Representing the Dependent Spouse in Tough Economic Times
Ask any Family Law attorney and they will tell you that collecting legal fees is high on the list of the stressors in the practice of Family Law. In the past year, the situation has gotten much worse with home values falling and retirement accounts losing, on average, more than a third of their value.
Even good intake procedures are not the safeguard they once were. A party with a good income today can be unemployed tomorrow, and severance packages are shrinking or becoming nonexistent.
If you are representing the dependant spouse, your risk is even greater, because unless the earning spouse is going to be fair, you are relying on the court or your client's relatives for your retainer and monthly payments.
So how can you protect yourself and your firm? By setting up good intake procedures, monthly receivable management, and obtaining protection from the court in the form of temporary interim and trial fees.
All clients should be interviewed by you, or someone on your staff, before setting an appointment. They need to know your hourly rate and retainer requirements during this initial call, so that if they cannot afford you they can be immediately referred to someone who they can afford. It is not fair to you or the prospective client to spend an hour at an initial consultation, only to discover they can't afford your fees. You should be prepared to ask a prospective client how they are going to pay your fees if it appears that they have neither the income nor assets that would allow them to pay you. Often you will find that a parent or other relative is going to pay the retainer and/or monthly bill. In that case, be sure to have the financially obligated party sign the retainer letter or a separate fee guarantee.
Before you meet with the client, have them fill out a basic intake sheet so that during the initial conference you can understand the asset picture, and can inquire as to how the client is going to pay your retainer and monthly bill. It is important that this be discussed at the initial conference, so both you and the client can make an informed decision on whether they can afford your services. Even if the prospective client has no resources to pay your retainer, but the estate has assets, or the other spouse has sufficient income, you may choose to take the client and hope to secure your fees at a temporary motion or at the end of the proceeding.
Your retainer letter should be specific as to the payment arrangements. If your agreement is a monthly payment, be specific about the amount and the due date. Your agreement should provide for a prehearing retainer, and an expense retainer for trial preparation costs. You should plan for at least 2 days of preparation for every day of trial, and reasonable time to prepare post-trial submissions. Your pretrial retainer should cover that estimated cost.
Finally make sure the retainer letter is signed, returned to your office and kept in a secure location in your office.
Monthly Receivable Management
Every office, no matter how small, should have a monthly receivable report showing a client's previous month's balance, any payments, itemized billing for the month and the balance of the retainer. You should have a specific time set aside every month to review this report, apply retainers to past due balances, send out letters asking for retainers to be replenished and making decisions on whether a client must be let go. This period of time is one of the most important monthly functions in your firm.
It can be done individually by sole practitioners, or in department meetings for larger groups.
One of the hardest decisions is whether to stay in a case where your fees are delinquent in the hope that you will get paid later in the case. If there are assets in the case, staying on board may be your decision, but attempt to secure your fee while the case is pending by the use of an attorney's lien or assignment of assets. However, if there are no assets or other likelihood of getting paid, it is better to withdraw then to continue to represent a client who cannot afford your services. The time you save can be used for marketing your practice and improving your collection procedures.
At your monthly receivable meeting (even if you are only reviewing the receivables yourself), you should send letters to clients who have had their retainers used for monthly fees, send requests to replenish client retainers, ask for pretrial retainers, advise clients that no further work is being done unless their account is brought current, and send withdrawal letters. You can also make decisions on fee collection once you have withdrawn from a case, using either fee arbitration, conciliation court, or a district court proceeding.
Requesting Fees from the Court
When representing the dependent spouse, receivable management and careful screening may not be enough. Often where one spouse has little income or access to assets, an award of attorney's fees may be the only viable method of getting paid.
In seeking attorney's fees, you may attempt to secure your fee all at once at the end of the case, or else collect a portion of your fee at a temporary proceeding and wait until the close of the proceeding to recover the rest of your bill. In the course of a family law action, Minnesota law permits either party to seek an award of temporary costs and reasonable attorney's fees as governed by the factors in Minn. Stat. 518.14. Minn. Stat. 518.131 Subd. 1(d), Subd. 7. Generally, requests for attorney's fees at a temporary hearing may be made in conjunction with other motions for temporary relief-e.g. child support, maintenance and possession of the homestead.
Whenever a request for attorney's fees is made-whether at a temporary hearing or at the close of the proceeding-it must meet the requirements of Minnesota Rule of General Practice 119, requiring that any request for attorney's fees over $1,000 be accompanied by an affidavit of the attorney describing the work performed, the date on which the work was performed, the amount of time spent on each item, the name of the lawyer or legal assistance performing the work, and the hourly rate of each person having worked on the case. Minn. R. Gen. Prac. 119.02. Expenses and disbursements must be similarly listed and detailed. Id. Lastly, the attorney submitting the affidavit of fees must attest that the work "was actually performed for the benefit of the client and was necessary and proper for representation." Id. Rule 119 also advises that the motion should include a memorandum of law "discuss[ing] the basis for recovery of attorney's fees and explains the calculation of the award of fees sought and the appropriateness of that calculation under applicable law." Whenever a motion for attorney's fees is brought-whether at a temporary hearing or at trial-these rules should be closely adhered to in order to improve your chances of recovering fees.
Minnesota law provides that attorney's fees may not be recovered absent specific authority. Geske v. Marcolina, 624 N.W. 2d 813, 818 (Minn. Ct. App. 2001). In family law cases, there are generally two types of attorney's fees that can be sought either at a temporary hearing or at the close of the proceeding: need-based fees and conduct-based fees. Both types of awards are governed by Minn. Stat. 518.14. When representing a dependent spouse, an argument for need-based fees will likely be central to recovery. However, conduct-based fees may also provide grounds for recovering fees. Be warned, however, that the dependent spouse's conduct may also potentially limit the amount of fees your client is entitled to recover.
Minnesota statute mandates an award of attorney's fees sufficient to allow a party to carry on a proceeding where: 1) the fees are necessary for the good faith assertion of the party's rights and will not contribute unnecessarily to the length and expense of litigation, 2) the party from whom fees are sought has the ability to pay, 3) the party seeking fees does not have the ability to pay. Minn Stat. 518.14 Subd. 1. Central to any award of need-based attorney's fees is the relative financial situation of the parties-the need of one party balanced against the other's ability to pay. Meyers v. Meyers, 409 N.W. 2d 532, 535 (Minn. Ct. App. 1987).
In regards to the first criterion-that the fees be necessary to a good faith assertion of the party's rights-of central importance is that the party seeking fees not appear to be abusing the legal system or, to quote the statute, "unnecessarily contributing to the length and the expense of the proceeding." Minn. Stat. 518.14 Subd. 1(1). Thus even where need and an ability to pay is shown, a court may deny fees where all or part of a party's attorney's fees are the result of unnecessary litigation or litigation undertaken in bad faith. Peterka v. Peterka, 675 N.W. 2d 353, 360 (Minn. Ct. App. 2004). However, the requirement that the fees be necessary for a good-faith assertion of the party's rights does not require that that the party is likely to succeed.
In addition, an award of need-based attorney's fees requires a finding that the other party has the ability to pay the fees requested. If you are the attorney representing the dependent spouse, it will be necessary to present evidence as to the other party's ability to pay. See In re Marriage of Sammons, 642 N.W. 2d 450, 458 (Minn. Ct. App. 2002) (denying an award of need-based attorney's fees on appeal where party requesting fees did not supply documentation sufficient to support her claim that the other party had the ability to pay).
Lastly, an award of need-based attorney's fees requires that the party seeking fees lack the means to pay their own attorney's fees. In determining whether a dependent spouse has the ability to pay their own fees, Courts have determined that a party should not be forced to dispose of a substantial portion of their property award or liquidate capital assets in order to pay attorney's fees. Karg v. Karg, 418 N.W. 2d 198, 202 (Minn. Ct. App. 1998), Beck v. Kaplan, 566 N.W. 2d 723 (Minn. 1997). However, even a significant award of assets to one party may not preclude an award of need-based attorney's fees where there is a significant disparity between the parties' finances. Flynn v. Flynn, 402 N.W. 2d 111 (Minn. Ct. App. 1987); Campion v. Campion, 385 N.W. 2d 1 (Minn. Ct. App. 1986); 566 NW 2d 723; Marx v. Marx, 409 N.W. 2d 526 (Minn. Ct. App. 1987); Novak v. Novak, 406 N.W. 2d 64 (Minn. Ct. App. 1987); Gillis v. Gillis, 400 N.W. 2d 775 (Minn. Ct. App. 1987). Indeed, where a severe income disparity exists, it may be error for a court to fail to award attorney's fees. See Petschel v. Petschel, 406 N.W. 2d 604 (Minn. Ct. App. 1987); Nash v. Nash, 388 N.W. 2d 777 (Minn. Ct. App. 1987); Cummings v. Cummings, 376 N.W. 2d 726 (Minn. Ct. App. 1985).
While still relevant, income disparity may no longer be as compelling as it once was. Although income disparity has been listed as one factor among others to be considered when determining one party's need and the other party's ability to pay (see Beck v. Kaplan), almost all Minnesota case law addressing need-based attorney's fees and income disparity predates the current version of 518.14 with its three part "good-faith-assertion-of-rights/need-for-fees/ability-to-pay-fees analysis" and the Court of Appeals has noted that cases decided solely on the grounds of income disparity may no longer be good law. See Geske, 624 N.W. 2d 813, 817 FN1. Any application for fees should be sure to address itself to the current three part test in Minn. Stat. § 518.14 rather than merely focusing on the presence of a disparity.
You may also attempt to recover conduct-based fees by showing that the other party has unreasonably contributed to the length and expense of the proceeding. Where the other party has engaged in tactics that have prolonged litigation, it is possible to recover fees even when there is no evidence of bad faith. See Geske, 624 N.W. 2d at 818. Indeed, the only other prerequisite to recovering conduct-based attorney's fees is that the behavior occurred within the context of litigation. Kronick v Kronick, 482 N.W. 2d 533 (Minn. Ct. App. 1992).
Conduct-based fees can, however, be a double-edged sword. While they may be one way of collecting fees when other avenues are not available, conduct-based fees are equally available to both parties, and may be awarded regardless of financial need. Dabrowski v. Dabrowski, 477 N.W. 2d 761 (Minn. Ct. App. 1991). [It is worth noting, however, that the Court of Appeals has made at least two overtures suggesting that it would be willing to make an award of conduct-based fees contingent on meeting the requirements for need-based fees in which case only parties entitled to recover fees on the basis of need could make conduct-based claims as well. See Geske at FN 5 and Mize v. Mize, 621 N.W. 2d 804, 807 (Minn. Ct. App. 2001). Although the law currently allows either party to recover conduct-based fees, there are certainly suggestions that this could change.]
ABOUT THE AUTHOR: Kathy Newman
Focusing her practice on clients whose business and financial interests require sophisticated counsel for discovery, negotiations and potential court representation, Kathleen is adept at legal strategies that keep your case moving forward toward a reasonable and appropriate conclusion. Until then, she will assertively pursue your interests even for issues that evolve after your divorce. Her experience includes business and asset valuation issues, custody, prenuptial agreements and maintenance disputes, and hidden or non-marital property matters.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.