f/k/a . . . the archives

February 28, 2009

Understanding and Reducing Attorney Fees

Filed under: lawyer news or ethics,viewpoint — David Giacalone @ 4:00 am

Consumers of legal services won’t find much information online or at their public library to help them keep their costs down when they hire a lawyer.  Some websites or firms might hawk their own services or materials as being a great value, or as an option far cheaper than using a lawyer, but almost no one — including bar associations and consumer groups — has compiled general tips on how to make legal services less expensive when you turn from prospective consumer to client.   Therefore, when I heard a couple months ago that the legal reform group HALT published a free, online Citizen Legal Guide titled “Understanding Attorney Fees So You Can Keep Legal Costs Down” (November, 2008; 8-pp. pdf. version), I was quite pleased.  Unfortunately, once I read it, my reaction to HALT’s Fee Guide was like f/k/a‘s fictional Prof. Yabut:  “Yeah, but . . . “.

HALT has been working for over 30 years to achieve “Simple, Affordable, Accountable Justice for All.”  f/k/a and our self-help-law sister weblog SHLEP have quoted and linked to HALT, its studies, Report Cards, and guides scores of times, beginning on our very first day of blogging in 2003.  To my surprise, however, I was disappointed by HALT’s Understanding Attorney Fees ["UAF"]. It correctly advises consumers that:

“If you find yourself with a legal question, you should explore all of the options available to you and become educated about your legal question. You may actually find that you do not need to hire an attorney. . . . However, if your legal matter is complex, substantial money is at stake, you’re charged with a crime, or you’re simply uncomfortable handling legal matters on your own, you’ll probably need to hire a lawyer.”

However, for those who do need to hire a lawyer, there is simply too much left unsaid in Understanding Attorney Fees about how to keep your legal fees down.  The HALT Guide does note that “As a legal consumer, your best defense against paying more than you should is to educate yourself about legal fees before signing on the dotted line.”  And, it promises to explain “the most common billing arrangements used by lawyers, some new billing arrangements lawyers are using and specific ways you can lower your legal costs.”

Nonetheless, for our money, HALT’s Understanding Attorney Fees:

  • Offers very little help for controlling or lowering fees that are based on an hourly rate for the lawyer’s time — not when the client is entering into an hourly billing agreement, while the services are being provided, nor when presented with a periodic or final bill.
  • Takes a real dive on contingency fees, completely ignoring HALT’s own position on such fees from a decade ago, as presented in its Injured Consumer’s Legal Bill of Rights (The Legal Reformer, December 1997; issue no longer online).  At that time, HALT insisted that p/i lawyers should be charging clients a lower percentage in less-risky cases, rather than using the same standard contingency fee for virtually all clients (i.e, one third or 40%).  Lawyers were also required to provide the client with key information and estimates relating to risk prior to entering a fee agreement, with the information included in the signed agreement.  Frankly, the contingency fee section in the UAF Guide sounds like it was ghost-written by the plaintiff’s personal injury bar.  It doesn’t even mention the word “negotiate.”
  • Seems to offer a blanket endorsement of “alternative” billing methods, with very little help on how to shop for such fees, and no warning that some lawyers offering alternative fee arrangements in fact intend to extract higher fees than possible when billing by the hour (e.g., so-called Value Pricing).

. .   We hope consumers will read HALT’s “Understanding Attorney Fees,” but we believe the HALT staff has left too much out of its Guide. There’s no way the f/k/a Gang can create a comprehensive new draft or supplement to HALT’s publication (especially since we are moth-balling this site tomorrow).  We will, however, summarize portions of HALT’s UAF Guide, suggest some tips for keeping fees down, and point to a few other helpful sources.

Consumers shopping for legal services need to remember that every kind of pricing arrangement can be exploited or misused to result in excessive fees or inadequate services.  For example, hourly billing might result in a lawyer doing too much, but fixed fees can lead to lawyers doing too little, and contingency fees can make you pay far more than is warranted by the risk the lawyer is taking of not being paid or by the amount of work that will be required of the lawyer.  See, e.g., our posts “other thoughtful voices on the lawyer billing debate;” and “the reality of alternate billing.”  Clients need to insist on more information and lawyers need to act in ways that create trust and give full value.

First, two quick points:

  • Unbundling can Save You a Bundle: With “unbundling,” the lawyer and client agree that the lawyer will only perform specific, discrete tasks. If you think you’re willing and able to play a large role in your own legal affairs, but know you want or need a lawyer to help perform “discrete tasks” and serve as advisor and coach, look into Unbundling. (see our prior post; and this posting from SHLEP for an introduction); the excerpts from M. Sue Talia‘s book Unbundling Your Divorce can help you determine if they are good candidate. Find State unbundling rules here.
  • Do-It-Yourself/Pro Se: For information relating to do-it-yourself resources, see shlep: the Self Help Law ExPress [which was started by f/k/a's Editor], where you will find information on locating self-help materials, thinking about whether representing yourself makes sense for you, a Topic Index, and much more.

In “Understanding Attorney Fees,” HALT reminds consumers that “The type of arrangement you enter into can have a huge impact on the amount of fees you’ll pay, so it’s important to understand how each works and the incentives lawyers have for using them.”  It explains that:

“How much lawyers charge depends on where they do business, whether they are self-employed or working for a firm, how complex the case is and, in some circumstances, what you can pay.  The market rate for any given legal service, then, is really a range of fees that often varies.”

“. . . Lawyers usually charge for their services in one of three ways—hourly rates, flat fees and contingency fees.  They can also charge a retainer or “down payment” on the legal services you are purchasing. The type of fee arrangement with your lawyer can have a huge impact on the amount you’ll pay.”

“. . . Hourly fees are based on the number of hours a lawyer works on your case. If your lawyer charges $100 an hour, your fee will be $100 multiplied by the number of hours worked. .  .  .  Flat fees are typically offered for routine legal matters that are largely paperwork, like preparing a will or getting an uncontested divorce.  You are charged one specific fee for all of the work done on your case, no matter how long it takes.  Finally, with contingency fees, attorneys receive payment only if they win your case”

In a too-brief section called “Lowering Legal Fees,” the UAF Guide offers ideas relevant to all fee arrangements.   Here are “specific things you can do before and after you hire a lawyer to help keep legal costs down.”

Shop carefully.  One of the best ways to ensure you won’t pay more for legal services than you should is by hiring the right attorney at the start.  To do that, you need to shop carefully—much as you would for any big purchase.  Lawyers develop expertise in different areas of the law so you shouldn’t hire a divorce lawyer to assist you with a real estate transaction.  Comparative shopping for a lawyer helps you to understand the range of services and prices available, compare differing views on your legal problem and select a lawyer who is likely to handle your case as you expect and at a price you can afford.”

Case retainers.  These fees are paid to retain the services of an attorney at the beginning of a case. This is the kind of retainer most often paid by the typical legal consumer.  It may represent all of the fee, none of the fee, or a portion of it. It may be refunded or not, depending on your agreement.  For example, a lawyer may charge you a flat fee of $800 for an uncontested divorce and ask you to pay a retainer of one-quarter—$200—up front.  This money may also be used to pay expenses associated with the case, such as filing fees. The important thing to make clear at the outset is whether the retainer is an advance on expenses, fees or both, and whether any unused part of it will be refunded.”

Review billing statements.  When you receive your lawyer’s bill, make sure you understand what you are being charged for—don’t be afraid to question discrepancies or to ask about charges you don’t understand.   Reviewing your bills lets your lawyer know you are on top of things and that you do not expect to be charged more than you should be.”

Here’s how HALT’s Understanding Attorney Fees treats the three primary types of billing arrangements, along with my comments and suggestions.

Hourly fees. As most Americans know, hourly fees are based on the time devoted to the client’s matter by lawyers or others in a firm, stated as dollars per hour.  Many commentators have wrongly made billable hours a scapegoat for all that ails lawyer fees and lawyer-client relationships.  As we said in the posting “chronomentrophobia [the fear of clocks]”:

  • from the client’s perspective, there is nothing wrong with the billable hour fee system that cannot be cured by the lawyer merely doing what is required of him or her ethically and as a fiduciary: (a) following the standards embodied in Rule 1.5(a) of the Model Code — i.e., basing the hourly rate on the experience and capabilities of the lawyer, complexity of the matter, skill required, customary local charges, time limits imposed, etc.; (b) performing in an efficient and competent manner (with no charges for time spent inefficiently or used to learn the basics in a new area); and (c) keeping the client well-informed [see Intro to ABA Statement on Principles in Billing for Legal Services; fees and the lawyer-fiduciary; Model Rule 1.4(b); and Brickman].

Although most clients still purchase legal services from lawyers by the hour, UAF has a rather brief discussion of hourly fees.  The HALT Guide makes the following points:

  • “If your lawyer charges $100 an hour, your fee will be $100 multiplied by the number of hours worked.  Lawyers also bill for partial hours spent, usually by the quarter or tenth of an hour.”

f/k/a says: Hours X Hourly Rate is meant to be the maximum that a lawyer can charge under an hourly billing agreement.  The figure is not automatic or set in stone.  As the 1996 Statement of Billing Principles from the American Bar Association [ABA] Task Force on Lawyer Business Ethics says: “The lawyer is expected to use professional judgment in determining whether the number of hours spent on a matter is reasonable under the circumstances of the engagement” — e.g., making appropriate reductions (“writing off” hours) for time that is not used in an efficient, cost-effective manner, or that constitutes training or getting up to speed.

Increments:  An “increment” is the shortest amount of time a firm will bill in calculating hours spent working for a client. An increment of 0.10 of an hour means the firm will charge the clients for the equivalent of six minutes, no matter how much less than that was actually spent.  In that context, a quarter hour seems very high and clients should resist such a large increment. [It would mean, for example, at $200 an hour, paying $50 for a two-minute phone call.]  As was stated in Professional Lawyer magazine (in an article discussed below),

“A normal billing arrangement for a firm is to bill in increments of 0.10 of an hour, (6 minutes). ‘[P]rofessional persons who charge their clients fees in excess of $80.00 per hour, based upon time spent, cannot, in all honesty and reasonableness, charge their clients for increments in excess of one tenth of an hour.’ In re Tom Carter Enterprises, Inc., 55 B. R. 548, 549 (Bankr. C.D.Cal. 1985).”

  • “Under an hourly-fee arrangement, the more hours worked, the bigger the bill.  This rewards the lawyer who puts in more hours on your case, whether or not it needs that much time.”

f/k/a says:  This is true, which is why the lawyer has an ethical and fiduciary duty to work efficiently and to find out, as the ABA Billing Statement puts it, whether the matter is “of such critical importance to the client that a ‘leave-no-stone- unturned’ approach is appropriate,” or the client would instead “prefer to accept some risk in order to avoid some of the costs attendant to such an approach.”

  • “If you agree to an hourly rate, make sure your agreement specifies the hourly rate for your attorney as well as what you’ll pay for junior level professionals or support staff.  You should not be paying the attorney’s hourly rate for work being done by administrative staff.”

The Actual Hourly Rate:  You should keep in mind, when looking at a firm’s schedule of hourly rates for its lawyers that the standards embodied in Rule 1.5(a) of the Model Rules of Professional Responsibility apply — i.e., to be reasonable, an hourly rate must be based on the experience and capabilities of the lawyer, complexity of the matter, skill required, customary local charges, time limits imposed by the clients, etc..  You should not, for example, be paying top dollar for inexperienced lawyers.

  • “You should also ask that your hourly fee agreement include a fee cap—an amount that cannot be exceeded without your prior approval.”
  • “Some lawyers are willing to coach pro se litigants (those who are representing themselves in court) on an hourly fee basis.  Instead of handling the litigant’s case from start to finish, they advise, coach, direct and charge for these services by the hour.” [Note: This is related to the Unbundling we mention above.  With "Limited Scope Representation," the lawyer might make court appearances.]

………………………. ..

By understanding some of the ethical principles relating to hourly lawyer billing, and utilizing certain practical strategies and tactics, clients can also help ensure that their fees are no larger than necessary.  Here are tips we’ve garnered from sources around the web:

.. .. Retainer Agreements:  The authors of the HALT book “Using a Lawyer: And What To Do If Things Go Wrong,” Kay Ostberg & Theresa Meehan Rudy, have put together a Model Attorney-Client Agreement [5 pages, pdf) that is "designed to secure the rights and stipulate the responsibilities of both the attorney and client."  Using a Lawyer tells us why a well-structured retainer agreement between the lawyer and client is important:

"As the saying goes, 'the devil is in the details.' Sophisticated corporate clients demand that their lawyers hammer out details in their attorney-client agreements.  This helps to ensure that their rights are protected and the fees they'll charge are expected.  The average consumer of legal services should demand the same.  HALT's research shows that most disputes between clients and attorneys could have been avoided if the nature of their relationship had ben made explicit at the outset.  If your attorney refuses to sign or draft an agreement that protects your rights, ask why. The answer will tell you whether or not the attorney is the sort you want to employ.

The f/k/a Gang urges legal consumers to take a good look at HALT's model agreement. As they note, "The language in this model contract is not magic.  There are other ways of protecting consumers' rights in writing.  However, this model will help you identify the most important protections that you should insist upon, and alert you to other possible sources of problems and frictions between lawyers and clients."  Among other items, the Model Agreement urges the client to ask for the inclusion of the following clauses:

- Attorney estimates that these court costs will not exceed the sum of ______ Dollars ($____)
- Attorney estimates additional costs listed above (e.g., phone charges, document search, computer research, investigator, travel) will not exceed the sum of  ______ Dollars ($____)

- Attorney estimates that the total cost of fees for the services of Attorney, junior members, and paralegal will not exceed the sum of  ______ Dollars ($____)
- Client will not be liable for any additional costs or fees which exceed the estimates given above in ___, unless attorney notifies Client of the additional expenses required and receives permission of Client before incurring the additional expenses.

- Client will receive a billing statement monthly (or at some other appropriate interval) with detailed itemization of the attorney's junior members' and paralegals' activities in the case, the amount of time involved, and the additional costs incurred.

- Should the retainer exceed the total cost of completing the case, the remainder is to be returned in full to Client.

A consumer who wants to understand the factors that go into a well-written retainer agreement (for working on representation in a particular legal matter) should also see the article "Retainer Agreements and Rule 1.5(b)" in the December 2008 issue of The D.C. Bar magazine, Washington Lawyer, by Dolores Dorsainvil and Daniel M. Mills.

update (7 PM, Feb. 28, 2009): By accident, I just ran across a post I wrote back in 2003, but had forgotten about, called "improving lawyer fee and retainer agreements."  It says, in part:

T he Law Practice Today blog, which is sponsored by the ABA Committee on Law Practice Management, has a new and useful posting entitled Build a Better Fee Agreement, by David Bilinsky and Reid Trautz (posted 7/10/03). The tips are excerpted from the April 2003 edition of Law Practice Magazine. The article states, with brief explanations, that a comprehensive written fee agreement between lawyer and client should do the following . . . ." [It's worth reading the rest and the original article.]

HOURLY BILLING GUIDANCE for Lawyers (and savy clients): Earlier in this post, we mentioned the Statement of Billing Principles produced by the American Bar Association’s The Task Force on Lawyer Business Ethics in 1996.   The guidelines for lawyer billing contained in the Statement should help clients better understand issues that are relevant to constructing and implementing a retainer agreement, and reviewing a billing statement.  Here are some of the most important concepts and principles (emphases added):

DISCLOSURE AND UNDERSTANDING

The first guiding principle for the lawyer with respect to billing for legal services should be an understanding with the client of the basis for such billing arrangement through full disclosure by the lawyer.   . . . Such understanding between lawyer and client should include not only the method to be used in calculating fees for legal services but also the scope of the legal services to be performed (and charged for) to the extent that an understanding with respect to the scope is expected to be an important factor in the lawyer-client relationship.   For example, is the matter of such critical importance to the client that a “leave-no-stone- unturned” approach is appropriate, or does the client prefer to accept some risk in order to avoid some of the costs attendant to such an approach? . . .

LAWYER’S RESPONSIBILITY IN PREPARATION OF INVOICES  

. . . The lawyer and law firm should make every reasonable effort to provide clients with complete and accurate invoices describing the legal services provided and the amounts charged for same. . . . Each invoice should clearly identify the legal services provided in such specificity as the client requests, the fees charged for such services, and the disbursements and other charges relating to the period being billed. . . .

HOURLY BILLING ARRANGEMENTS

The agreement by a client to be billed for legal services on an hourly basis does not justify the lawyer spending an unreasonable number of hours on a particular matter or task.   The amount of time spent on a matter should be reasonable in relation to the client’s goals and expectations and must also be consistent with the lawyer’s professional ethical obligations.   In general, the lawyer should have an obligation to address the matter that is to be billed on an hourly basis in a cost effective manner and to avoid “churning” hours, whether due to the lawyer being under-worked and therefore spending more time than is reasonable on the matter, the assignment of the matter or task to a lawyer who is too inexperienced to perform it competently and/or cost- effectively, or otherwise.

The lawyer is expected to use professional judgment in determining whether the number of hours spent on a matter is reasonable under the circumstances of the engagement.

Premium Billing

. . . [An] example of opportunity cost would be a client who demands an unreasonable turnaround time for certain work, thereby rendering it impossible for the lawyer to attend to other business or personal matters in the normal course.   Such “rush” demands may provide a reasonable basis for a surcharge or higher hourly rate.   If such a surcharge is to be implemented, however, it would require advance disclosure to and agreement by the client.

Hourly Billing Rates

When legal services to be performed are to be billed on an hourly basis, the hourly rates or range of rates for lawyers involved (or expected to be involved) in performing work for the client should be disclosed to the client… as well as, if applicable, the existence of multiple hourly billing rates for the same lawyer depending on the type of service provided.

Minimum Time Increments

. . . Legitimate use of a minimum time increment may depend on how the lawyer records the balance of the increment.   Two fifteen-minute charges for two five-minute calls within the same fifteen-minute period seem inappropriate; some balancing should be used.

. . .

Learning Curve

Some clients have indicated that they do not wish to (or will not) pay for the cost of training lawyers or bringing them up the learning curve with respect to a particular substantive area of the law or a particular type of case or transaction.   Resolving this issue requires communication with the client in order to ascertain the nature of the concern.

Provision by the lawyer or law firm of cost-effective services to clients requires that certain tasks be performed by less experienced lawyers whose hourly billing rates are lower but who, in the judgment of the managing attorney on the project, have sufficient expertise and experience to perform such task.   Lack of experience should be appropriately reflected in a lawyer’s hourly rate.. . .

If the primary purpose of participation in a meeting or project by a less experienced lawyer in a law firm is to train such lawyer, then the lawyer’s time should not be billed to the client.

Staffing Considerations

. . . The touchstones for determining such issues as staffing should be cost-effectiveness and quality of legal service to the client.   Staffing should be discussed with the client if the client has expressed an interest in such information and must be disclosed if the lawyer has created an expectation that the matter will be handled by a particular lawyer or one with a certain experience level and such is not in fact the case.   . . .

. . .

In recognition of the value of continuity of representation, law firms should endeavor to staff a specific client matter with a relatively consistent team of lawyers.   If a change must be made in a critical member of the team (other than in response to a client request), and this change necessitates any significant expenditure of time by the new member of the team in getting up to speed, counsel should make appropriate downward adjustments to the fees billed in such matter to avoid unreasonable charges to the client.

  • Overhead:  Prof. Yabut says: The more overhead your lawyer has, the higher your fees are likely to be.  Don’t confuse a fancy location or office suite with better service or value.

REVIEWING YOUR BILLING STATEMENT:  In “Reviewing A Law Firm’s Billing Practices” (The Professional Lawyer, Fall 2001), mediator and arbitrator Gerald F. Phillips reviews billing statements received by a client from a law firm.  In discussing the problems he found, Phillips gives us useful concepts to keep in mind when determining whether hourly charges are reasonable or should be reduced or eliminated.  For example, Phillips discusses issues involving rounding up and incremental billing [see the excerpt quoted above].  Here are other topics covered, with select excerpts (emphases added):

C. THE BLOCK-BILLING CONCEALED THE ACTUAL TIME EXPENDED AND FACILITATED BILL PADDING

“Block-billing, assigning one time charge to multiple
tasks is a practice that is almost universally disapproved
.”
U.S. Business Litigation (at page 16). It is disapproved
because it allows a lawyer to conceal the time spent on each
task and prevents the determination of whether individual
tasks were performed within a reasonable period of time. In
this case, this practice also enabled the attorneys to round
up and to bill more often for a half or full hour.

Billing Statements should show clearly the amount of time incurred with respect to each task and that information should not be concealed by such devises as block-billing.

D. THE EXCESSIVE REVISIONS WERE UNNECESSARY OR WERE REQUIRED BECAUSE OF THE POOR QUALITY OF THE ORIGINAL WORK

The Statements indicate that it was the regular practice of
the Firm to have attorneys repeatedly review and revise the
work product of others. This practice generated larger fees.
If the constant “reviewing and revising” were necessary, then
the original work was not of the quality that a first rate firm
should perform.
If this was the case, the firm should not have
billed you fully for both the poor quality original work and
for the time spent in making the revisions. If the tasks were
given to inexperienced young attorneys, you should not have
been billed for their training. Billing partners, when review-
ing statements, often write off time that they recognize as
excessive and the result of an associate’s inexperience
.

E. THE EXCESSIVE RESEARCH AND THE REPETITIVE TASKS SHOULD NOT HAVE BEEN REQUIRED

For a Firm that specializes in the type of law required in
your case and holds itself out as having that expertise one
must wonder why so much time was spent and so many revi-
sions made on what should have been routine matters for
such a firm
. . . . [T]he Firm may have misrepresented its expertise.

Some of the research appears to have been used to educate or train
young associates and should not have been billed
.

F. INEFFECTIVE STAFFING SUBSTANTIALLY INCREASED THE FEES

The Firm used two partners and two associates on this
case. The Billing Statements show that others often
reviewed and revised the work and that there was excessive
conferencing. The charges for conferences often did not
indicate, as it should, the subject of the meeting.

G. THE BILLING STATEMENTS WERE VAGUE AND MEANINGLESS AND DISCLOSED REPETITIVE ENTRIES

Many of the entries were vague, such as “legal research”
or “Telephone conference with X”. Many entries were
repetitive such as “Review discovery” or on successive days
billed for “Review articles.” If “legal research” was done it
is incumbent on the attorney to specify the nature of the
research. Many entries are vague, especially since they were
repeated month after month. “Reviewing” “revising” and
even editing may have been used to permit gross padding
.

PRACTICAL TACTICS for the Cost-Conscious CLIENT

Several lawyers have compiled tips for clients who want to keep their bills from ballooning. here are samples:

In his “Tips on Reducing Legal Fees,” Tennessee divorce lawyer David M. Waldrop says “Divorce is expensive. Nevertheless, there are ways to reduce your legal fees.”  His tips are good for divorce and other family law cases, and many of the notions can be applied elsewhere, too.   Here are a few examples:

1. Prepare for your phone calls.

. . . You are charged for every phone call with your lawyer. Remember, your lawyer sells time. Therefore, make a list of the topics you wish to discuss before you call so you will not forget what you wish to discuss. Also, call only when necessary.

Do not call your lawyer at home unless it is an emergency. Your lawyer does not have your file with him. Most lawyers charge double the hourly rate if you call them at home.

4. Fee disputes.  If you believe you have been over-charged, discuss it with your lawyer. If you are still dissatisfied, contact the bar fee dispute committee to mediate the dispute.

5. Keep your sense of humor. . . .  It will save you money by preventing you from litigating the non-essential points. If you are going to negotiate a settlement, remember both sides have to give to reach a settlement. Otherwise, no one wins but the lawyers.

6. Be responsible and don’t sweat the petty stuff.

Reducing Legal Fees“  .. Both the website of Minnesota lawyer Maury D. Beaulier and the Separated Parenting Access & Resource Center offered a set of cost-cutting guidelines, under the following categories:

Keeping A File At Home
Organizing Documents and Filling Out Requested Forms
Compiling Questions

“You should also keep a notebook of any issues and questions that you have for your attorney noting the date of your question or issue in your notebook. When you have a sufficient number of issues or questions, you should contact your attorney for answers. By waiting until you have a number of questions at one time, you may significantly reduce your legal fees.”

Do Not Use Your Lawyer as a Therapist;
Focus on the Legal Issues
Don’t Try to Cheat

  • Regarding telepone calls, the New York State Bar Association’s “Choosing a Lawyer” suggests:

“If you have agreed to pay the lawyer an hourly rate for work performed on your behalf, then the time it takes to stop working on another matter, retrieve your file and consider the questions that you pose over the phone would be properly billed to you. Therefore, while you should contact your attorney when necessary in the context of the case, you should not do so on the spur of the moment. Make a list of matters that need to be discussed and speak about all matters at one time. If a paralegal can help you, do not insist upon speaking with the lawyer.”

.. For a scholarly-but-practical treatment of the ethics of hourly billing, see “The Honest Hour: The Ethics of Time-Based Billing by Attorneys” by William G. Ross  (280 pages. 1996).  The publisher’s synopisis says: “The Honest Hour explains how attorneys and their clients can work together to develop fee agreements that will give attorneys enough time to produce quality work while guarding against practices that exploit clients.”  And, check out Prof. Ross‘s eye-opening surveys, including his 2006 – 2007 Survey.

Nolo’s IEP Guide , by Lawrence M. Siegel, was written to help parents of children with learning disabilities through the Individual Education Program process.  His suggestions, however, have a much broader application:

Be organized.    “Especially when you are paying by the hour, it’s important to gather important documents, write a short chronology of events, and consistently explain the problem to your lawyer.  Keep a copy of everything you give to the lawyer.”

.. Be prepared before you meet your lawyer.  Whenever possible, put your questions in writing and mail, fax, or deliver them to your lawyer before all meetings or phone conversations.  Early preparation also helps focus the meeting so there is less chance of digressing (at your expense) into unrelated topics.

Carefully review lawyer bills.  Like everyone else, lawyers make mistakes.  [like transposing figures] . .. Don’t hesitate to question your bill.  You have the right to a clear explanation of costs.

Ask your lawyer what work you can do.

Listen to your lawyer.  . .. But large legal bills are sometimes the result of clients losing track of time or ignoring advice. . . . As a client, you should not be afraid to question your attorney’s recommendation.  But part of what you’re paying for is reasonable and objective advice, — and when your attorney says not to waste time on an issue, you should probably listen.

Stuart M. Saft wrote “Reducing Legal Fees: A Ten-Step Program” (Habitat Magazine, November 2006) for the board and management of cooperatives and condominiums.  Often, however, his good advice has broader application.

1. The Board Should Not Be Paying to Educate the Attorney

. . . If your attorney has not dealt with a similar issue, ask if someone else in the office has and could handle the matter. You can also consider referring that particular matter to a law firm that does have experience in the area. Using another attorney for a particular matter does not mean that your relationship with the old attorney has to end.

As an alternative, ask your attorney to bill the start-up time at a discount.

2. Don’t Micromanage the Attorney

Several times I have seen the board members or the managing agent call the attorney daily to discuss the status of the matter and to offer suggestions and to cross-examine him or her on how the matter is being handled. This adds significantly to the cost  . . .

3. Appoint a Legal Liaison.  There is nothing more important that having a single point of contact between the board and the lawyer. . . .

4. Listen to the Lawyer 

If your attorney responds to an inquiry by noting that it is forbidden to do something based on the language of the proprietary lease, bylaws, or declaration, then it its not productive to beg or to demand of the lawyer that he or she not object to this thing being done. These documents are written in English — or at least legalese — and they are decipherable. Ask the lawyer to point out the specific language that creates the objection and review it yourself to see it you agree with the interpretation. Then, if you don’t, call the lawyer to see why he or she believes that it says what you don’t think it says.

7. Use Junior Partners, Associates and Paralegals

8. Not Every Principle Is Worth Litigating Over

. . .  Lawyers make money representing clients, so if your lawyer is attempting to dissuade you from bringing a lawsuit, perhaps you should listen. Most of us will bring a lawsuit if the client insists, but we try to talk them out of it first.

9. Don’t Litigate Based on Judge Judy

10. Blame the Lawyer

. . .  just say that you wanted to be tough and fight for truth, justice and the American Way, but the lawyer would not let you.

 

Contingency Fees:

Understanding Attorney Fees has remarkably little to say about contingency fees — and virtually no advice for reducing the often-excessive fees. Here’s the core discussion:

“Contingency fees.   In this type of fee agreement (used mostly in personal injury or collections cases in which the client can’t afford to pay if the case is lost), the attorney receives payment only if she wins the case, although the client usually must still pay any expenses an attorney incurs because of pursuing the case.

“This is an all-or-nothing proposition—either the client wins and the attorney is paid, or the client loses and the attorney walks away unpaid.  The theory behind contingency fees is simple.  The attorney takes the risk of losing; the greater the risk of losing, the bigger the percentage.  If you win, the attorney is highly compensated on the theory that he must also absorb losses on contingency fee cases that didn’t succeed.”

“The customary contingency fee is 33 percent of the settlement, although fees range from 15 to 50 percent.  Some lawyers offer a sliding scale in which the percentage changes depending on the stage at which the case is settled.  For example, the lawyer may collect 25 percent if you settle before trial, 30 percent if there is a trial and 40 percent if there is an appeal.”

” . . . make sure you ask that the attorney’s percentage be calculated after expenses have been subtracted from the award.  This can result in significant savings for you.”

Although it states “the greater the risk of losing, the bigger the percentage,” the statement in UAF offers no clue on how the client is to determine the degree of risk his or her case poses for the law firm (the likelihood of winning and earning a fee that adequately compensates for the firm’s efforts and expenditures).  As mentioned in the opening segment of this post, HALT appears to have abandoned its campaign to bring fairness to contingency fees, by giving clients enough information about the lawyer’s risk that they can negotiate lower fees.  Instead, UAF seems to capitulate to the standard contingency fee, which is forced upon virtually every personal injury client.

In 1999, HALT’s executive director James C. Turner talked to Washington Post columnist Don Oldenburg about standard contingency fees.  The Consummate Consumer column for March 3, 1999, titled “‘Standard’ Legal Fees”( $$ article preview) reported:

“Last summer, HALT, a District-based legal reform group, launched its Legal Consumers Bill of Rights Project to inform consumers of their rights when hiring an attorney.  Among its consumer protection provisions is the client’s right to have an objective review of a contingent fee by a court or a bar association committee to assure it is reasonable and fair.  It also calls for written fee agreements in injury and death cases that cover the probability of winning, amount of award expected, number of hours of legal services required, out-of-pocket expenses the client will pay, and the availability and cost of alternative fee arrangements.”

HALT’s director told the Washington Post:

“It is a tragedy that people just swallow this one-third concept. Every consumer has a right to expect and demand that there be a relationship between the work that is actually done and the fee they pay.  You have the right to be informed of different fee arrangements.  Responsible and competent lawyers do that already, but there are bad apples in the barrel.

“The most important thing that any person needs to keep in mind is that they are the boss, and the terms of employment are negotiable.”

The December 1997 issue of HALT’s newsletter The Legal Reformer, which explains and contains HALT’s Injured Consumer’s Legal Bill of Rights is no longer available online. Luckily, I printed it out many years ago, and uploaded it to our webserver in pdf form.  The Injured Consumer’s Bill of Rights includes the right to have the lawyer’s good faith evaluation of the case prior to signing any fee agreement, including the following information, which must be incorporated into the fee agreement:

- the probability of a successful outcome;
- the amount of recovery reasonably expected in that outcome;
- the number of hours of legal services that are likely to be required to secure that outcome;
- the amount of any costs or expense that the client must bear:
- the availability and costs of alternative fee arrangements [such as allowing the client to pay a reasonable hourly rate rather than a contingency fee]

With this information, the client can understand how strong his or her case is and attempt to negotiate a fee level that adequately compensates the lawyer for the level of risk and amount of effort required, while  making sure the client wins and keeps all the money he deserves.  The standard contingency fee, on the other hand, is normally the maximum allowed in a jurisdiction for the particular type of injury, and treats every case as if it justified the maximum fee.  Thus, because p/i lawyers are usually very good at weeding out risky cases, injured clients often are forced to pay an unreasonably high fee.

The HALT “client’s rights” mirror those imposed on lawyers using contingency fees in a 1994 ethics opinion of the American Bar Association.  ABA Formal Ethics Opinion 94-389 ($$ download from ABA; it is described here, along with a full discussion of the ethical use of contingency fees).  Those two sources (along with Florida’s contingency fee Bill of Rights), were the basis for f/k/a‘s comprehensive Injured Consumers’ Bill of Rights for Contingency Fees.  Prospective clients can use the HALT Bill of Rights, the f/k/a version, and Op. 94-389 to discover the kinds of questions to pose when shopping for a personal injury lawyer.

Unfortunately, although trial lawyer associations, the Federal Trade Commission, and many courts have stated that contingency fees should correspond in each case with the level of risk (see our post, “risk matters“), most p/i lawyers have refused to give up the excessive fees that are generated using the standard contingency fee.

Flat fees are often a bargain, but never take that for granted.  Here’s what the HALT Guide says about Flat Fees:

Flat fees.  Many lawyers and legal clinics offer flat fees for routine legal matters, such as for uncontested divorces, will preparation, business incorporation, lease preparation and some probate work—basically uncomplicated legal matters that involve filling out forms.  A flat fee means that you will be charged a specified total for work performed on your case, regardless of the time it takes to complete. . . . Often an agreement with a flat rate will require that the client also pay such “extras” as filing fees, photocopying and other out-of-pocket or unanticipated expenses.

“Flat fees are charged when lawyers can accurately predict the average amount of time a case will take. . . . Recognize, however, that a flat fee often reflects an hourly rate, so ask how much time the work will take, include this estimate in your agreement and choose an hourly figure if the math is in your favor.  Usually, however, flat fees turn out to be bargains because when the work is repetitive and time-saving forms are used, the savings are passed on to clients.”

f/k/a Note: Yes, do the math and compare prices. One fixed-fee advocate recently told his weblog readers “Sophisticated clients who insist on hourly billing do so because they’re smarter than you are, not because they want you to be paid fairly.”  That lawyer admitted at his weblog that he had switched to fixed fees to avoid passing on efficiency savings to clients.

“Flat fees allow you to shop around among lawyers if you have a routine matter.  Ask what specifics the flat fee covers in each case to be sure the various attorneys are offering the same services for the quoted price.  In other words, if one lawyer’s flat fee includes copying costs and another identical fee does not, the first lawyer is more economical.  If you agree to a flat fee, make sure your agreement specifies exactly what the fee covers as well as any costs not included.”

f/k/a Cautionary Note: Lawyers will often switch between hourly and flat fees for their own advantage.  For example, many lawyers (e.g. in Family and Criminal matters) find themselves at court with several clients at the same time, doing motions, status calls, and sundry non-trial matters.  Some would bill each client for overlapping time at court (charging, for example, $200 per hour to each of three clients for the same 60 minutes).  When they were told such multiple billing was unethical, a lot of lawyers started billing a flat rate for each court appearance — say, $500 to each of the three clients, instead of $200 per hour.  That could turn sixty or ninety minutes at court into a $1500 morning, whereas the three clients would have split a mere $600 tab paying by the hour, if the lawyer had spent a full three hours at court.  So, you might want to ask about hourly fees when a busy lawyer is piggy-backing clients at court.

The UAF section on Alternative Fees (which apparently does not include the separate category of Flat Fees) is particularly unenlightening:

Alternative billing.  While not as common, some lawyers will use an alternative billing arrangement—for example, a lawyer working with a small business owner might offer a steep hourly or percent discount as a way to increase the volume of work he or she gets from that client.”

We can’t flesh out the topic of alternative billing here, but suggest you see our posts “other thoughtful voices on the lawyer billing debate” and “broadening the billable-hour debate” for information that can help you make smarter choices when looking at alternatives to hourly billing — remembering that each billing arrangement has both advantages and disadvantages for the client, and for the lawyer.  If hourly billing gives the lawyer the incentive to work too much, fixed fees give the firm the incentive to do less (they say “be more efficient”) for the client.  Indeed, if lawyers are really busy, they are less likely to be padding hourly fees, but more likely to be cutting corners for clients paying fixed fees. (see, e.g., our post “finally: NLJ on the realities of alternative billing,” Sept. 11, 2007)

Is time expended relevant? A cautionary point: Some lawyers have switched to alternative fees precisely because they want to charge more than they could with hourly billing.  They are unhappy that there are only 24 hours in a day to be used billing clients, and they would rather not pass efficiency savings along to clients. [See, e.g., this post.]  Yet, most clients — including you, if you’re reading this piece — want to move from hourly billing precisely to pay less, not more in lawyer fees.

Therefore, be wary of a lawyer who says the amount of time spent on your case or transaction is not relevant to the size of the fee.  You should want to know how much attorney time is likely to be expended on your behalf, when deciding on the reasonableness of a “value-based” or fixed fee, if only to better compare the fee to that of lawyers billing by the hour. And, because they owe you a fiduciary duty to fully inform you and treat you fairly, lawyers should be willing to tell you their best good faith estimate of the time it will take to provide the needed services (as HALT suggested in its Model Attorney-Client Agreement, which is discussed above).  Furthermore:

– In our economy and marketplace, the “value” of a product or service is not determined merely by how much the buyer needs or wants it.  Otherwise, computers would cost more now than than did 20 years ago rather than much less, because they are so much more central to our personal and business lives.  And, necessities like food, housing, gasoline, would be priced far higher than they already are.  A monopolist may decide to charge without regard to his cost, but when there are lots of sellers competing for your business (as there are in the market for legal services in the USA, which has more than a million practicing lawyers), we expect price to stay close to cost.  For a law firm, the time a lawyer spends applying his or her knowledge is the main input or cost of the service.  And, for more than a century, time expended has been the primary criteria used in deciding the reasonableness of a fee under lawyer ethics rules.

– No mater how important it is for you to have a particular legal problem solved, if it won’t take much effort to fix the problem, or there are many attorneys who know how to fix it, the law firm is usually not adding much value in your situation.  At times, by analogy, all it takes to prevent a major accident or tragedy is to tighten a bolt.  Yet, you pay the mechanic or plumber who tightens the bolt a substantial hourly rate for the expertise it takes to diagnose the problem and turn the bolt, not an extortionist’s (or hero’s) fee for averting the calamity. The same is true for a doctor who saves your life with a simple tourniquet or by prescribing a common pill for a common but deadly malady.  Don’t buy the argument that the fee for lawyer services should be the same, no matter if it takes 30 minutes or 30 hours to perform.  Don’t let them change the definition of marketplace value from “a good product at a reasonable price,” to “whatever you are willing to pay to solve your problem.”

Certainty Premium“?   Some lawyers charge a “premium fee” higher than what they believe a client’s hourly bill is likely to be, and justify it by saying they are giving the client “certainty” and taking the risk of having to do more work than expected.  Certainty can be very important for some clients and worth a higher fee; and risk can warrant a law firm charging a higher fee. But, most clients seeking alternative billing arrangements are not interested in “certainly paying a lot more” than they were likely to have paid by the hour.  To know whether a higher Certainty Premium is worth the price, you need to know how much you most likely would be paying with an hourly billing arrangement, and how likely it is that the hourly fee might be significantly smaller or a lot bigger than the fixed “premium fee.”

Therefore, before entering into a fixed fee agreement that includes (implicitly or explicity) a Certainty Premium, the lawyer owes you a good faith estimate of the range and probability of likely fees. [For example: Given your situation, the most likely hourly fee, and how likely an hourly fee could be half of that estimate, or could be twice that estimate.]  You can be sure that the lawyer charging you a fixed fee is making those estimates (if only rougly in his or her head), and has weighted the price to minimize its risk of underestimating the amount of work that needs to be done.  Until you know the range and probability of higher and lower fees, you really can’t make a rational decision to pay a Certainty Premium.

We hope the information above will help clients to avoid unnecessarily high legal fees.  (Sadly, they will still, in general, be painfully high.) Don’t be too shy to ask the questions and (politely) assert your rights.  Remember, lawyers have ethical and fiduciary duties to fully inform clients and to charge only reasonable fees.

  • Final Note: Criminal Defense Fees:  These days, most private criminal defense lawyers provide their services on a fixed fee basis, but many also use hourly billing arrangements; they’re  not allowed to use contingency fees.  We won’t try to cover this topic here, except to say that we  disagree strongly with Brian Tannenbaum’s assertion in his e-book The Truth About Hiring a Criminal Defense Lawyer, that a client should never ask a lawyer if he charges a consultation fee and “never negotiate,” because you’ll be perceived as cheap or unsure whether he is worth his fee.  There are too many lawyers competing for your business to put up with one who is so cavalier about your financial distress.  As Mark Draughn said when he reviewed Brian’s e-booklet, “Everything is negotiable. It’s just a conversation.” [We can't vouch for them, but you'll find materials on criminal defense fees here, here, and there.]

2 Comments

  1. David, thanks for all your support over the last few years and after this mammoth post, you deserve a long rest, so I hope you enjoy reclaiming all the time spent on f/k/a for whatever you decide to do. Regards, Matt

    Comment by mattm — February 28, 2009 @ 10:53 am

  2. Thanks for your good wishes, Matt. Did you notice what time I got this post up? I better not expire before my weblog does.

    It’s been great sharing haiku cyberspace with you and sharing your poems at f/k/a.

    Comment by David Giacalone — February 28, 2009 @ 12:05 pm

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