Attorney fee introduction
Attorneys must seek legal services fees for their services. Not only are attorneys responsible for their own personal income, attorney fees also support the staff that they employ and pay for the overhead of running an office. Attorneys in many firms must also contribute to the partnership. Like any company, law firms are in business to make a profit.
The expenses of running a law office are seldom cheap. An attorney that runs a broken down, ill-equipped office would not only suffer the consequences of not being able to operate efficiently, they would not be able to attract the clients that they need to make their business successful. An attractive office is a direct reflection on their perceived ability as a lawyer.
Attorney fees in general
Attorney fees are usually the biggest and scariest part of deciding to hire an attorney. In most cases, the client will ask about attorney fees in the first meeting and there may be an up front charge for the initial consultation. Some do, some don't. Unless it is a standard case where most facts are known, attorneys must give you a guess as to the amount of their fees. Too often, there are unknowns when a case begins and some clients will even lie about the case.
You should always explain your case fully. Give all the facts to the attorney even if they are not in your favor or somewhat embarrassing. Unless your attorney knows everything, it's not reasonable to expect that he or she can advise you properly or give you an accurate idea what fees will be incurred.
Under the law in every state, your conversation is protected by attorney-client confidentiality laws. Short of planning a crime and telling the attorney about it, nothing you say can be released Therefore, you can feel free to be, and should be totally honest.
Attorney fee structures
There are generally three methods that attorneys have for charging their fees though there may be some that will offer an alternative or combination between them:
Flat attorney fees
Flat attorney fees or fixed rate services are generally reserved for services such as wills, start-up incorporation, uncontested divorces, drafting of routine documents, and other services where a reasonable determination of time and resources can be made.
You can often shop these rates but be careful because the fee amount isn’t the only factor that you should consider. See finding the right attorney.
Contingency attorney fees
You have probably seen television commercials where the spokes-person says something like, “We only get paid if you do.” That reference is to a contingency fee structure. You will not have to pay anything up front (though you may have court filing costs) or along the way, no matter how long the case takes or what resources are required.
The attorney pulls all* costs out of his/her own pocket until the case is either settled out of court or decided by the court. At that time, the attorney is due a percentage of the award or settlement.
* Some states require that you pay certain filing fees.
These percentages will vary, but a standard contingency agreement may allow the attorney one fourth of an out-of-court settlement or one third of a settlement if you go to court. This may sound rather high, but consider that nothing is guaranteed in any lawsuit. In cases where the cases is lost, the contingency agreement says that there will be no attorney fees.
Be sure that you fully understand the contingency fee percentages before you sign any agreements.
Needless to say, contingency fee agreements are not appropriate in many cases. They are generally reserved for such cases where there is an injured party and the attorney believes that there is a very high probability of winning, though the amount is yet to be determined.
While the attorney realizes a nice income from a large contingency settlement or award, few awards are considered high.
Multi-million dollar settlements are the ones that you hear about on the news but they are a rarity and such settlements are generally only possible in cases where there are debilitating, life-long injuries requiring extensive treatment or care.
Even so, large awards are often appealed and can take a long time to collect. Other times, they are settled between the parties at a much lower amount than given in the original award, in order to avoid further action and delay.
For the most part, settlements cover costs, time off from work or other compensatory damages, which might include pain and suffering. Except in cases of extreme negligence or intentional misconduct, few cases will be awarded any significant punitive damages.
The biggest advantage of a contingency fee schedule is that the client can afford legal representation when many times, they otherwise could not. Someone who has been injured in an accident may have a great case but doesn't have the financial means to hire an attorney and pay by the hour. The contingency agreement is the only viable means of pressing the case forward.
The other advantage to a client in taking a contingency fee agreement is that the attorney is basically working on commission and his/her income will be directly linked to the effort that they put into it. In other words, the more the client makes, the more the attorney makes.
Attorneys are generally allowed to set up any fee structure that they choose and there are no regulations that govern what attorneys are allowed to charge. They are primarily market-driven.
Hourly fee structures are often reserved for situations where there are unknown and potentially complicating factors. Examples of such would include litigation, contested divorces, and large estates, or estates where there is a family business involved.
In multiple-partner law firms, the fee schedule is often set by the partnership. What governs those fees can be somewhat complicated and there is no formula for determining what they should be. Several factors are often considered in setting up a fee schedule:
Location: An attorney in Santa Barbara, CA has much higher expenses than one in El Paso Texas. Expect that when all other things are equal, the attorney in Santa Barbara will charge more for similar services.
Area of practice (field of law): An attorney that only handles traffic cases will certainly have lower fees than a litigation attorney who handles product liability matters.
Complication: Like any profession, there are those cases that are simple while others have complicating factors. Settling an estate that has a large family business attached to it will take a lot more time and resources than one that does not.
Expertise: Some attorneys will limit their practice to a very narrow area. Others could be considered to be an expert in multiple areas of law or other non-law services such as accounting or medical science. The later often find themselves representing clients with more complicated cases where their expertise comes in handy.
Experience: Theoretically, the longer an attorney is practicing in a given area of law, the better they become at it. When that happens, your chances of a better outcome may increase significantly. In general, you should expect that a seasoned and successful attorney would have higher rates than someone who has just started a law career.
When an attorney is charging by the hour, you will probably have to pay a retainer fee before any work is done on your behalf. A retainer is simply fees paid in a lump sum, in advance. Think of the retainer as a deposit in an account to which your attorney has the right to withdraw from as services are performed and fees are generated.
The amount of the retainer may be negotiated between you and the attorney, but will likely be several thousands of dollars and be dependant upon the anticipated number of hours that will be required in the near future.
If those fees are exhausted, it is very likely that your attorney will request additional fees so that work may continue. However, if a portion of your retainer is not used at the completion of the case, you are entitled to receive that portion back as a refund.
Other billable hours
Most attorneys employ other individuals that are billable as well. Legal secretaries, researchers, investigators, etc are all billable per hour though their rates are usually significantly less than the attorney’s rate. You wouldn’t want an attorney to be filling out standard forms when a legal secretary could do the same at one-third the cost.
Remember that you are entitled to review your attorney’s time logs. All attorneys that work by the hour must keep an accurate time log showing when and what services were performed and the amount of time allocated to that service. Many attorneys will send out a monthly statement of account showing what hours were used during that month and all credits and debits against your account.
In addition to the fees generated by the work of the attorney and their employees, you may see other fees develop as a part of the case.
Depending on the requirements of the case, the attorney may need to arrange for the services of outside personnel such as a court reporter, research agents, experts, investigators, etc.
There could also be other costs that would fall under the category of expenses such as travel, court fees, and others.
Regardless of the fee structure, the nature and amount of the fees should be fully explained to you by your attorney before you sign any documents and before any work is performed.
Equally important is a complete explanation of the services that will be performed under those fees and any potential other costs that may arise.
Be sure to ask any questions that you may have before you sign any documents. A good attorney wants you to fully understand what you are agreeing to pay.
Even when an attorney is charging by the hour, be sure to ask for an approximation of the total bill. Remember though, this is an approximation based on past experience and every case is different. Circumstances may arise that will cause your final bill to be more or less than the original estimate.
If the attorney seems vague about the costs, you owe it to yourself to persist until you get an answer that makes sense to you. If an attorney still seems vague or won’t answer your questions, it is probably time to seek a different attorney.
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