Disputes regarding legal fees are usually not investigated by the state's disciplinary body. The cost of legal services is generally left to an agreement between the lawyer and the client. Often disputes occur because you and your lawyer have a different understanding about what the attorney fees will be in your case. Written fee agreements are strongly encouraged to avoid misunderstandings. GET A WRITTEN FEE AGREEMENT AND ASK FOR PROMPT BILLINGS.
Although most attorney-client relationships are concluded without fee disputes, controversies do periodically occur regarding an attorney's professional fee. The dispute may be between the lawyer and his or her client or it may be between lawyers who have been involved in a case. Although such disputes can be resolved through the courts, low cost, confidential, and prompt alternative solutions are available, which are generally called Alternative Dispute Resolution Programs or ADR Programs.
In most states, the attorney licensing authority may sponsor a fee arbitration or mediation program for the resolution of legal-fee disputes through impartial arbitrators or mediators. Also, many local bar associations may sponsor similar programs and several private organizations sponsor dispute resolution programs. You are encouraged to use these various programs. For information regarding the attorney licensing authority's alternative fee dispute resolution in your state, click here. Fee arbitration is a relatively fast and simple way of resolving fee disputes.
Most fee disputes between lawyers and clients are the result of misunderstandings or a lack of communication. If you have a problem with your lawyer, it is very important to discuss your concerns with your lawyer. You and your lawyer may be able to reach an understanding. As soon as you discover that a problem exists, call your lawyer and tell him or her that you believe there is a problem or mistake with your bill. Your lawyer may not be aware that you have a different understanding of the terms of his or her professional billing in your case. Insist on a face-to-face meeting. Often, after an open discussion, you may be able to reach a mutually acceptable solution. Clients should never be reluctant or embarrassed to discuss fees with their lawyers.
Most fee disputes come from a lack of understanding as to how a lawyer charges for his services.
Understanding How Lawyers Charge
Abraham Lincoln said that time and advice are a lawyer's stock in trade. For most people, the definition of legal services is a lawyer appearing in court on behalf of a client. Television shows and high profile media cases tend to reinforce this concept in our society.
Most people realize that when an athlete runs a 100-meter race to win a Gold Medal at the Olympics, it is the years of constant practice and training that won the Gold Medal and not simply the 10 seconds it took to run the race. Similarly, many factors go into the successful resolution of a client's legal matter. Lawyers provide legal services in many different ways. Many may not be obvious to the average layperson. However, all of these legal services require time and training.
To become an attorney, after graduating from college, men and women must then receive an advanced degree in law (an LLB or JD) from an accredited university, which allows them the privilege of taking an intense bar examination. Only after both gradating from law school and passing the bar examination are these men and women certified to practice law. Lawyers are licensed professionals. Only people admitted as members by the state's licensing authority are permitted to practice law in that jurisdiction.
Lawyers realize that clients are consumers and that they are entitled to the quality legal services at fair and reasonable prices. Every lawyer has an incentive to provide his or her clients with high quality representation. Lawyers understand the economics of the marketplace. To build a law practice Lawyers must have satisfied clients. Lawyers recognize that by providing good service and charging a fair and reasonable fee, they will have satisfied clients who will use their services again and refer other clients to them.
At your initial consultation, ask the lawyer you are interviewing about the attorney fee he or she will charge you to handle your legal matter and what services the lawyer will provide on your behalf (yes, you are interviewing the lawyer to decide if you want to entrust your case to him or her to handle). Before you give your legal matter to any attorney, you are entitled to inquire into the lawyer's qualifications to perform those services and the probability that he or she will successfully resolve your legal matter. When a new client or a client a lawyer has not regularly represented retains an attorney, the Rules of Professional Conduct require that the basis of the fee or the hourly rate of the fee be effectively communicated to the client. To avoid misunderstandings, written fee agreements are strongly encouraged, preferably before beginning representation in your case, or, at least, within a reasonable amount of time after work is initiated. Most of the attorney licensing authorities strongly recommend that you GET A WRITTEN FEE AGREEMENT AND ASK FOR PROMPT BILLINGS.
Under the Rules of Professional Conduct, established by the Highest Court of the state, lawyers are obligated to charge only a reasonable fee.
What Is a Fee Reasonable?
Under the Rules of Professional Conduct certain factors must be considered in order to determine the reasonableness of a lawyer's fee:
- The time and labor required, the novelty and difficulty of the questions involved, and the skill required to properly handle your case,
- The likelihood (if apparent to the client) that the acceptance of your case will limit your lawyers opportunity to handle other cases while he or she is representing you,
- The fee customarily charged in your area for similar legal services,
- The amount of work involved and the results obtained,
- The time limitations imposed by you or by the circumstances,
- The nature and length of the professional relationship between the lawyer and the client,
- The experience, reputation and ability of the lawyer performing the services, and
- Whether the fee is fixed or contingent.
Since no two legal cases are identical, the attorney's fee in each case will depend upon a variety of factors, such as the nature of the case, the fee agreement between the attorney and client, and the guidelines set forth in the Rules of Professional Conduct. The key factor in determining an attorney's fee is the anticipated amount of time that will be required to resolve the client's matter.
Much of a lawyer's work is research, investigation and other preparation. A lawyer or the lawyer's staff generally does this groundwork in the absence of the client. Like the tip of an iceberg, a 30-minute consultation or a contract drafted on a client's behalf is the result of much work done by the lawyer or staff when the client was not present.
A lawyer's fee is not simply a matter of how much he or she earns per hour. An attorney's hourly rate is designed to compensate him or her for the thousands of dollars spent receiving a college education, graduating from law school, and passing the bar examination, as well as general business overhead such as: staff, law books and journals, rent, insurance and continuing education courses. A reasonable fee must be adequate enough to cover the cost of education and overhead as well as provide an income for the lawyer. In addition, lawyers need to devote time to managing the business of their practice and providing pro bono work (free legal service to the community). During an eight to ten hour workday, an attorney may only have worked on his or her clients cases for five or six hours.
In legal matters, every case is inherently different. This uniqueness makes it difficult to predict at the beginning of a matter the amount of time that will be required to handle a particular case. Often, a lawyer may not be able to quote a specific sum or fixed fee to resolve your case. In many instances, an attorney may only be able to give you an estimated minimum and maximum range of the fee. If a fee or an estimated fee seems too high to you, do not be afraid to comparison shop. Ask other lawyers what they would charge for the same service. To reduce misunderstandings about fees, confirm the cost of handling your legal matter with your attorney before he or she begins representing you. And, GET IT IN WRITING. It is strongly recommended that you GET A WRITTEN FEE AGREEMENT AND ASK FOR PROMPT BILLINGS.
Remember, as Abraham Lincoln said, you are paying for a lawyer's experience and expertise. For that reason, you are entitled to inquire about the qualifications of your attorney to handle your particular legal matter. Lawyers who specialize in a particular area of law tend to charge more than a general practitioner. All a Lawyer has to sell are his or her time and advice.
The costs of litigation are generally not a part of an attorney's fee. Lawyers are entitled to receive reimbursement for expenses incurred in connection with your case, including travel costs, meals away from the office, telephone calls, postage, and court and litigation fees prescribed by law which your lawyer paid on your behalf.
Types of Fee Arrangements
There are four primary forms of attorney's fees -- they are:
- An hourly rate,
- A contingency fee,
- A retainer, and
- A fixed fee.
- (In certain cases, the court sets lawyers' fees).
Hourly Rate
An hourly rate fee arrangement is a fairly straight forward billing plan. In hourly rate billing, your attorney's fee will be based on the amount of time your attorney spends on your behalf. Your attorney will keep records of the time spent on your case. By definition, any legal service involves a lawyer spending time with you or working on your behalf. You are paying for the time your lawyer spends on your legal matter, whether it is in court, in his or her office, on the phone, researching the law, drafting documents or simply advising you.
Therefore, time is the key element in the professional fees charged by lawyers.
The hourly rate charged by lawyers can vary greatly from state to state, city to city, and even within a given area. In addition, hourly rates may be different depending on the legal specialty involved in a case. Hourly rates can vary from $100 per hour to more than $300 per hour. Fees based on hourly rates focus on the amount of time that will be needed to perform the legal services necessary to resolve your case. At times a client may not understand the relevance, importance, or ramifications of an aspect of a legal matter for which he or she is being charged. If this happens in your case, ask your lawyer to explain to you the necessity of his or her actions.
It is important to realize that when your lawyer is working on your case, he or she is not working on someone else's legal matter. If your legal matter is demanding and time consuming, your attorney must charge a fee that is fair and reasonable for the time your case requires. When choosing between lawyers whose hourly rates (for the same service) are different, one consideration should be which lawyer has the skills and experience to resolve your case faster.
To help maintain cost control, you can insist that your agreement contain a provision that the lawyer's fee will not exceed a set amount of time or money without your approval.
Contingency Fee
A fee is contingent when it is conditioned upon your attorney's successfully resolution of your case. This type of fee is contingent upon the outcome of the matter for which you hired your attorney. A contingent fee is paid as a percentage of your monetary recovery (either settlement or court award). However, the client is generally responsible for the "out-of-pocket" costs of litigation. Under a contingency fee arrangement, no attorney's fee is incurred if there is no monetary recovery, which is often referred to as: "No fee unless you win." However, the client may still be responsible to pay the costs of the litigation.
This type of fee arrangement has certain advantages for people who need legal services but do not have funds available to pay an hourly attorney's fee, especially, in cases in which the client recovers nothing. Since rich people can afford to hire any attorney and since poor people have access to free attorneys, a long time ago, our society determined that contingent fee agreements provide a fair and just system in which middle Americans are able to hire competent attorneys to represent their interests in difficult legal matters. Contingent fees insure that all Americans have equal access to our Justice System. Contingent fees are advantageous to people who have a valid case but do not have the funds to hire an attorney. Also, contingent fees are especially beneficial if there is no recovery.
The most frequent type of case handled on a contingency fee basis is a personal injury claim. It is important to note that the Rules of Professional Conduct provide that certain types of cases may not be handled on a contingency fee basis. These include divorce and criminal cases. Also, the Rules of Professional Conduct require that a contingency fee agreement must be in writing and that the agreement state the method by which the fee is to be determined, including:
- The percentage to be paid to the lawyer in the event of settlement, trial or appeal,
- Whether litigation and other expenses are to be deducted from the recovery, and
- Whether these expenses are to be deducted before or after the contingency fee is calculated.
At the closing of your case, the attorney must give you a written Settlement Statement that sets forth the funds collected, the deductions from that amount and the net amount paid to the client.
The contingent fee percentage the lawyer is to be paid is not set by the court. The percentage is agreed to and set by the lawyer and client. The percentage depends upon many factors, such as the possibility that the claim may be not be resolved favorably on behalf of the client, the likelihood of a significant recovery, and whether the case will involve a lengthy trial. Although many lawyers charge the same percentage, you have the right to ask questions about the amount of work to be performed for the contingency fee. Also, you are entitled to negotiate for a different percentage if you think that is fair.
In Personal Injury cases a typical fee is 33% if your case is settled and 40% if a lawsuit is filed. In complex cases (such as Medical Malpractice), the typical fee may be 40% if your case is settled and 50% if a lawsuit is filed. In extremely complex cases, the fee may be even higher.
As in any case, you are entitled to inquire about the attorney's ability and experience in the type of legal matter for which you are seeking representation.
Retainer Fee
You also may hire a lawyer by giving him or her a retainer either 1) as payment of an agreed upon fee to secure the lawyer's general availability on your behalf to represent you for unspecified legal matters during a set period of time; or 2) as an advance deposit toward a fee to be charged for a particular representation in the future on an hourly or fixed fee basis.
In the first type of retainer, the payment becomes the property of the lawyer when fee is paid. This fee guarantees the lawyer's availability to represent you. With this kind of retainer fee agreement, you may be billed additionally for the legal work that is actually preformed.
In the second type of retainer, your lawyer is required to place those funds in a special account called a trust account. When legal representation begins, your attorney will make withdrawals against those trust account funds as payment for the legal fees incurred in your case. If the retainer deposited in the trust account is insufficient to cover the legal fees involved in your case, your attorney may ask that you deposit additional funds in his or her trust account. Also, if at the conclusion of the legal matter, any unused funds remain in the trust account, those funds are the property of the client and will be reimbursed to the client after all expenses are paid.
Both types of retainers require that the fee be reasonable. Remember to GET IT IN WRITING. Establish up front what rate you will be charged and the way in which the fee will be billed.
Fixed Fee
One of the most common methods lawyers utilize to charge for legal services is to establish a fixed fee for a specific task or representation in a particular matter. Fixed fees are commonly used in legal work involving divorces, wills, purchases or sales of property, and title examinations. When you agree to a fixed fee, be sure you know what the fee includes and what is not covered. Ask if there any "other" charges which might be added to your bill.
How to Hold Down Legal Costs
You can help hold down your legal costs by following a few suggestions:
- Gather all of the information relevant to your claim and place it in a logical order, include the correct name, address, and telephone numbers (home and work) of all interested parties and all witnesses.
- Prepare a written statement of your case and indicate the results you seek.
- Make photocopies of everything. Give the originals or photocopies to your lawyer (your lawyer will decide if originals or the copies are needed).
- Be on time for appointments and do not take excessive amounts of time with office consultations or phone calls relating to minor details or small matters.
- Share all relevant information. Let your lawyer decide what is and is not in your favor. It is much better for your lawyer to know, rather than be surprised later.
Fee Arbitration
Although most attorney-client relationships are concluded without fee disputes, fee disagreements do occasionally arise. If this happens to you, first, discuss the matter with your attorney. Often, simply communicating with your lawyer regarding your concerns over the fee in your case will resolve the problem. If discussing the issues you raise regarding your fee does not resolve your problem, consider utilizing an "alternate dispute resolution" method to resolve your fee dispute.
Check your fee agreement, perhaps it requires that the parties submit to arbitration or mediation. It is important to note that you can negotiate for arbitration or mediation to be a condition or your fee agreement. Establishing the terms for resolving fee disputes is strongly recommended.
Fee arbitration or mediation is a quick, low cost method of resolving fee disputes between attorneys and clients without filing suit in a formal court of law. Many local bar associations provide free arbitration of fees. Many state Bar Associations or state attorney licensing authorities offer arbitration services for fee disputes between attorneys and clients. A nominal fee may be charged to each party to cover administrative expenses. For information regarding the state bar association's or attorney licensing authority's alternative fee dispute resolution in your state, click here.
If you have a fee dispute, you and your attorney will have to reach an agreement to enter into arbitration or mediation. When an attorney sues a client to collect a fee, it is common for the client to file a counterclaim alleging legal malpractice. The potential for a malpractice counterclaim gives a lawyer an incentive to avoiding needless litigation by agreeing to arbitrate fee disputes.
In Conclusion
It is unfortunate that many people in need of legal advice are reluctant to hire a lawyer because they believe that legal services are expensive. Actually, most legal fees are reasonable (some may even be small), when compared to the benefits clients receive and the client rights that are protected and preserved in the legal process. Good lawyers want satisfied clients. A major component in client satisfaction is the client's belief that the fee was reasonable. A good attorney will be receptive to your concerns regarding the fees in your case.
David Danda
David E. Danda & Associates, LLC
P. O. Box 941334
Atlanta GA 31141-0334
770.938.0977
770.939.6538 (fax)
daviddanda@mindspring.com (email)