Ch 6 Legal Office Procedures: Legal Fees
just under 3 percent of U.S. attorneys charge
$1,000 an hour or more.
The average contingency fee rate charged is normally
33.33 to 40 percent of the recovery.
The average rate charged is normally
33.33 to 40 percent of the recovery.
percent of law firms use standard hourly rates for fees.
87
What is the most common fee found in law offices?
An hourly fee
Whose responsibility is it to set fees?
Attorneys or law firm
Why must paralegals comply with attorney guidelines concerning fees?
Case law has ruled that a person must have a law school education to quote fees.
What are the two arguments for referral fees?
Clients benefit by being referred to the most competent attorney. ii. Clients are protected from increased fees by other rules of professional conduct.
What is the difference between costs of litigation and expenses of litigation?
Costs are recoverable by the prevailing party in some cases, and expenses are not recoverable.
What is task-based billing?
Each phase of a case contains a list of tasks, and each task contains activities. Each task is given a specific fee or hourly rate that is appropriate to the level of complexity of the task.
Factors that have made a true retainer fee unnecessary.
Increased competition in the legal arena and the advent of ethical rules that mandate a lawyer's loyalty to clients and former clients
Other possible variables are also considered when determining rates
Local living standards • Experience of attorney • Attorney's seniority • Client's ability to pay • Rates of competitors • Attorney's specialty • Attorney's ability • Firm's prestige
Referral Fees
Payment for referring a client to a firm
Four considerations are involved in taking a case on a contingency basis. They can be described by the acronym ...
RISC: risk, inflation, significant expense, and cash flow.
Who has full responsibility for a client's fee?
The lawyer
What is a flat (fixed) fee?
a set fee for a service rendered.
A refundable chargeable retainer fee is
applied to a total fee and is returned if a client terminates an attorney-client relationship. This type of retainer is used to prepay for the lawyer's services and in cases in which a lawyer suspects that a client is not likely to pay the bill.
Why are lawyers prohibited from fee splitting with nonlawyers?
because it may allow the lawyer's independent judgment to be controlled by a nonlawyer who is interested in his or her own profit rather than the legal needs of the client. It also discourages nonlawyers from engaging in the unauthorized practice of law and referring clients to the lawyer for a percentage of the fee, a practice known as capping
Why have a number of states put limits on contingency fees?
because they felt that doing so would discourage lawsuits.
Instead of charging a client different hourly rates for different employees working on a case, a firm may offer the client a
blended hourly rate, which is an average hourly rate of the people working on the case.
A per diem flat fee is a fee charged
by an attorney for a day's work. It is based on an attorney's hourly rate for eight hours of the attorney's time.
What is the lodestar calculation?
determining the number of hours reasonably spent in a case and applying the attorney's hourly rate thereto to arrive at a reasonable fee.
What are hard cost
directly attributable to the client's case, such as filing fees, service fees, deposition expenses, and so on.
ABA Model Rule 1.5(d) expressly prohibits contingency fee agreements in....
domestic relations and criminal cases.
different hourly rates are established within those categories to compensate a person for
education, experience, specialty, and seniority.
What is a refundable retainer?
fee is applied to the total fee and is refundable if the client terminates the attorney-client relationship.
What is a true retainer fee?
fee is paid to the law firm to ensure the firm's availability to the client.
What are minimum/maximum flat fees?
fees based on the out- come of the matter. If the outcome of the matter is extremely satisfying for the client, the maximum fee is charged. If the outcome is not as the client had hoped, the minimum fee is charged.
What are statutory fees?
fees set by state statute.
What are the two methods of calculating the attorney's contingency fee?
gross-fee method and the net-fee method.
What are the four considerations in taking a case on a contingency fee basis?
i. Risk. ii. Inflation. iii. Significant expense. iv. Cash flow
The trend toward task-based billing was created
in the late 1990s by corporate legal departments who wanted to manage their legal costs more effectively and economically.
Emperor Claudius passed a law permitting lawyers to accept a fee as long as
it did not exceed a certain amount. Under this law, however, a client was under no legal obligation to pay a lawyer a fee.
What has case law ruled that a person must have to quote fees?
law school education
At the time of the Roman republic, how much did legal services cost?
legal services were free of charge—rendered for the honor and personal satisfaction the advocate received by providing the service.
To calculate an hourly rate, one must consider?
overhead, profit, salary, and billable hours.
What are value-based fees
paid according to the value of the outcome to the client.
What is a nonrefundable chargeable retainer fee?
paid in advance of representation and is not refundable to the client in most circumstances. It is applied to the client's bill.
A nonrefundable chargeable retainer fee is
paid in advance of representation, is not refundable to a client in most circumstances, and is applied toward the total fee.
A nonrefundable nonchargeable retainer is
paid to a firm at the beginning of a case and is not applied to a client's bill. It is not returned to a client should the client decide not to retain the firm or elect to discharge the firm for any reason. This type of retainer is often called a sign-up bonus.
A true retainer fee is
paid to a law firm to ensure the firm's availability to a client. No services are provided in return for the fee. This type of fee was prevalent before the 1960s, when few law firms existed.
What is a nonrefundable nonchargeable retainer fee?
paid to the firm at the beginning of the case and is not applied to the client's bill. It is not refundable if the firm is discharged
Different hourly rates are set for
partners, associates, paralegals, and law clerks.
Per diem
per day
The ABA, state law, and state bar association codes of ethics have restricted the types of cases that can be taken on a contingency basis to?
personal injury; medical malpractice; wrongful death; and other tort cases, or cases involving a legal wrong done to a person or a civil wrong that is not based on a contract.
What is the difference between the gross-fee method and the net-fee method of calculation?
the attorney's fee is deducted before the costs in the gross-fee method. In the net-fee method, the attorney's fee is calculated after deducting costs.
What is a blended hourly rate?
the average hourly rate of the people working on the case.
What is a contingency fee?
the fee paid to an attorney based on a percentage of the sum the client is awarded or settles for in a lawsuit
Two methods are used to calculate a contingency fee:
the gross fee method and the net fee method.
The more experienced and reputable an attorney,
the higher the hourly rate.
What is a modified contingency fee?
the lawyer is paid a percentage of the difference between the amount at issue and the amount of the final judgment.
If the outcome is extremely satisfying for the client,
the maximum fee is charged.
If a client's case should end before the nonrefundable chargeable retainer fee is used or if the client should discharge the firm....
the remaining retainer fee is not returned to the client.
Some firms vary their hourly rates according to the type of client served;
they charge higher hourly rates for corporate clients and lower hourly rates for individual clients. The reasoning is that corporate clients have more complex issues than individual clients.
Why are attorneys not allowed to pay for the expenses of litigation?
to discourage lawyers from putting their own recovery before that of the client and therefore creating a conflict of interest
Why is a true retainer fee used?
to secure a firm's loyalty to a client.
What type of fee calculation gives the client the most money?
when a contingency fee is calculated by the net-fee method.
What are hourly fees?
when clients are charged by the hour for each hour or portion of an hour spent on the case.
What are some examples of soft costs?
Photocopies. ii. Attorney's time in preparing forms or other multiple-use documents. iii. Use of conference rooms. iv. Use of substantive systems. v. Local and long-distance telephone charges. vi. Meals and transportation on occasions of overtime. vii. Telex and fax. viii. Supplies. ix. Storage of documents. x. Use of computer and computer database. xi. Destruction of documents. xii. Housekeeping services for meetings and depositions. xiii. Interest on accounts receivable. xiv. Outside services. xv. Document production. xvi. Postage.
To determine what rates need to be charged in order to obtain a desired level of income and profit for a firm, a number of variables must be considered. Among them are the following:
Planned or budgeted expenses, excluding partner or shareholder compensation and benefits • Anticipated billable time by partner, associate, and paralegal • Desired profit percentage • Reasonable allocation of expenses by partner, associate, and paralegal • Firm collection rate—billings divided by cash receipts • Billing rate—work-in-progress billable time versus past billed hours
What is the name of the case that ruled that paralegal fees are recoverable
The case of Missouri v. Jenkins, 109 S. Ct. 2463 (1989)
What are the two types of liens that an attorney may place to secure payment of fees?
a charging lien and a retaining lien.
What are combination fees
a combination of all the types of fees.
A contingency fee is..
a fee based on a percentage of a client's recovery in a case.
What is a per diem flat fee?
a fee charged by the attorney for a day's work.
Emperor Augustus decreed th practice of charging fees for legal services unlawful and assessed lawyers who charged for their services ...
a fine of four times the amount charged.
In addition to a charging lien and a retaining lien, what else may a lawyer do to secure payment of fees?
an attorney may secure payment of fees by having the client sign a promissory note secured by a deed on the client's property.
In a task-based system, legal work is categorized
by phase.
What are the four arguments against referral fees?
i. The fee may increase the client's bill. ii. Referral fees have a damaging effect on a lawyer's image. iii. Most clients are offended by referral fees. iv. Referral fees are beneath the dignity of the profession.
What are multipliers?
if the court determines that lodestar does not adequately compensate an attorney for all factors of the case, the court may apply a multiplier to the lode- star figure, thereby increasing the fee. Multipliers are additional fees.
A refundable chargeable retainer fee is often used when
prepay for the lawyer's services and in cases in which a lawyer suspects that a client is not likely to pay the bill.
lawyer hopping,
seeking advice and representation from a series of lawyers.
What is an essential ingredient for any fee agreement?
should be in writing
Putting a monetary value on legal services requires a great deal of
skill, knowledge, and management expertise.
Hourly rates vary according to what three things?
specialty, geographic area, and the lawyer's years of experience.
Hourly rates vary according to
specialty, geographic area, and years of experience.
What are the eight considerations in determining a reasonable fee (TOCATPET)?
time and labor required. ii. Other employment opportunities. iii. Customary fees in community. iv. Amount involved and results obtained. v. Time limitations. vi. Professional relationship with client. vii. Experience,reputation,and ability of lawyer. viii. Type of fee: fixed or contingent. 41. Calculation of a lodestar equation is accomplished b
Why do many firms use nonrefundable retainers?
to ensure client loyalty to the firm and to test a client's commitment to the case.
In the Matter of Cooperman, March 17, 1994, New York Court of Appeals)
upheld the two-year attorney suspension and stated that the nonrefundable fee agreement interfered with the client's right to discharge the lawyer and was a form of economic coercion against that right
Some states require that attorneys
use the net fee method.
What are the six factors used to determine hourly rates?
-Planned or budgeted expenses, excluding partner or shareholder compensation and benefits. -Anticipated billable time by a partner, an associate, or a paralegal. -Desired profit percentage. -Reasonable allocation of expenses by a partner, an associate, or a paralegal. -Firm collection rate—billings divided by cash receipts. -Billing rate—work-in-progress billable time versus past billed hours
extraordinary fee
A fee that is awarded in addition to statutory fees and that compensates an attorney for extra work required by the circumstances of a case.
How are flat fees established?
A law firm knows by experience about how long it takes to complete a certain type of case. The attorney's and paralegal's time are estimated, and the attorney's and paralegal's hourly rates are applied to the time estimate for completion of the case.
What is most often the source of dispute between a client and a lawyer?
A misunderstanding about fees
Name the 10 different types of fees.
Retainer fees. Hourly fees. Flat (fixed) fees. Task-based fees. Contingency fees. Statutory fees. Referral fees. Premiums. Value-based fees. Combination fees.
Why are written fee agreements desirable?
They prevent misunderstandings. ii. They enhance the attorney-client relationship. iii. They provide protection for the lawyer in case of a fee dispute
Name the four types of retainer fees.
True retainer. Nonrefundable chargeable retainer. Nonrefundable nonchargeable retainer Refundable retainer.
tort
a legal wrong done to a person; a civil wrong that is not based on a contract.
What is a charging lien?
a lien placed on a client's judgment that the lawyer obtained for the client.
In some cases, a firm may quote a client two flat fees:
a minimum and a maximum. These types of flat fees are based on the outcome of a matter.
A contingency fee for a defense contingency case is called
a modified contingency fee.
In a modified contingency fee case, a lawyer is paid
a percentage of the difference between the amount at issue and the amount of the final judgment.
A flat fee, or fixed fee, is
a set fee for a service rendered.
What type of fee must be in writing according to Model Rule 1.5(c)?
all contingency fee agreements
In addition to a contingency fee, a client must pay
all costs of a litigation that may be advanced by a law firm.
What is a retaining lien?
allows a lawyer to retain papers, money, or other property received from a client until the lawyer is paid the fee.
What are premium payments?
can be best described as tips. If the attorney obtains an especially favorable result for the client, the client will give the firm a premium fee in addition to the usual attorney's fee, whether it is a contingency fee, flat fee, or hourly rate.
What are soft costs?
cannot be directly attributable to a client's case until applied to the client's case.
A client paid a true retainer fee to
secure a firm's loyalty and availability to the client and to ensure that the firm would not accept a case against the client.
What are the two reasons that the ABA established rules and guidelines concerning legal fees?
to preserve the effectiveness, integrity,and independence of the profession, and (2) to give society reasonable access to the legal system.
