Client Hijacked to Pay Legal Fees

Article written by John W. Toothman, commenting on a story published by tabloid, "Texas Lawyer", regarding Jeff's case. Mr. Toothman is a lawyer and co-author of "Legal Fees: Law & Management" and is also the author of

Normally a client may hire and fire lawyers at will, subject only to the lawyer agreeing to be retained. If there’s a dispute over the fees, it gets resolved in the normal course in a court proceeding or perhaps by a special fee arbitration proceeding. But the claims of lawyers for payment of their fees are not special, although in bankruptcy, for example, certain claims do have priority otherwise no one would take on bankruptcy cases. Lawyers should know how to screen their potential clients and take steps to make sure they get paid — it’s hard to feel sorry for the lawyer who complains later that the client didn’t pay him.

Once you take the job, however, you’re in until you follow the rules to get out. Unless the client fires you, if you’re involved in litigation you have to get permission from the court and satisfy one of several grounds for withdrawal — not getting paid is a ground, but some judges won’t let you out right away. With administrative exceptions for things like liens, whether a lawyer is getting paid for his services in a case is not generally part of that case and of no concern to the court hearing that case.

Here’s a story from Texas in which a federal judge, with second tier responsibility for monitoring a bankruptcy case being handled by a bankruptcy judge, has decided that the principal of a company in bankruptcy is so “vexatious” that the judge has spontaneously appointed a receiver to take control of the principal’s business, including control of the company in bankruptcy. (A receivership basically puts a court-appointed or controlled individual in place of the person or company under the court’s jurisdiction. It’s an extreme remedy, though popular with banks or other lenders and the lawyer-friends of judges who usually get the lucrative gig as receiver.)

Being labeled vexatious is one of those “eye of the beholder” and virtually meaningless labels that usually just means you’ve annoyed your judge or one of his friends. The facts in the story don’t back that up — you should see how many law firms the typical insurance company goes through.

The story must be missing lots of facts because this is such an unusual and extreme array of relief against a business person who’s primary fault seems to be that he hires lots of lawyers, pays them well up front, then fires them and hires another lawyer — leaving most of the ex-lawyers claiming they haven’t been paid in full. How stupid are these lawyers that they keep signing up, given the fate of their predecessors?

But that’s the sort of thing that the legal system should handle in the normal course. The bankruptcy process has plenty of tools for dealing with retaining lawyers and paying them. It doesn’t look good when a judge is inventing shortcuts or extraordinary means for lawyers to get paid at the expense of the client’s normal rights. (Even with this stripped down, lawyer-centric system, the court cut over a third of the fees, but the client is undoubtedly also being saddled with the cost of the receiver — another lawyer the court stuck on his tab.)

About John W. Toothman

John Toothman founded The Devil's Advocate, the legal fee management and litigation consulting firm, in 1993. He graduated from Harvard Law School, with honors, in 1981. He is the author of several books and dozens of articles about lawyers, law firms, legal fees, ethics, litigation and trial practice, and related issues. John won the ABA's Ross Essay Award. Before founding DA, John was a lawyer with large and small law firms and the US Dept. of Justice. He's tried over sixty cases. He has testified as an expert witness in over sixty more. His pro bono activities include teaching and speaking at seminars. John is admitted to practice law in DC and Virginia.


Apparently relying solely on an article published by Texas Lawyer, John Toothman, who has an extensive background as an attorney, displays incredible insight in discarding the false information contained in the Texas Lawyer article and understanding the real issue. If he had the benefit of knowing the facts of the case, the author's article would likely be even more critical.

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