Attorney billing varies widely between cases

Let’s talk about a subject which is of great importance to my children — lawyer fees.

Most of us — by which I mean everyone who is not a lawyer — consider lawyer fees to be one of life’s great mysteries. They are probably the single greatest source of friction between lawyers and clients.

There are a number of different methods which lawyers use for billing clients. The most common arrangements include billing by the hour, contingent fee agreements, and fixed or flat fees.

In an effort to slow the tide of new lawyer jokes, several alternative billing arrangements have surfaced, including unit or task-based pricing, modified contingent fee agreements, and blended hourly rates. I will briefly touch upon each of these in this and the next column.

Which particular fee arrangement your lawyer suggests often depends upon the type of service to be performed. Hourly billing is by far the most common method. Why? Let me use an example to illustrate the point.

Your next door neighbors are about to sell their house. They are very nice people, and you have spent many hours over the years chatting with them across the fence. You really like them, and you wish them the best. That is, until you learn that they intend to sell their house to a local family with a business in town, and they intend to use it for employee housing. What do you do?

You pay a visit to your favorite lawyer and tell her what you have just learned. The first question is, of course, “Tell me how you intend to stop this abomination from happening? The second question is, “What’s it going to cost me?”

Your lawyer is smart, experienced and quick on her feet. That’s why you are in her office. But she has no way of knowing at that moment the extent of work necessary to obtain what hopefully will be a satisfactory result. Is it possible to negotiate with the prospective buyer? Is it possible to negotiate with the next door neighbors, who are no longer on your short list of friends? Is there a legitimate basis for a lawsuit to prevent the use of the house for employee housing?

This particular situation is unique, of course. But it is quite typical of the process involved when your lawyer states, in answer to your very legitimate second question, “I don’t know.” She is also thinking the very same thing in response to your first question, although saying to a client whose world has crashed down that you have no idea at that moment precisely how to tackle the problem is probably not a great confidence builder.

It’s a little like taking your car to the mechanic, telling him there is a strange noise in the engine, then asking him to tell you then and there what the problem is and how much it will cost to fix it. Unless he’s one of the Tappett brothers, he will probably first have to pop the hood, snoop around, pull a few parts here and there, and figure it out step by step. Although he may have a hunch what the problem is, he won’t really know until he dives in and gets his hands dirty.

Back to the lawyer’s office. Your lawyer has some preliminary ideas, some hunches. She shares her thoughts with you and tells you what options initially come to mind. The two of you then begin discussing the fee arrangement.

What is the most appropriate method for billing in this case? Contingent fee? Flat fee? Hourly billing? Or one of the new hybrid arrangements?

Contingent fee agreements have been used in the U.S. for the last 100 years or so. The concept was developed to enable a client who has suffered an injury, but cannot afford to pay the lawyer out of pocket, to pursue the case.

A contingent fee is an agreement that the lawyer’s compensation, or fee, for a project is contingent upon the successful completion or outcome of the project. Although the fee may be a predetermined dollar amount, it is usually based on a percentage of the money collected. Typically the percentage is between 25 and 40 percent, although the percentage can vary greatly depending upon such factors as the complexity of the case, the likelihood of success, the likelihood of collecting on a judgment, and the amount of time that the lawyer is likely to invest.

The contingent fee arrangement is the preferred option in a personal-injury lawsuit, such as an injury from an auto accident, or a situation where someone is injured as a result of the negligence of another. It is also used in collection cases, where one party is owed money by another, and in most other situations where the client is unable to pay an hourly fee and the lawyer is willing to gamble his investment in time and effort.

There are exceptions, however. A contingent fee may not be used in divorce cases, criminal cases, or in probate matters.

Will a contingent fee agreement work in your situation with the next door neighbor? No, because in your case you are not seeking money but the integrity of the neighborhood and the preservation of value. You and your lawyer will need to agree on some other fee arrangement, which we will explore in the next article.