by Joel A. Rose

During an informal survey of Managing Partners in smaller, mid-size and larger law firms conducted by myself during client consultations, many of these Partners agreed that their firms’ revenue and profitability would improve if there was in place in their firms a well conceived process for client screening and selection that would be implemented fairly and consistently.

However, practically speaking, several of these Managing Partners acknowledged that the decline in the volume of profitable work from quality business clients, the pressure placed on partners by lawyer managers to attract new business from existing and potential clients and increased competition from other law firms have caused partners in many firms to relax their usual qualitative client selection process and willingness to accept  work assignments from “higher risk” clients under the guise that it is better to be busy working for a questionable client that may produce a fee than to have attorneys who work in certain practice areas to sit at their desks and have less than a full  workload.

It has been my experience that those firms with a high proportion of "higher risk" clients have larger inventories of unbilled time and aged receivables, and more fee disputes as many marginal quality clients seek to reduce or avoid  paying their bills for fees and expenses.

Traditionally, higher risk clients often consume inordinate amounts of attorney and/or non-attorney time that may be much better spent with other, more profitable, clients or developing other types of business from existing and/or potential clients and referral sources.

We have assisted many law firms develop high risk client profiles, and establish due diligence procedures that attorneys must follow before agreeing to represent “high risk” clients who may pose a potential financial problem.

What is a “high risk client”

Managing Partners surveyed for this article defined “high risk" clients as those who are likely to have a greater than average propensity for:

  • Becoming a collection problem;
  • Demanding firm time and attention in amounts far exceeding what is appropriate for the legal matter;
  • Creating conflicts of client and/or business interest;
  • Bringing ethics complaints or asserting malpractice claims against the firm and its attorneys if the latter threaten to sue the client for failure to pay their long-time outstanding bills for fees and/or expenses.

Identifying a Potential High Risk Client

Managing Partners suggested a high risk client may involve one or more of the following:

  • The attorney has a negative "gut" instinct ("I had a bad feeling about that prospective client.");
  • The area of practice involved is outside the firm's expertise;
  • The potential client:
  • Has a history of problems with other firms;
  • Has fired previous attorney(s) because they did not understand him or her, but feels he or she would not have a similar problem with the attorney he or she is speaking with ;
  • Has a litigious or dishonest reputation within the community;
  • Has little or no experience dealing with attorneys in personal or business matters;
  • Does not seem to understand or listen to explanations concerning the costs, timeframes or procedures involved with respect to their legal matter;
  • Demonstrates a negative or dismissive attitude toward quoted attorneys' fees, costs and retainer requirements;
  • Has exhibited belligerence or other unusual or inappropriate attitudes or behaviors;
  • Has demonstrated a negative attitude when requested to pay a retainer before the attorney begins to work on his or her matter; or

Establishing due diligence guidelines

All firms should establish due diligence guidelines and procedures with respect to the acceptance of work from new clients (as well as certain types of work from existing clients.) Asking the right questions and documenting the answers through new business intake forms during the initial meeting with a potential client will enable the attorney to determine whether to accept the representation of a potential client.

Typical questions for prospective clients should include the following:

▸How did the prospective client select the firm?

▸ Was the prospective client referred to the firm through other clients or business contacts or are they contacting the firm "cold?"

▸ Are any attorneys in the firm related to the prospective client or otherwise socially acquainted with them?

▸What is the prospective client’s business and who are their competitors?, i.e., Check web-site, Lexis/Nexis for articles, etc.

▸ Where/how did the prospective client originate, i.e., .a spin-off from another company, new venture, practical experience of the owners of the business, etc.?

▸ How many law firms does the prospective client retain? Are they one-time users of legal services, or do they have on-going legal needs?

▸ What is the financial situation of the prospective client and the owners of the business, including:

  • Client size (annual sales documentation and D&B search if business; net worth if individuals)?
  • What is their outstanding debt load?
  • What are the source(s) of funds to pay for the business operating expenses, including the legal work to be performed?
  • What fee arrangement is being contemplated?
  • What is the client's willingness and  ability to pay a retainer?
  • What is the client's attitude toward "evergreen" retainers?
  • Are there any outstanding judgments against the prospective client, either as a company or as individuals?
  • Have there been any bankruptcy filings made, i.e., lien and judgment searches?
  • What are the prospective client’s legal needs?
  • What is the nature of the work being contemplated and what is the expected duration of the assignment?
  • What is the expected total volume of billings?
  •  What are the expectations of the client regarding the outcome of legal services?
  • How does the prospective client’s legal needs comport with the firm's strategic plan regarding the firm's desired mix of business?
  • What has been the prospective client’s experience with other law firms, i.e., how many law firms do they retain? How do they allocate work among these firms? Has the client ever sued an attorney for malpractice?
  • Has the prospective client used other firms on the matter in question? (Check these references, i.e., if applicable, what are the prospective client's reasons for changing law firms?

Basic Due Diligence

Regardless of the answers to questions provided by the prospective client to the questions set forth above, the firm should perform the following checks:

1. Reference checks, including funding sources;

2.Website review, if prospect has one;

3.Dunn &Bradstreet search and/or review of financials if company;

4.Credit reports run on individuals (with client's permission);

5.Conferences with prior or existing counsel, with prospective client's permission.

If this due diligence uncovers a "high risk" client, then more due diligence is necessary, i.e., Litigation search (home state, at a minimum); Nexis search for articles, news, etc.

Who Should Implement the Review Process?

A partner or committee of partners should be designated to perform the above due diligence function for all new prospective clients.

An objective review removes the temptation to accept undesirable clients, particularly in a difficult economy or if the partner contacted by the prospective client is currently under-utilized.

If a high risk prospective client is identified, the firm's reviewing body must have, and be willing to exercise, the authority to reject new business.

The firm should establish blanket policies that prohibit the representation of certain types of clients or particular kinds of matters. The firm also needs procedures in place that set forth how it will deal with prospective clients that it determines should not be rejected, but closely monitored. Sometimes such prospective clients can be dealt with if the firm implements safeguards, including special retainers, and increased documentation of all work and billings.


Lawyers who fail to initiate some discipline in the types of cases they accept early in their practice are the lawyers who eventually find that they are not managing their law practice - their law practice is managing them.

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