Payment of Consultants
From time to time, consultants encounter a client who refuses to pay their bill. The excuses run from, "Our client has only authorized such and such amount," to, "We lost, so you will have to take less." I have even heard of a case where the client said, "we won, but we are only going to pay you three quarters of your fee"
We have discussed before the ethics of an expert witness receiving a contingency fee - they can't because then they would have an interest in the outcome of the case. When experts are asked or told to accept less when a case was lost, that is a one way contingent fee. The fee offered them, though not what was agreed to when the expert witness was retained, is founded upon the outcome of the case. If they had won, would the attorney have paid more? Not likely! Nor should the expert expect more. So why should an expert witness take less when the case is lost?
But this article concerns who pays when an expert must sue to obtain his fees, rather than how much is paid. A very recent case handed down by the State Court of Appeals in Washington, Copp v Breskin, 56 Wn.App.229 (Dec 89), has directly addressed this issue.
A summary judgment was granted in the Superior Court to an expert attempting to collect his fees from a Seattle law firm which had hired him. The law firm had advised Copp before hiring him that fees "were being paid, and were to be paid" by the client. Copp said he would never have accepted employment if an attorney's obligation were dependent upon reimbursement from a client. He made this policy known.
Copp, a resident of California, was aware of the California custom that absent an agreement to the contrary, a provider of litigation services can expect an attorney to pay the provider's bill. The law defendant firm admitted by way of deposition that such custom exists in King County, Washington, too. However, they averred as an affirmative defense that it had hired Copp as agent of a disclosed principal, their client.
In upholding the lower court, the Court of Appeals in part relied upon a case involving Washington's unique Business and Occupation (B&O) tax, Walthew, Warner, Keefe, Arron, Costello & Thompson v. Department of Revenue, 103 Wn.2nd 183, 190, 691 P.2d 559 (1984). In that case the law firm was attempting to avoid the B&O tax on gross receipts. They stated that in certain transactions they merely acted as a conduit for the fees paid by the principal for whom they were the agent and the payment should not be taxed as part of their gross receipts. Walthew held that reimbursements for litigation costs are per se exempt from B&O tax relying on the Code of Professional Conduct, now the Rules of Professional Conduct, which forbids an attorney from advancing or otherwise paying for the cost of litigation unless the client remains ultimately responsible. Walthew at 188 (discussing CPR DR 5-103, now RCP 1.8(e)).
Washington State Bar Association, Ethics Opinion 140 (1969), states:
When the attorney has directly and personally ordered or arranged for services in circumstances under which . . . the attorney . . . did not make it clear (if such were [the] intent) to the person rendering the services that such a person must look to the client alone for payment, the attorney has been derelict in . . . preserving a good public image of the legal profession. The primary responsibility of making it clear that the attorney acts in an agency capacity with no personal liability rests upon the attorney. If [the attorney] has been derelict herein, others may reasonably be misled into believing that the attorney is agreeing to pay or to guarantee the payment of the obligation so created. In this circumstance it would be the ethical obligation of the attorney to pay such indebtedness and then look to [the] client for reimbursement and assume the risk of nonpayment.
The Court of Appeals stated that the Rules of Professional Conduct prohibit attorneys from using the ignorance of litigation service providers to their financial advantage. Attorneys may not engage in conduct involving dishonesty, fraud, deceit, or misrepresentation. RPC 8.4(c). While the rules of conduct do not "undertake to define standards for civil liabilities", RPC Preliminary Statement, it is often a necessary and logical consequence of upholding them. See, e.g., Walthew, at 188; see also Allard v. First Interstate Bank of Washington, 768 P.2d 998 (1989).
Other jurisdictions are split as to whether an attorney is responsible to an expert in the absence of a disclaimer. See Annot. Attorney's Personal Liability for Expenses Incurred in Relation to Services for Client, 66 A.L.R.4th 256 (1988). Several have held that absent an impliedly or specifically agreement to be bound, the attorney is an agent of a disclosed principal and as such is not liable for payment of fees. For this reason, since experts work in many jurisdictions, if it is their expectation that the attorney who hired them will be responsible for paying their bills, it is prudent to have a written Billing Agreement which so states. While acceptance without objection of a Billing Agreement by the attorney and performance under the terms of that Agreement by the expert are undoubtedly sufficient for implied acceptance of its terms, if both parties signed the agreement, there would be no question as to their intentions.
Conversely, where an attorney does not intend to be the guarantor of payments, he should be specific and advise his expert that he will have to look to the attorney's client for payments. In one case where a MEC Associate agreed to that arrangement, the client went bankrupt and the MEC Associate did not get fully paid.
It is doubtful that many expert witnesses will agree to look to the attorney's client for payment since generally they have not met the attorney's client and know little about his financial stability. But clearly, both parties should agree to their expectations before hand.
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