Lawyers can be expensive. We all know that. But you can take a few steps to ensure that you avoid any surprises when the bill arrives in the mail. Talk to your lawyer about fees and expenses, and make sure that you understand all the information on fees and costs that your lawyer gives you. It’s best to ask for it in writing before legal work starts.
What billing method do most lawyers use?
The most common billing method is to charge a set amount for each hour or fraction of an hour the lawyer works on your case. The method for determining what is a “reasonable” hourly fee depends on several things. More experienced lawyers tend to charge more per hour than those with less experience—but they also may take less time to do the same legal work. In addition, the same lawyer will sometimes charge more for time spent in the courtroom than for hours spent in the office or library.
How can I be sure that my lawyer will not overcharge me?
The fee charged by a lawyer should be reasonable from an objective point of view. The fee should be tied to specific services rendered, time invested, the level of expertise provided, and the difficulty of the matter. This fee, however, may also be a percentage of recovery, called a contingency fee, which is discussed below. Here are some broad guidelines to help you in evaluating whether a particular fee is reasonable:
- The time and work required by the lawyer and any assistants
- The difficulty of the legal issues presented
- How much other lawyers in the area charge for similar work
- The total value of the claim or settlement and the results of the case
- Whether the lawyer has worked for that client before
- The lawyer’s experience, reputation, and ability
- The amount of other work the lawyer had to turn down to take on a particular case.
Someone said that I should ask my lawyer to represent me on a “contingent fee” basis. What does this mean?
A contingent fee is a fee that is payable only if your case is successful. Lawyers and clients use this arrangement only in cases where money is being claimed—most often in cases involving personal injury or workers’ compensation. Many states strictly forbid this billing method in criminal cases and in most cases involving domestic relations. In a contingent fee arrangement, the lawyer agrees to accept a fixed percentage (often one-third to forty percent) of the amount recovered. If you win the case, the lawyer’s fee comes out of the money awarded to you. If you lose, neither you nor the lawyer will get any money.
On the other hand, win or lose, you probably will have to pay court filing charges, the costs related to deposing witnesses, and similar expenses. By entering into a contingent fee agreement, both you and your lawyer expect to collect some unknown amount of money. Because many personal injury actions involve considerable and often complicated investigation and work by a lawyer, this may be less expensive than paying an hourly rate. It also gives the client the option of defraying the upfront costs of litigation unless, and until, there is a settlement or money award. You should clearly understand your options before entering into a contingent fee agreement.
Are all contingent fee arrangements the same?
No. An important consideration is whether the lawyer deducts the costs and expenses from the amount won before or after you pay the lawyer’s percentage.
Example: Joe hires Ernie Attorney to represent him, agreeing that Ernie will receive one-third of the final amount—in this case, $12,000. If Joe pays Ernie his fee before expenses, the fee will be calculated as follows:
$12,000 (Total amount recovered in case) – $4,000 (One-third for Ernie Attorney) Balance: $8,000
$8,000 – $2,100 (Payment for expenses and costs) Amount that Joe recovers: $5,900
If Joe pays Ernie after other legal expenses and costs, the fee will be calculated as follows:
$12,000 (Total amount recovered in case) - $2,100 (Payment for expenses and costs) Balance: $9,900
$9,000 – $3,300 (One-third for Ernie Attorney) Amount that Joe recovers: $6,600
The above figures show that Joe will collect an additional $700 if the agreement provides that Ernie Attorney collects his share after Joe pays the other legal expenses.
Many lawyers prefer to be paid before they subtract the expenses, but the point is often negotiable. Of course, these matters should be settled before you hire a lawyer. If you agree to pay a contingent fee, your lawyer should provide a written explanation of the agreement, clearly stating how he or she will deduct costs.
Why do some lawyers use contingent fee arrangements? Isn’t there a chance they won’t get paid at all?
There is a chance that under a contingent arrangement, the lawyer won’t get paid at all. However, this is also a chance that, if you end up with a large amount being recovered, the lawyer may end up earning more than under a traditional fee arrangement. The legal field has approved of contingent fees in most cases because they allow clients without much money to access the legal system. However, most states restrict the types of cases for which payment is done on a contingent basis, and limit the attorney’s fee to a “reasonable” percentage of the total amount recovered.
If my lawyer and I agree to a contingent fee arrangement, should the method of settling my case affect the amount of my lawyer’s fee?
Yes, but only if both of you agree beforehand. If the lawyer settles the case before going to trial, less legal work may be required. On the other hand, the lawyer may have to prepare for trial, with all its costs and expenses, before a settlement can be negotiated. You can try to negotiate an agreement in which the lawyer accepts a lower percentage if he or she settles the case easily and quickly or before a lawsuit is filed in court. However, many lawyers might not agree to those terms.
A friend suggested that I might want to have a lawyer “on retainer.” What does this mean?
If you pay a set amount of money regularly to make sure that a lawyer will be available for any necessary legal service you might require, then you have a lawyer on retainer. Businesses and people who routinely have a lot of legal work use retainers. By paying a retainer, a client receives routine consultations and general legal advice whenever needed. If a legal matter requires courtroom time or many hours of work, the client may need to pay more than the retainer amount. Retainer agreements should always be in writing. Most people do not see a lawyer regularly enough to need a lawyer on retainer.
Prepaid legal services plans, which were discussed earlier, are similar in effect to retainer agreements: a small fee paid periodically ensures that a lawyer will be available to provide legal services at any time.
Is having a lawyer “on retainer” the same thing as paying a “retainer fee”?
No. A retainer fee is something quite different. Sometimes a lawyer will ask the client to pay some money in advance before any legal work will be done. This money is referred to as a retainer fee, and is in effect a down payment that will be applied toward the total fee billed.
I saw an advertisement from a law firm that charges fixed fees for specific types of work. What does this involve?
A fixed fee is the amount that will be charged for routine legal work. In a few situations, this amount may be set by law or by the judge handling the case. Since advertising by lawyers is becoming more popular, you are likely to see ads offering “Simple Divorce—$150” or “Bankruptcy—from $250.” Do not assume that these prices will be the amount of your final bill. The advertised price often does not include court costs and other expenses.
Does the lawyer’s billing method influence the other costs and expenses that I might have to pay?
No. Some costs and expenses will be charged regardless of the billing method. The court clerk’s office charges a fee for filing the complaint or petition that begins a legal action. The sheriff’s office charges a fee for serving a legal summons. Your lawyer must pay for postage, copying documents, telephone calls, and the advice or testimony of some expert witnesses, such as doctors. These expenses may not be part of a legal fee, and you may have to pay them regardless of the fee arrangement you use. Your lawyer will usually pay these costs as needed, billing you at regular intervals or at the close of your case.
What are referral fees?
If you go to Lawyer A, he or she may be unable to help, but might refer you instead to Lawyer B, at another law firm, who has more experience in handling your kind of case. In return for the referral, Lawyer A will sometimes be paid part of the total fee you pay to Lawyer B. The law may prohibit this type of fee, especially if it increases the final amount to be paid by a client. The ethics rules for lawyers in most states specify that lawyers in different firms may not divide a client’s fee unless:
- the client knows about and agrees to the arrangement;
- they divide the fee in a way that reflects how much work each lawyer did, or both lawyers are fully responsible for the case; and
- the total bill is reasonable.
If one lawyer refers you to another, you have a right to know if there will be a referral fee. If there is, then ask about the specifics of the agreement between the lawyers.
Is there anything I can do to reduce my legal costs?
Yes, there are several cost-cutting methods available to you. First, answer all your lawyer’s questions fully and honestly. Not only will you feel better, but you also will save on legal fees. If you tell your lawyer all the facts as you know them, you will save time that might be spent on the case and will help your lawyer do a better job. Remember that the ethics of the profession require your lawyer to maintain in the strictest confidence almost anything you reveal during your private discussions. You should feel free to tell your lawyer the complete details in your case, even those that embarrass you. It is particularly important to tell your lawyer facts about your case that reflect poorly on you. These will almost certainly come out if your case goes to trial.
Can I reduce my legal costs if I get more involved in my case?
Sometimes. Stay informed and ask for copies of important documents related to your case. Let your lawyer know if you are willing to help out, such as picking up or delivering documents or making a few phone calls. You do not want to interfere with your lawyer’s work. However, you might be able to move your case more quickly, reduce your legal costs, and keep yourself better informed by doing some of the work yourself. Discuss this with your lawyer.