Understanding Law Firm Billing
By Kristen A. Campbell
Attorneys often refer to a quote attributed to Abraham Lincoln: "A lawyer's advice is his stock in trade." Attorneys earn their living by billing clients for the advice they give and for their expertise in dealing with the ever changing, complex legal field. However, clients often have no idea how attorneys bill, and they may not understand the bills once they receive them. You should have a clear understanding of how the services you receive will be paid for. Never be afraid to ask questions, and make sure your fee arrangement is put in writing.
Generally, an attorney will choose one of four fee arrangements:
· Hourly Rate
· Contingency Fee
· Flat Fee
Many attorneys charge by the hour in 1/10th of an hour increments. For example, a 5 minute phone call and the one minute email follow up to the phone call would either be billed at 1/10 (.10) of an hour. The hourly rate of an attorney varies depending on location, experience, and case type. You will not only pay for the hours your lawyer spends talking to you or is in court, but the time he or she spends researching, writing motions, meeting with opposing counsel, reviewing discovery, etc. Also, keep in mind you will pay for the attorney’s support staff, including paralegals and legal secretaries, though at a rate lower than what the lawyer charges. A good attorney should be able to give you an estimate of the time he or she believes the case or matter will take. You should be provided an itemized bill, detailing exactly what the law firm is billing you for. If you do not understand a bill or time entry, do not hesitate to ask your attorney about any aspect of the bill. It is your right to understand what you are paying for.
Like a down payment, a retainer is paid at the beginning of the attorney's representation, usually when the attorney is billing on an hourly basis. The total services and costs are subtracted from the "retainer," against which further work will be performed. You should ask if your attorney requires replenishment of retainers, or whether you will pay ongoing after the retainer is used. There are many different kinds of retainers as well as pay schedules, so make certain you understand your agreement up front. You should still receive detailed billing statements to clearly detail the services being provided, the value and the balance of your retainer. If the retainer is not depleted at the conclusion of a matter, you should be refunded the balance.
A contingent fee means that your attorney will not bill on an ongoing basis, but will take a certain percentage of monetary settlements and damages you receive from your case. Contingent fees are typically charged in personal injury lawsuits. A typical contingent fee is 33%, but can vary by state or by case. While this may seem like a large percentage, the benefit to the client is that they will owe their attorney nothing if the case does not result in a monetary award. There is no risk to client. The risk is on the attorney.
For more cut-and-dry matters, attorneys may charge a flat fee. Preparing a power of attorney or a simple Bankruptcy are good examples. Although the fee should be clearly explained at the beginning of your relationship, make sure you understand what the fee does and does not cover. For example, in some instances, filing fees or other costs will not fall under the flat fee's umbrella.
Some of the above payment agreements are not applicable to all sorts of law. For example, an attorney cannot charge you contingent fees if you're being charged in a criminal case, as you will not be awarded damages. Remember, whichever fee agreement you select, make sure you understand it up front and that the details are in writing and that an attorney should not be hesitant to answer any question about their billing.