.5 hours (no charge)
10.6 hours ($2,120)
Common examples of unethical billing
Unfortunately, as the case of Philip James Layfield illustrates, unethical billing practices do happen. Let’s look at some common examples of unethical billing.
All states have statutes preventing attorneys from charging “unreasonable fees.” Although every state is different, most courts consider the following factors when deciding whether a fee is unreasonable:
- The time and labor required
- The novelty and difficulty of the questions involved
- The fee customarily charged in the locality for similar legal services
- The amount involved and the results obtained
- The time limitations imposed by the client or by the circumstances
- The nature and length of the professional relationship with the client
- The experience, reputation and ability of the lawyer
- Whether the fee is fixed or contingent
If a fee is deemed “unreasonable,” the court may sanction the attorney and require the attorney to reimburse the client.
The most common example of double billing occurs when a lawyer performs work that applies to more than 1 client and then bills both clients for the work performed.
Consider the following example:
Attorney Smith receives a call from Client A with a legal question. Client A got into an accident after running a stop sign that was obscured by an overgrown dogwood tree on a homeowner’s property. Client A wants to know whether he can hold the town or the homeowner liable.
Attorney Smith conducts 1 hour of legal research and tells Client A the answer. He then sends Client A a bill for 1 hour of legal research at $200.
Two days later, Client B leaves a telephone message with Attorney Smith after getting into an accident at the exact same stop sign. Client B wants to know whether he can sue the town or the homeowner.
Attorney Smith returns Client B’s telephone call and provides the answer based on his previous research. Attorney Smith then sends Client B a bill for 1 hour of legal research at $200.
The hypothetical above is an example of double billing. Attorney Smith cannot bill both clients for 1 hour of legal research. To avoid double billing, Attorney Smith should instead bill both clients for 0.5 hours of research.
What’s more, if an attorney decides to catch up on Client B’s work while traveling for Client A, it’s considered unethical to bill both clients, as this is another (albeit less egregious) example of double billing.
The term “bill padding” refers to an instance in which an attorney bills for work that was simply not done. For example, if it takes an attorney 3.7 hours to “draft a motion for summary judgment,” but the attorney bills the client for 4 hours, the attorney is padding the bill.
Sometimes bill padding is a blatant attempt to rip off a client, but other times bill padding is an attempt to make up for non-billable time (time spent doing administrative work or other similar tasks that lawyers typically don’t bill for). Either way, bill padding is illegal.
It’s considered unethical to have someone with a high hourly rate perform a trivial task. For example, a lawyer shouldn’t deliver a document to the post office themselves (at a cost of $200 per hour) if they could easily have a secretary or paralegal deliver the document (at a cost of $50 per hour).
How do I know if an attorney is taking advantage of me?
The most important thing you can do to avoid being the victim of unethical billing is to review the billing statements you receive and ask for clarification when necessary. When reviewing billing statements, keep an eye out for the following red flags:
- Block billing (where an attorney bills for a number of separate services without specifying the time devoted to each service). Block billing is a common way to hide bill padding.
- Repeated entries that are for the same amount of time (e.g., “research 2 hours” appears several times on the billing statement).
- Billing for “review of file” when nothing is happening in the case.
- Billing you know is incorrect because you were there. For example, billing for a 15-minute telephone call with the client when you know the call lasted 5 minutes.
- Being billed for office overhead (utilities, secretarial services, etc.).
What should I do if I think my lawyer is taking advantage of me?
If you spot any red flags or otherwise have concerns that your lawyer has engaged in unethical or illegal billing, the 1st step is to have an honest conversation with your attorney. You may be mistaken, or your attorney may have made an honest mistake. Sometimes a simple, respectful conversation is all it takes to get things back on track.
If you’re still unable to resolve a billing dispute after a conversation, it’s time to reach out to another party for help. Here are a couple of places to look:
- Your state bar association. Most state bar associations have an attorney fee dispute service. In most cases, the state bar will help you resolve your problem through a low-cost arbitration process.
- Other counsel. You may need to reach out to another attorney for help recovering the money you’re owed. The attorney may be able to negotiate a settlement, or you may end up having to sue your former lawyer.