Font Size: 
To Get What They're Owed, Law Firms Are Taking Delinquent Clients to Court
The Legal Intelligencer
October 06, 2009
There's no denying collections have been a challenging, sometimes uncomfortable, situation throughout the recession as clients are finding it more difficult to pay and law firms are all the more eager to get the money they are owed into their coffers.
With varying motivations and frequency, some firms have said, "enough is enough," and have taken their delinquent clients to court in hopes of forcing payment.
As Wolf Block's operations wind to a close, the firm is looking to collect some of the money it is owed. The firm, through attorney Michael D. LiPuma, filed four suits in Philadelphia Common Pleas Court in September seeking a total of $1,344,243 from four former clients.
Two of the clients are businesses and two are individuals. The complaints are nearly identical to one another with the exception of the defendant and the dollar amount, which ranges from $12,575 to $1.2 million.
While Wolf Block is no longer a going concern and has little to lose in terms of suing its clients, other firms are reluctant to do so.
Cherry Hill, N.J.-based consultant Joel Rose said an active firm would most likely only sue clients in the most "dire of circumstances" because the fear is that the client would turn around and file a legal malpractice counterclaim and argue it isn't paying because it received bad advice. Firms also aren't eager for the potential publicity, he said.
Firms might sue if they know the client is a "total deadbeat" with little chance of providing future work or payment for past services, he said. But rather than sue clients, Rose said his clients are doing more to tighten up their intake procedures and check the creditworthiness of potential clients.
David I. Grunfeld, of counsel at Astor Weiss Kaplan & Mandel, has been handling collection work for more than 40 years and has represented law firms large and small in this city for about 25 years. Most recently he has filed suits on behalf of Schnader Harrison Segal & Lewis and Fox Rothschild. He said he is seeing somewhat of an uptick in this work during the recession partly because firms are more eager to collect what they're owed, and partly because clients are less willing, or able, to pay.
"Yes, I think there is perhaps a little more now, but I've had a steady stream of it for all these decades and it's probably because some of these larger firms realize it's something worth pursuing," Grunfeld said.
Many of these clients, he said, bounce from firm to firm.
"You're talking about former clients in almost all of these cases, and generally speaking, it's companies that have been former clients for a year or two," Grunfeld said.
Many firms put their own attorneys on the cases so that they don't have to give away a portion of the collection, he said. Obermayer Rebmann Maxwell & Hippel and Stradley Ronon Stevens & Young are two examples of firms that have filed a number of cases on their own behalf since the beginning of 2008, according to The Legal Intelligencer's review of recent case filings in Philadelphia Common Pleas Court.
Grunfeld handles cases both on a contingent basis and on an hourly rate. He also handles the collection process once judgments are entered.
There are certainly firms, Grunfeld said, that have made it a policy never to sue clients because of the fear of a potential retaliatory claim for malpractice. But he said such claims are rare, and when filed, almost never prevail.
Once filed, several claims against former clients end up with default judgments, those under $50,000 get scheduled for arbitration and claims for more than that sum typically get set for trial, he said.
Grunfeld said a great many cases see default judgments entered because clients know they don't have an argument. He said he then works on collections and sometimes the firms have to take a loss. It is very difficult, Grunfeld said, to collect from individuals in Pennsylvania. According to dockets in several of these cases, many are settled or discontinued at the request of the firm.
