The top gripe I hear from people on the street regarding lawyers is how expensive they are. But costs for legal services vary greatly. As the economy strangles consumers and as technology slowly (finally!) makes gains into the world’s most old-fashioned profession, attorney culture has begun to embrace efficiency and self-awareness. This means better value—though not always lower prices!
But even as attorneys start to focus on value, one thing that remains largely unchanged is the types of fee arrangements in common use. If you understand these fee structures, you as the consumer may be better equipped to find a lawyer with an arrangement that works for you. You might even be able to negotiate the finer points with a forward-thinking lawyer. Below are some explanations of typical fee arrangements.
Retainer. You may have been quoted an upfront retainer amount in the thousands. A common misconception is that this is the total cost of your case; another is that the lawyer gets to keep and spend this money. In truth, a retainer is usually like a down payment on hours the lawyer expects to be working on your case—meaning that for the lawyer, this money is a liability, not an asset. The retainer is placed in a special account, and the lawyer cannot touch it until services are performed. (This goes hand-in-hand with an hourly rate, because the lawyer must show how they earned the money in order to draw it from the special account.)
The lawyer’s retainer amount may sound unreasonable or unaffordable, but there are many factors that determine a retainer quote. First, a lawyer may be able to predict how many hours the case should take to complete. Your type of matter might be front-heavy, meaning lots of preparation and court filings to start it off, but might cost less on the back end. Second, the lawyer may have to outlay certain funds or material costs to make headway on your case, and they may need that money available to avoid dipping into their own operating funds. Keep in mind that lawyers are running a business, and businesses have overhead. And finally, the lawyer may be thinking of the retainer as an “insurance policy” to make sure they will be paid for their efforts. If they don’t know you—or if you have a reputation for not paying your bills—it is reasonable to give them a guarantee against the work you are asking them to perform. (And if your case has you risking jail or a large settlement against you, does it make sense for the lawyer to bill you later?) If you cannot afford the full retainer, ask if the lawyer can break the case into stages and charge separately for each one. They may say no, but you won’t know if you don’t ask.
Hourly Rate. Hourly rates can sound horrendous when you view them in total, but most attorneys charge in small pieces of an hour—usually by one-tenth of an hour (six minutes) increments or by some other arbitrary measure. They keep track of almost every task and bill accordingly. If you have deposited a retainer, the hours will be drawn down out of that retainer—but you may be asked to replenish it at some point.
The hourly rate itself may represent a combination of the lawyer’s experience, past success and reputation, specialization, and the rates for similar lawyers in the geographic market. Some lawyers will charge different hourly rates for different things—such as a higher rate for courtroom litigation, a lower rate for paralegal work, or different rates for partner versus associate work. Make sure you understand how (or if) the time will be broken down, and don’t add unnecessary work (such as sending long emails or leaving tons of messages) to avoid incurring unnecessary billable hours.
Flat or Fixed Fee. According to the Interwebs, flat fees are typically used only where a matter is routine—such as an uncontested divorce or simple estate planning documents. But more and more, experienced attorneys are using flat, earned-on-receipt fees to avoid cumbersome billing and trust accounting processes. As attorneys build their own efficiencies, it can benefit them to quote a single amount for a traffic, criminal, or business matter. Then, the onus is on them to maximize their time compared to the fee. It can also benefit you as the client, because once you pay the flat fee, your matter is handled without unexpected bills later on. But, buyer beware: read the fine print when you are asked to sign a flat fee agreement to avoid forfeiting the fee in the event you want to hire different counsel or resolve the matter on your own. You also may have to pay “hard costs” incurred outside of the agreement, such as postage, court costs, or expert fees.
Contingency Fee. You have all seen the commercials: “You don’t pay unless we win your case!” While the percentages vary, a “contingency fee” is typically found in cases where you are the plaintiff seeking a substantial monetary award from another party. The percentage may be capped by the court or may be based upon a sliding scale that changes depending on when or whether settlement is reached between the parties. In some practice areas, the fees (called “statutory fees”) are limited by law because the matters are “of public concern.” You will see this in cases asserting violations of specific federal acts, such as the Civil Rights Act Title VII or the Fair Labor Standards Act.
If a lawyer advertises that they charge on a contingency, this likely means that they work in plaintiff-side practice areas such as personal injury, property damage, civil rights, or other kinds of torts. If you are the defendant, it is unlikely your case will be taken on contingency. You should know that fees in some practice areas (such as criminal or child support) are forbidden from being charged as contingent; expect to pay a lawyer upfront for these areas. Also note that you may be required to pay some of the costs of litigation to avoid the attorney taking on additional costs.
Prepaid Legal or Legal Insurance. Some employers, banks, or unions provide prepaid plans as a benefit. In exchange for access to a lawyer—usually in limited practice areas—the consumer (or organization) pays an ongoing fee. When the client needs help, the Plan provides an attorney referral. There may be a limit on the hours or services that can be provided under the Plan, and additional charges may apply. You may or may not be in an area where lawyers are signed up to provide these services.
Now that you are equipped with knowledge, you may go forth and hire an attorney—but unlike the wise legal consumers in today’s video clip, I do not recommend that you go to your lawyer on the street and hand him piles of cash in an envelope. In 2019, most lawyers accept credit card payments!