Attorney Fees and Expenses
Attorneys' fees are one of the biggest factors in any client's decision to hire an attorney. Some lawsuits are handled on a contingency basis where attorney's fees are contingent on the lawyer recovering some sum of money for her client. Other lawsuits, such as bankruptcies, divorces and DUIs are often handled for a flat rate fee. The traditional method of billing by an attorney based on his hourly rate is generally the most costly method.
Fee-Based Billing
Lawyers set an hourly price on the legal services they provide based on their experience, education, location and specialty. For example, a partner in a law firm that specializes exclusively in oil and gas law may charge a minimum of $300 per hour. A young attorney just out of law school (known as an "associate") may have a rate of $100 per hour.
My lawyer charges $200 an hour. If we meet for 30 minutes, how much am I charged?
Lawyers break down their hourly rate in segments within the hour. A 30-minute meeting will cost you $100.
Why have I been charged 15 minutes worth of fees when I only spoke to my lawyer on the phone for 5 minutes?
Your attorney has broken his hourly rate into 15-minute time segments. The phone call was rounded up to 15 minutes for billing purposes.
TIP: One of the most important questions to ask a fee-based attorney is in what increments of time she bills her clients. Obviously, an attorney billing quarter-hour increments will be much more expensive than one who bills in 6-minute increments. For example, the short phone call in the previous question would have been billed at 6 minutes (or 1/10th of the attorney's rate) rather than the rate for 15 minutes of time.
Why does my bill contain charges for "memo to the file" after every phone conversation I have with my attorney, no matter how brief?
Lawyers keep written documentation of all phone calls with their clients. These memos are an important part of the file and help refresh the attorney's memory when he next talks to you. Remember, your attorney could be handling 50 different files at one time.
Are attorneys' fees negotiable?
Yes. Some attorneys may cut their hourly rate depending on the situation. You can also ask if the associate rate could be reduced.
TIP: Attorneys' fees are best negotiated once the bill has been received. It is not unusual for clients to call and question items on the bill. Lawyers frequently agree to reduce or delete specific items on the bill. For example, if the bill shows 30 minutes charged for an associate to travel to the courthouse, the attorney handling your case might agree to cut that amount in the interest of good client relations.
My bill includes 3 hours for "research." What does this mean?
Research is the time the lawyer puts in studying case law, statutes, regulations and investigating the legal status of your claim.
TIP: You can always request a more specific description on the bill. Ask that the entry on the bill include a brief of explanation of the research problem. For instance, the entry would read "Research - age discrimination proof."
Flat-Rate Case
The most common legal problems people encounter in their lives are often handled for a flat fee. These attorneys commonly handle one type of case over and over, and their offices are set up to efficiently represent the clients.
The attorney sets a rate based on the type of case, and the client is charged that amount only. However, the flat rate remains effective only if the case proceeds as expected by the attorney. For example, an attorney that agrees to handle an uncontested divorce for $2,000 will no longer apply the flat rate if the other spouse decides to fight or contest the case.
My bankruptcy is being handled for a flat fee of $1,000. I signed a contract with my attorney stating that if the matter is litigated, I will be billed on an hourly basis. What does this mean?
You have agreed to pay your attorney her hourly fee if one of your creditors objects to the bankruptcy. Your attorney set her flat fee based on the assumption that there would be no objections to your bankruptcy and the bankruptcy trustee would approve it.
My husband is fighting our divorce and I cannot afford to pay my attorney now that his hourly fee that has gone into effect. What happens now?
Unless you can work out something with your lawyer, she will probably ask the court to permit her to withdraw as your attorney because you cannot pay.
SIDEBAR: Lawyers are routinely allowed to withdraw from representing a client when the client has not paid. The lawyer must file a "Motion to Withdraw," which the judge typically grants. Only if the lawyer is in the middle of a trial will she be forced to continue to represent the nonpaying client.
Contingency Fee Cases
Being represented on a contingency fee basis is the most advantageous way to pursue litigation. The client pays nothing unless the lawyer recovers money on his behalf. However, because the lawyer is essentially working for "free" until the case ends and money is recovered, attorneys are extremely picky about the contingency cases they take.
Attorneys take cases on contingency only when there is a good chance of recovery, the client would be believable and likable in front of a jury and the amount of money at stake is not insubstantial. For example, an attorney is likely to take a medical malpractice case on a contingency basis that involves a child's death where the healthcare personnel made obvious mistakes.
The typical contingency contract provides that the attorney will get 40 percent of any recovery, before expenses have been deducted. If the lawyer settles a client's case for $10,000, she is due $4,000. The client gets $6,000 minus any expenses paid by the attorney, such as filing fees, expert fees and the like. Fifty percent contingency fee contracts are becoming more common.
I know I do not have to pay attorneys' fees because my case is being handled on a contingency, but what about expenses?
Lawyers' attitudes toward expenses vary. Most attorneys pay expenses on behalf of the client as the case proceeds then deduct the expenses from the client's portion when money is recovered. However, you may be asked to cover some or all of the expenses.
TIP: If you are paying expenses, make sure you have a written agreement limiting certain types of expenses. For instance, you do not want to be charged $.10 for every copy when copying can be done at $.03 a page.
If my case is being handled as a contingency, do I have to accept a settlement offer?
No. You do not have to accept a settlement offer even if your lawyer advises you to take the money. Just because yours is a contingency case does not mean you must immediately settle so that your attorney will get paid.
SIDEBAR: Clients who repeatedly turn down reasonable settlement offers against the advice of their attorney may lose their lawyer. The attorney can ask the court to let him withdraw on the basis that the client is being unreasonable.
If the person who sued me loses the case, will they have to pay my attorney's fees?
Generally, your attorney's fees will not be reimbursed for defending a civil lawsuit.
SIDEBAR: Lawsuits brought in bad faith or for harassment could possibly be dismissed by the judge, along with an order that the defendant's attorney's fees be paid.