Legal Fees Demystified
Most clients are uncomfortable talking with an attorney because they are unsure how they will be billed, nervous about the transparency behind the monthly statement, and are unfamiliar with the billing options that may be available to them.
IntroductionThere are many different ways that clients and attorneys can agree to have the legal fees paid for. This guide attempts to provide a basic overview of those options. A well-informed client almost always makes the legal process easier, cheaper, and less uncomfortable for all of the parties involved.
Contingency FeeContingency agreements are not available in all actions. For instance, there can be no contingency agreement for criminal divorce proceedings. Most notably, these fee agreements are used in personal injury cases. As such, my explanation will focus us a personal injury action as an illustration.
When a client gets injured and they seek an attorney, the personal injury lawyer will have them sign a contingency agreement. You never put up a retainer or receive a bill for any services, costs, or fees. The lawyer pays all of these costs in a calculate gamble on whether he would be able to recover these expenses from the settlement in the future.
Fast forward to the end of the case (when this becomes important) and lets say you received your settlement. The attorney will then deduct a certain percentage (agreed upon in the initial agreement) and then reimburse the law firm for the expenses incurred during the representation.
Contingency agreements are great because they do not require the client to put any money into their case. They can use that money for any medical expenses or to help cover any inability to work.
Hourly FeeWhen people think of attorneys and their fees, this is typically the arraignment that first comes to mind. It is pretty straight forward. The client is billed, typically monthly, for the work that was done during that time period. Each task that is done is typically itemized and the amount of time spent on that task is also listed. You are then charged the agreed upon hourly rate.
When you meet with an attorney and your case is accepted, you may be required to put up a retainer. This amount is decided on by the attorney based upon your case and its complexity, the estimated amount of time that will be expended, and some other factors.
These are accounts in which the attorney holds your money. It is your money until it is earned and their are very strict rules that govern how the attorney must handle these funds. At the end of the month you receive a statement that lists the amount of time expended and then shows that the stated amount of money has been taken from your retainer and transferred into the attorneys bank account.
An "Evergreen Retainer" is a retainer agreement that replenishes itself when it falls below a certain agreed upon amount. For instance, if you and the attorney agree on a $500 evergreen retainer then whenever your account falls below $500 you must bring the account balance up to at that amount.
Flat FeeThese are pretty self explanatory. You are charged a flat rate for the entire thing. The lawyer calculate and attempt to estimate the amount of work that will be needed. Therefore, flat fees are typically only used in simple or uncontested matters where this estimation can be made accurately.
Statutory FeeFees can be dictated by statute or require court approval. These are most commonly seen in bankruptcy or probate proceedings.
Referral FeeA lawyer who sends a client to another lawyer can sometimes ask for a portion of the fees charged or a flat fee. These are referral fees. There are special regulations and ethical concerns about retainer agreements, but, in essence, they must be reasonable and the client must agree to it. This fee is not often passed onto the client.
Consultation FeeSome lawyers require that a prospective client pay them to come in and discuss the possibility of forming an attorney-client relationship. This fee can be paid at that meeting or, if the prospective client retains the lawyer, then that fee will often be included on the first statement. These fees were much more common in the past and many lawyers offer free consultations, but you would have to check with them to confirm.