Ride the Lightning
Cybersecurity and Future of Law Practice Blog
by Sharon D. Nelson Esq., President of Sensei Enterprises, Inc.
Should E-Discovery Vendors Sue Their Deadbeat Clients?
October 24, 2012
You might justifiably wonder what brought that question to mind. I saw a story in yesterday's ABA Journal which highlighted the fact that New York City law firms are aggressively pursuing clients for non-payment, in spite of the fact that 42 to 47 percent of the collection suits result in a malpractice claim. That is one heck of a dice roll.
We do indeed have to file collection suits from time to time. Several of the defendants have ended up in bankruptcy proceedings. For the most part, our defendants tend to be individuals, with the odd small company thrown in.
When e-discovery vendors get together, they talk in hushed tones about filing collection suits. Late-paying and non-paying clients are a curse to all of us. They foul up our cash flow at the very least – and if the sum is big enough, their tardiness or complete failure to pay can do real damage.
But just like the law firms, we are apt to be faced with a counterclaim. So now we have to invoke our insurance policies which will ultimately result in bigger premiums. And, as I have learned the hard way, the attorneys who represent us for the insurance companies will evaluate our chances of ultimate success. Sadly, even when the attorney believes that we did everything right, the tendency is NEVER to give the insurance holder more than a 66% chance of success.
What that means, from the very beginning, is that the insurance company wants you to settle to make the risk of a successful counterclaim, however slight, go away. If the other side is well-heeled and can settle in for a dogfight, you are, to put it politely, screwed.
More and more, I have come to like the English judicial system, where the losing party must pay the attorney fees and other costs of the prevailing party. The American system has devolved to a point where the merits of the case are sometimes a trivial factor. Cynically, I have come to believe that you must choose your collections actions wisely.
Most of us in the e-discovery world have law firms as our primary clients. Would it be wise to sue a law firm? If that sounds like a rhetorical question, it is.
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