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Attorney Fee Agreements - Put It In Writing

Updated on March 12, 2016

Why should I have an attorney fee agreement?

Whatever fee arrangement you have with your attorney, contingency, fixed fee, or hourly rate, it is advisable to have a written fee agreement. Some states, courts and agencies require that attorneys practicing in their jurisdiction have client fee agreements because most disputes between clients and attorneys involve – you may have guessed it – money. Even if not required, it is a good idea to have one.

Some fee agreements are pages long and attempt to cover every contingency, while others are stated in more concise terms. While each has its relative pros and cons, in either case it's important that the agreement clarify the attorney and client's expectations and provide a guide to resolve any disputes. Having a copy of the attorney’s standard agreement before committing to the attorney’s representation of you can also assist in making cost comparisons between attorneys to ensure you aren’t comparing apples and oranges when comparing fees.

What expenses are included - or not?

Some things to look for in the agreement include what expenses will be charged separately. It is fairly customary for the attorney’s “out-of-pocket” expenses to be charged to the client, such as fees paid to obtain or copy documents recorded at the courthouse, court filing fees, court reporter fees for depositions, expert witness fees, travel expenses, etc., that is, things the attorney has to lay out money for specifically in pursuit of your case. But what about “in-house” expenses? Will you be billed separately for the copies that the attorney and his staff make on the firm’s own office copier, a “technology fee” covering use of phones and computer technologies, long distance phone charges, or any other overhead surcharge?

The going rate for attorney billing may be, say, $ 200 per hour, but if one attorney charges that rate inclusive of all overhead expense, while another charges that rate but charges separately for in-house expenses that others might regard as overhead, it is easy to see how much variance there could be in the fee you are quoted and the amount you are billed.

Contingent and fixed fee agreements

A contingency fee bases the attorney's fee on the dollar value of the amount recovered or handled by the attorney. In a litigation case, the attorney's fee is based on the amount of monetary recovery obtained, such as one-fourth or one-third of the judgment obtained. The justification for this fee is incentive - the attorney shares with the client a financial incentive to obtain the best possible recovery, even when the client may not otherwise be able to afford to hire the attorney at an hourly rate. Similarly, an attorney handling an estate or trust administration may charge fees based on a percentage of the dollar value of assets held by the estate or trust. The justification for doing so in these cases is risk - the larger the dollar value for which the attorney assumes responibility to properly manage and account, the more the attorney should be paid for assuming that risk.

Fixed fee arrangements charge a flat rate for all services required in support of the client's desired legal outcome or transaction, such as to obtain a divorce or representation in a criminal or traffic offense proceeding. The fixed fee is based generally on what a typical or average case of that nature costs. The benefit to both client and attorney is certainty. The risk to both client and attorney is that the case may not turn out to be typical or average. It it ends up being more complex than anticipated, the attorney's return for his or her increased time and effort is reduced. (Knowing this may cause the attorney to cover that contingency in setting the amount of the fixed fee.) On the other hand, if the client's case turns out to require less attorney time and effort than the average or typical case, the client may "overpay", i.e., pay more than he or she might have paid by paying a straight hourly rate.

It is important for the client assuming a contingent fee or fixed fee arrangement to appreciate the difference between fees and expenses. While a contingent fee agreement may not charge a fee unless recovery is obtained, it often will make the client responsible for the costs and expenses associate with the litigation such as filing fees charged by the court, payment of fees to obtain records from third parties such as doctors or hospitals, payments required to obtain expert evaluations and testimony, etc. Similarly, the fixed fee agreement may or may not include expenses associated with the matter. The expenses charged to achieve the ends of litigation can be substantial and even prohibitive. How they will be billed and paid? Will the attorney advance the costs and “settle up” at the conclusion of the case or client relationship, or expect the client to pay as they are incurred, or pay in advance? If the client has to pay or deposit expense money in advance, will it accrue interest until needed? How often will the client receive an accounting of those funds and how it is used?

Other questions to be addressed in contingent fee or fixed fee agreements include whether the agreement gives both parties the right to terminate the relationship at any time, and any conditions for doing so. Does the agreement give the attorney the right to withdraw from the representation if the client does not advance money for the litigation expenses? If the client or attorney terminates the agreement before the case is over, will either client or attorney owe anything to the other?

Many clients who have entered into contingency or fixed fee arrangements have been surprised to find themselves owing thousands of dollars in litigation expenses, regardless of the case’s outcome, or even before the case is finished. Having the agreement in writing will avoid such surprises and permit more informed decision-making concerning the course of litigation.

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Hourly rate agreements

In hourly rate billing arrangements, an attorney charges for his or her time spent ion behalf of the client. While simple in concept, the arrangement still presents opportunity for misunderstanding and conflict. Will the attorney’s time be billed the same regardless of how it is spent, or vary depending on how it is used? Some fee arrangements, including court-appointed counsel fees, differentiate between “in-court” and “out-of-court” time. Will you pay only for the attorney's time, or will you be billed separately for a legal associate or paralegal's time? If so, will it be charged at the same or a lower rate, or will it be characterized as an "expense"?

What about travel time? Will the attorney’s time traveling to a court hearing, meeting or deposition be billed? If so, how? Some clients do not object to paying for the attorney’s legal training, skill and expertise, but find it difficult to swallow paying the same rate for the time the attorney is simply driving or riding on public transportation. From the attorney’s point of view, though, the travel time spent on the client’s behalf is time that could otherwise be productively billed to another client, so they may charge for it the same as time spent in court or in the office. Some fee agreements attempt to strike a balance by billing a lesser rate, say half the hourly rate, for travel time with a set maximum per diem rate for overnight travel.

As you can imagine, proper accounting for the attorney's time is critical to this kind of fee arrangement. A good hourly fee agreement may provide for monthly billing, so the client can see what time has been spent by the attorney during the month, whether the client retains a credit balance against any pre-paid retainer, or whether the client owes the attorney at the end of each billing cycle. The agreement should include the parties' expectations of whether any balance billed must be paid in full, whether a new pre-paid retainer may be required to cover future fees and expenses associated with the representation, or whether the client will be permitted to make payments against any balance due. Any interest or finance fee that may be associated with a credit arrangement should, of course, also be addressed in the fee agreement.

Conclusion

All of these arrangements are valid depending on the type of case and the attorney and client’s circumstances. But they are also legitimate topics for discussion and agreement to avoid surprises that can result in a fractured professional relationship. Don't be afraid to talk to your attorney up front about how you will be charged for the attorney's efforts on your behalf - and to get it in writing.

© 2013 G Laver

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