Missing Clause Costs Firm $35M
This is all happening because I didn’t write, “I’ll charge you 1.5 percent” – John O’Quinn
What’s the value of a clause? About $35 million if your name is John O’Quinn. His firm failed to include a clause authorizing the deduction of “general expenses” from settlement payouts in a breast implant class action. And this month, an aribtration panel ordered the firm to pay $35.7M in damages to the clients who were overcharged. Expensive mistake.
Surprising mistake, too. If there’s one thing you’d think law firms are good at it would be drafting a tight costs agreement with their clients. But unlike most other agreements a firm drafts, costs agreements are unbillable. The time you spend drafting one is time down the drain. So the incentive is to get it done fast, and get onto to real work that makes the firm money.
Which is what makes costs agreements and engagement letters such perfect candidates for automation. You build in all the right clauses for the matter at hand. You make it easy to draft an agreement that’s relevant and tight. And your lawyers can get the job done quickly and without mistakes.
Of course, there is one thing worse than a bad costs agreement: no agreement at all. That’s a mistake Glenn Judge won’t make again. The Pennsylvania lawyer claimed a deal for $175,000 worth of fees for referring a client to another firm. But it wasn’t in writing, and it wasn’t disclosed to the client, and the U.S. District Court decided he wasn’t entitled to a penny.