Historically, law firms have based their billing practices on the following concepts:
A. Retainer Fees and Cost Deposits
Often times, attorneys will toss around the term “Retainer Fee” as if clients will know exactly what they mean instantly. However, it is not always clear which definition of “retainer” will be applied. The term “retainer” is as much a method of billing, as it type of Fee.
That said, there are three types of fees that fall into the Retainer category:
True Retainer: The True Retainer is typically an upfront, flat fee charged by an attorney to the client for the attorney’s assurance that a particular attorney will be available to work on a client’s matter immediately, irrespective of what other matters the attorney is currently working on. With certain demanding types of legal issues (mergers and acquisitions, criminal matters, complex litigation, and government related matters) and certain attorneys regarded as the unquestioned top lawyer in their fields, a True Retainer is justified because the matters will require fast turnaround, are subject to unpredictable time schedules, may require emergency interventions, and may force the attorney to hire additional staff and expert testimony and witnesses. Attorneys regard these kinds of matters as “all hands on deck” events.
Non-Refundable Retainers: The Non-Refundable Retainer is typically an upfront, flat fee charged by an attorney to the client for more routine and predictable matters. The fee may be adjusted depending on the complexity of a particularly matter. The Non-Refundable Retainer Fee is appropriate for routine matters with schedules fixed by the courts and standard filing schedules (Bankruptcy, Immigration, Foreclosure). The Non-Refundable nature of the fee is designed to take into account that although routine, each situation is typically nuanced in its own way.
Refundable Retainers and Cost Deposits: A Refundable Retainer or Cost Deposit is an advance on legal fees from which the attorney may then draw as invoices become do. Unlike a retainer which serves only to fund attorney’s fees, a cost deposit is an advance by the client to cover legal costs as they arise throughout the pendency of the case. Both Refundable Retainers and Cost Deposits will be placed in a client trust account that will not be commingled with the lawyer’s personal funds or the firm’s operational funds until earned.
It will be up to the attorney and client to decide whether the retainer will be refundable or non-refundable in the event actual billed costs are less than the amount deposited as a retainer.
B. Types of Fees
Fixed attorney’s fees are those that can be readily quoted to you for undertaking the performance of a particular task. Examples would be drafting a will, filing a petition for dissolution of marriage, presiding over a real estate closing, etc. They may be charged upfront or billed upon the conclusion of the matter.
Hourly – the longstanding tradition in the legal field has been to bill the client for hours actually worked on the client’s case. The computation is simple; hourly fee times number of hours worked plus any additional costs or expenses the client has agreed to pay in the fee agreement, which may include travel expenses, long distance phone calls, copies, etc…
Rates will vary widely depending on the size, location, and reputation of the firm, and will also vary considering the complexity of the issues presented by the client’s case.
Contingency – for certain enumerated types of lawsuits, primarily in civil litigation, an attorney may charge a client a percentage of the total recovery the lawyer is able to collect on the client’s behalf. One important note is that the American Bar Association Model Rules or Professional Conduct (“Model Rules”) prohibit contingency fees from being utilized in family court proceedings to determine child support payments, nor may they be used in criminal defense cases. The Model Rules also require a contingency fee be in writing and signed by the client.
In the event the case is unsuccessful, the client will not be responsible for the attorney’s time in pursuing the matter, however, the client may still be liable for various costs incurred in doing so. Whether costs are to be attributed to the client or absorbed by the attorney is something to consider when drafting the required retainer agreement.
For contingency fees in cases involving personal injury or property damage resulting from tortious conduct, from an auto accident, medical malpractice, or products liability, the Model Rules place caps on the percentages that can be charged to the client.
Hybrid Fee Arrangements – in some cases involving on-going or complex civil litigation, an attorney may charge a client both a Refundable Retainer and a percentage of the total recovery the lawyer is able to collect on the client’s behalf, or any combination of the fees previously mentioned. The use of a Hybrid Fee Arrangement is guided by expectation of costs associated with the matter, length of time for which the matter is likely to take, and the level of expertise required to conclude the matter. An unfortunate truth of litigation is that it can be unpredictable as to length of time and amount of costs will be associated with a particular matter. Most attorneys feel it to be an undue burden to rely exclusively on a contingency fee arrangement in certain types of litigation.
Worth repeating: No matter which fee arrangement is ultimately chosen, it is highly advisable for all clients to have a written and signed fee agreement with their attorney. Please do not hesitate to Contact Us for a discussion of fees as they might pertain to your particular matter.