If you have a legal issue that you think requires an attorney, one of the first things to do is learn a bit more about attorney billing methods. Not every lawyer bills for their time the same way, which can make a dramatic difference in how much your legal matter costs you. From flat fees to hourly fees, here is more information about the payment methods you may encounter.
A retainer is an upfront fee you pay when you hire an attorney, according to the American Bar Association (ABA). This is relatively common, however, the amount varies greatly depending on the firm and your case. Some attorneys ask for a few thousand dollars upfront based on the likelihood of your case being lengthy and complex. Others ask for what is equal to the first two or three hours of their services. It may also be refundable or non-refundable. If it is refundable and your attorney does not utilize all of your retainer, then you will receive the remainder at the end of your matter.
Typically, a retainer covers your legal team’s first couple of hours of work and your court costs, like the filing fee for a lawsuit, though it can go to any number of expenses depending on your legal matter. You must pay the retainer before your lawyer will get started on your case.
If a law firm requires a retainer, ask what it goes toward – or doesn’t – and how the attorney documents their time and expenses. Also, discuss with the lawyer how much your case may cost overall, since a retainer is usually only a small part of your total fees.
Many attorneys bill based on an hourly rate, commonly broken down into tenths of an hour or quarters of an hour, which means you could be billed for every six or 15 minutes spent on your matter. What a lawyer charges for an hourly rate depends on a number of factors, including their practice area, their years of experience, their geographic region, and the complexity of your case.
You may also pay various rates depending on who performs specific work on your matter. Some legal tasks can be completed by paralegals, other attorneys in the firm, and other professionals. You may pay a different hourly rate for each of these individuals.
If a law firm charges an hourly rate, be sure to obtain information regarding rates for your lawyer and other employees of the firm upfront. Discuss how your team’s work will be recorded and when you will be billed. Also, have an honest talk with your lawyer regarding how long your matter may take. You should always discuss the potential cost of a case and your budget when deciding on which lawyer to hire.
Moreover, hourly fees must be “reasonable,” and should be comparable to that of other equally qualified attorneys in the same city or state.
Personal injury cases almost always rely on a contingency fee. This means your attorney’s fee is contingent on their winning your case, explains the ABA. You agree at the beginning of the matter to pay your attorney a certain percentage of whatever settlement or court award you receive. If you lose your case, you do not owe your lawyer a fee – though you may be responsible for court costs.
Court costs are separate from attorney fees, and can add up to a substantial figure. These costs include filing fees, which vary by court and by case: A filing fee for a simple landlord/tenant dispute in Delaware’s Justice of the Peace Court will cost $40, whereas the filing fee for the civil division of the Vermont judiciary is $295. The hiring of expert witnesses in a malpractice or personal injury case also accounts for a significant amount of court costs.
“A medical malpractice case that goes to trial, the total fees with experts, etcetera, could approach or be even in excess of $50,000, a complicated product liability case you could be talking over $100,000,” says Christopher L. Sallay, a partner at Queller, Fisher, Washor, Fuchs & Kool, who works exclusively on a contingency-fee basis. While these figures are steep, these are cases in which the plaintiff stands to recover a significant amount in damages. Depending on your case, you can apply to have your court fees waived.
If your lawyer offers to take on your case based on a contingency fee, discuss the details carefully. When do you have to pay or not pay? When is your lawyer considered to have “won” your case? When you have to pay, how much will you owe? Contingency fees are helpful in making legal representation available during difficult times, yet you need to fully understand what you are agreeing to.
Alternative billing methods
In recent years, some firms have become more flexible about the hourly rate and have started offering alternative billing methods, according to Lexicata.
Some legal matters are predictable enough that a lawyer offers a fixed or flat rate for them. This can be very helpful, enabling you to know exactly how much your issue will cost and without having to worry about being over-billed. In some situations, lawyers offer services “a la carte.” Each task is its own fee and you can hire the lawyer to perform one or more specific tasks. In other situations, lawyers bundle certain services together. You must pay the entire fee and receive each task.
This method is typically for simple and common issues. For instance, a real estate attorney may offer a flat fee for handling a title search and representing you at the closing. However, a family attorney is unlikely to offer a fixed fee for a potentially contentious divorce.
Kirkland & Ellis, a complex litigation firm which employs an alternative fee structure, writes that, “First and foremost, shifting the fee risk to the law firm aligns the law firm’s incentives with the client’s, and reduces the risk to the client.” The firm, in an outline of their fee structure, notes that clients seeking out alternative billing methods include those for whom traditional billing is financially unrealistic, as well as those interested in sharing the incentive to win with their attorney.
If a lawyer offers to provide a service for a flat fee, be sure to clarify what this flat fee does and does not entail. Is it purely for the lawyer’s time or does it also cover court costs? You need to be aware of any additional fees you may be responsible for.
Another type of flat fee method consists of a law firm billing you an agreed upon amount for a specific period of time, such as each month or quarter. This is often used by firms that are aware they have work to do for you over an extended period of time. However, it also requires a clear understanding of the type and scope of the work, which can be a complicated issue to pin down.
Planning your Budget
You and your attorney should decide on the details of the payment structure and billing method before he or she begins work on your case. Having clear guidelines on what you can and cannot afford—and what they can and cannot do with the resources available—will save you both trouble down the line. Unlike in Canada and the United Kingdom, the winning party is responsible for their own costs of trial in the United States. If the attorney and court fees prove a financial burden for you, free services by legal aid societies, pro-bono attorneys, and nonprofits in your area can help.