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The Minimalist Guide to Avoiding Client Refund Requests

The Minimalist Guide to Avoiding Client Refund Requests

client refund requestsIt happens to all attorneys sooner or later. You work really hard for a client, do great legal work, get them a great result, and then the client writes you a glowing review on Avvo… Right?


Actually, you do work hard for this client. You do some great legal work for them, answer all their questions, keep them updated on the status of their case, etc. Then, instead of writing you a glowing review on Avvo they ask you for a refund.

Say what?

It doesn’t happen often, but when it does it can be one of the most miserable feelings in the world for an attorney.

What causes refund requests?

Requests for refunds happen in several situations. Most notably, they occur when a flat fee is involved. I have no scientific research to back up this assertion, but this could be one of the reasons that many attorneys do not like flat fees. I know that it is one of the reasons I do not like them. Once I have earned a fee, we use that fee to pay office expenses, payroll, etc. If someone asks for a refund, that is coming directly out of my pocket. My experience has been that when you send someone an invoice showing all the work that was done on their file with an itemized statement of charges and time spent, the client is much less likely to seek a huge discount, which is essentially what a refund is.

But here are a couple of other reasons why a client may seek a refund:

  1. Mind Changers.  They changed their mind about hiring you very soon after they paid you. If a client comes in and hires us, but then a week or two later changes their mind and not much work has been done on their file – I will typically give a refund, deducting an appropriate amount for time that the firm has spent on their case. In those situations, it is fairly easy to recalculate the time spent on the file since everything is new.
  2. Lack of Understanding.  The client doesn’t fully understand the flat fee. Some clients are just not sophisticated enough to understand a flat fee. They don’t understand the potential liability that a law firm undertakes when it accepts representation. They believe that the fee should be based solely on how much time you actually spend on the case, and if they perceive that you only spent a couple of hours on something that required a several thousand dollar fee, then they may request a refund.
  3. Don’t appreciate your work.  The client doesn’t appreciate the value of the flat fee or the work you do for them as their attorney. For the client, they are receiving legal representation for a pre-determined fee. The client may not fully understand what this means. They do not understand everything that goes on in a law practice behind the scenes. They don’t understand that if you have a hearing on a case, the lawyer will most likely spend a full day or two of non-billable time preparing for that hearing. They don’t see these things, they only see the email you send or the time you spend on the phone or in person meeting with the client. By failing to understand the actual time you spend on their case, they may request a fee.

What to do if a client asks for a refund?

At my firm, most of our cases are handled on an hourly basis. However, there are some cases that are uncontested that I will charge a flat fee for. In addition, if there is a client that I really want to help, but I know they can’t afford the hourly billing law firm machine, then I will charge them a flat fee.

If you have a client that requests a refund, the first thing you must do is determine whether the fee was reasonable under the circumstances and make sure that you have complied with all professional conduct rules in your jurisdiction. Assuming that the fee was reasonable, then what?

The first thing I do is undertake a complete review of the file, starting at the date the client first retained my firm. This is likely to take several hours, if done properly. I’m not attempting to recreate a bunch of time entries, but rather just look at what activity happened on the file. Here are some of the things I look for:

  1. The date of hire. How long have I represented this client, and what were the total fees collected to date?
  2. Emails. I will run a search in Gmail of the client’s email address and look for all emails to or from the client, emails to or from opposing counsel, and emails to or from anyone else affiliated with the matter. This will give me a sum total of emails sent or received on this clients behalf. Dividing this number by the number of days/weeks/months that I have represented the client will give me an average number of emails per day/week/month.  This will give a pretty good overview of how much activity occurred on the file.
  3. Phone correspondence. I use a phone system called Vocalocity that allows me to create reports showing calls over a given time period. I can take that report and break it down into a smaller report showing only a given number. This will tell me how many times the client called our office and how often we called them.
  4. Meetings and teleconferences. I use MyCase for my case management system. I do not accept inbound unscheduled phone calls from any clients. This is a perfect reason why. Those phone calls get lost. By scheduling the phone call, there is a record on the case calendar of each meeting and phone call I had with the client.
  5. Client notes. MyCase also allows you to take notes, which I do for every meeting and phone call. I review these to get a quick summary of what happened with the case over time.
  6. Previous discounts. It is possible that I previously gave the client a discount, off of a previous flat fee. Maybe the client has not fully paid the flat fees they were supposed to.  This will certainly play into my decision as to whether to give a refund.

Once I have reviewed the file in total, I attempt to recalculate how much time was spent on the file using the information I have collected. In most cases, the time spent far exceeds the money paid for the flat fee. (This is especially common with people who request a refund. For whatever reason, people who request a refund are demanding, irrational clients and do not understand that they take up a disproportionate amount of your time to begin with. The best clients never ask for a refund and take up very little of your time.)

I will then prepare a letter to the client detailing my findings. If a refund is warranted, I will tell the client that I will send them a check within 30 days. (Remember, when you take a flat fee, that money is typically used to pay office expenses immediately, so it may not be immediately available for a refund.) If no refund is warranted, I will tell the client as much, include a copy of their employment contract, and direct them to the appropriate fee dispute office with the state bar.

Regardless of the decision I make (to refund or not to refund), the next step I take is to withdraw from the case – especially if the refund request is from a problem client.

How to avoid a refund request

I alluded to this earlier, but it bears repeating.  The best way to avoid a refund request is to be very careful in your client selection. Allowing your firm to retain C and D level clients will only cause you headaches and cost you time and money in the long run. These clients are typically unappreciative of your services, late paying their bills (if they pay at all), and non-compliant with both your firm policies and your requests for information from them.  In other words, they are a complete pain in the ass and make it very difficult for you to properly represent them.  (This assumes, of course, that you are actually doing the job you were hired to do.  If you take someones money, do no work on their file, and then receive a refund request or complaint, the only one you have to thank for that is you – and you should promptly return those funds.)  

Have an experience that you would like to share about a problem client?  Feel free to comment below.

Image courtesy of Natara / FreeDigitalPhotos.net

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