By Mark A. Chinn
Most lawyers become lawyers because they like to help people. They care very
much that their life’s work is viewed as a service to people and to the betterment of the community and nation. For that reason, many lawyers are somewhat embarrassed to bring up the subject of fees. But lawyers know that clients need to know the basis for the charges they are about to incur. So, if your lawyer does not bring up the matter of charges, don’t be afraid to take the initiative and ask about fees and billings. You might say something like, “Is there a charge for the initial consultation?” or “How does your firm charge for services?”
Finding the Right Fit
In the initial discussion with your lawyer, ask basic questions to quickly determine if the lawyer handles the type of case you have. You will also need to share enough personal information for the lawyer to determine if there is a conflict, such as that the lawyer has worked previously with your spouse. Both client and attorney are well served by a business-like approach to determining whether they are right for each other.
Do Your Homework
Before you agree to hire a lawyer, do some homework as to the qualifications of the lawyer and the typical charges by other similarly qualified lawyers in the area. You can do this by reviewing firm websites on the Internet and asking your CPA, friends, and other lawyers in the community for referrals.
Types of Fees
Flat fee—A “flat fee” is a one-time charge designed to cover all of the work on your case. For example, a lawyer might charge $1,500 to draft a property settlement agreement with the understanding that the parties will have reached an agreement. Another lawyer might charge a one-time fee to attend a hearing. Of course, flat fees can be designed to encompass almost any situation. The fee can be due “up front” or it can be divided into installments. The primary attribute of the flat fee is that it will not change, no matter what happens in the case or how long it takes.
The flat fee has several advantages. First, it allows the client to determine on the front end whether the project is affordable. This is different from the “hourly billing method” for which the true cost of the project cannot be known until the very end. Second, the flat fee fixes the cost for the client. As long as the project remains within the bounds of the understanding as to what is to be done, the client should not be charged more than the agreed upon price, no matter how much time the lawyer expends.
Hourly billing—The most common form of billing in the divorce world is the “hourly fee.” Attorneys record their time in predetermined intervals and charge the client according to time spent. The most common intervals are either onequarter or one-sixth of an hour. For example, under the quarter-hour interval method, the minimum charge for any effort is at least 15 minutes. Under the one-sixth of an hour method, the minimum charge for any activity is 10 minutes.
The attorney tracks time spent each month and bills the client, itemizing the date on which something was done, a description of the activity, and the amount of time spent. The bill will vary each month, depending on how much time it takes the lawyer to perform the work.
The advantage of hourly billing is that it metes out the cost of litigation according to the amount of time expended by the lawyer. If something takes very little time, then the charge will be less than if the matter drags out. On the other hand, if the matter becomes difficult and protracted, the cost to the client will increase accordingly. (Thus, sometimes the intractability of the opposing party can cause your legal bill to increase.)
Value billing—Many codes of professional responsibility allow for what is called “value billing.” What this means is that the attorney and client can negotiate a price for the work, based on what the client seeks to accomplish and the value of that work to the client. Value billing requires a lot of work by both the lawyer and client to customize the price of the project. Since such charges are based on “value” to the client, attorney and client can devise an infinite number of arrangements. For example, a client might agree to pay a certain amount of money each month for a service, or an agreement might call for certain charges for certain tasks, such as fixed charges for depositions, hearings, or mediation.
Contingency—A contingency fee allows a lawyer to take a percentage of the amount collected on behalf of the client. In family law cases, this method of charging is generally not permitted by state codes of professional responsibility, except in child-support-arrearage cases, where contingency fees are generally permitted. For example, if a person is owed $18,000 in past-due child support pursuant to a court order, it is permissible for the attorney to agree to take the case and collect a percentage of the amount collected from the delinquent parent when the money is received. This is the same
way most personal injury lawyers might handle a car accident case. They might collect a sizeable percentage, but they don’t collect anything unless they make a collection. The advantage of this form of charging is that the client can obtain an attorney without having to advance any funds.
Most lawyers use “retainers.” A retainer is a certain amount of money that is
obtained in advance of the work. This retainer is placed in a trust account
and the lawyer may draw on those funds as needed. Abraham Lincoln, who was a great trial lawyer, advised that a retainer is important because its payment indicates that the lawyer then knows he has a client, and the client knows he has a lawyer.
The amount of the retainer should be determined by means of a number of different factors. The factors are much the same as setting an hourly rate or flat fee. The advantage of a retainer is that it secures the lawyer’s representation for a certain amount of time, and additional payments need not be made until the retainer is spent. Clients should always understand, though, that a retainer is not to be confused with the price for the legal work. The actual cost of the project may well exceed the retainer.
Refundable or nonrefundable—Retainers can be either refundable or nonrefundable. Any unused portion of a refundable retainer must be returned to the client at the end of the case or when the representation ends. A nonrefundable retainer is not refunded. The attorney simply keeps whatever is left, whether he or she has billed for the work or not. In some states, nonrefundable retainers are not permitted.
End retainer or “evergreen retainer”—A certain amount of the end retainer is held until the end. The lawyer takes the retainer at the beginning of the representation, but does not use it. Instead, the client is expected to pay the bills as they are incurred. Typically, the full amount of the retainer is refunded at the conclusion of the representation if all bills have been paid. The end retainer or evergreen retainer provides reassurance to the attorney that final charges will be paid.
Expenses above and beyond the payment of attorney’s fees include charges for support staff, such as a paralegal. These services are often charged at a rate of about one-quarter to one-third of the hourly rate of a lawyer. Other expenses
include: photocopying, long-distance telephone, computer legal research, service of process, court reporter fees, expert witness fees, private investigator fees, and mediator fees. These fees are usually charged to the client at the rate the attorney pays for these services. Sometimes attorneys charge for office expenses, such as photocopying and long-distance telephone, by adding a simple percentage surcharge, such as three percent to the bill.
The best way to reduce costs is to ask your attorney what you can do to keep divorce costs to a minimum. In addition, the following cost-cutting techniques may be helpful in just about any case:
- Tell your attorney that you do not want a copy of everything that comes in or goes out of the law office. Ask only for copies of the most important documents.
- If documents need to be copied, volunteer to copy them yourself.
- Don’t call your attorney unless it is absolutely necessary, and if you must call, keep calls short.
- Don’t call your attorney about matters that should be discussed with your therapist.
- Before your attorney takes certain actions, ask what they might cost so that you can decide if you really want to pay for them.
- Suggest that your attorney tape-record or video-tape noncritical depositions to save reporter fees.
- Don’t ask your attorney to subpoena unnecessary witnesses or documents.
- Communicate with your lawyer by e-mail.
- Do record searches, such as corporate searches or deed searches, yourself.
Always be cautious in attempting to cut costs. Talk with your lawyer first to ensure that efforts to save money won’t be detrimental to your case.
If the billing agreement is “hourly,” both the attorney and the client are best served by regular monthly billings. Clients have the right to know how their retainer is being spent and how the expense of their case is progressing. Clients should feel free to ask their attorneys for statements on a regular basis, such as once a month.
Talking About Fees
It is important to talk frequently and candidly with your attorney about fees. At each stage of the case, ask what each action to be taken will cost. It is important for you to know the cost, or an estimate of the cost, before you embark on a course of action. A good example of this comes from the movie, “Kramer vs. Kramer” (1979). Dustin Hoffman has just lost custody of his child to Meryl Streep, and he is talking with his lawyer at a bar about what to do.When Dustin Hoffman emotionally protests the trial result, the lawyer calmly replies, “You can appeal, but it will cost you $20,000.” Hoffman elects not to appeal. That scene is very important. The lawyer did not leave the client with an unclear picture of what lay ahead. The lawyer gave the client the information necessary to formulate a decision. And, if Hoffman had elected to appeal, he and the lawyer would know and
understand that $20,000 was necessary to start the work.
If you are struggling with payment of a bill, it is best to communicate immediately and honestly with your lawyer. The same is true if you are not happy with your lawyer’s handling of something. Call your lawyer and say exactly what is on your mind. If you are concerned about charges, be prepared to tell the lawyer exactly which charge you are concerned about and why. This will be of much more benefit to you and the lawyer than simply stating the “bill is too high.”
Written Fee Agreement
Most states do not require a written fee agreement, but it is always best that contractual relationships be defined in writing. Ask your lawyer to provide you with a written fee agreement that outlines what he or she is going to do for you and how he or she is going to charge.
About the Author: Mark A. Chinn is a principal with Chinn & Associates in Jackson, Mississippi. He can be reached at www.chinnandassociates.com.
This article was originally published in the September 2009, Vol 32, No. 1 issue of Family Advocate entitled “Client Manual: You’ve Got Choices”. The manual is available online at http://www.abanet.org. The article is reprinted here with permission of the American Bar Association.