What is real is that we usually know the client is going to be trouble before we take them on... SO..... sometimes it is self inflicted. We have taken to just not taking on clients we know out the gate are going to be impossible to please or deal with. A good indicator is ...... "Hi, your the 5th designer that I am trying to hire to do this job. "

But sometimes you have to fire a client....

This definitely happens from time to time, however I think this necessity is far better than suffering through projects with clients that just don't get it. Our typical approach is to give a refund (where appropriate). Then we let the client know that while we appreciate their business, we do not feel we can meet the unique needs they have and that is likely better to seek our another solution. We will usually tell them that sometimes it is just not a good fit for us, or them. 

Recently we fired a client that paid consistently late 3-4 weeks, and also set expectations far beyond the contract. So we were able to explain the situation to them. Subsequently, they really wanted to work with us, so they committed to paying on time and expecting only what our contract stated. 

That said, firing a client can be a great relief. Usually when a client is to the point of being fired... they are the one client keeping you up at night, absorbing extremely unreasonable amounts of your time and your teams time, they are the client that doesn't know what they want until they "see" it, your on revision number 75 over the course of 4 months. It is clearly not fair to you or them. Firing a client when the writing is on the wall is far batter for all concerned verses drawing it out.