Question everything – especially your legal fees

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In a recent exchange with a new client, there were significant questions about how attorney’s legal fees were earned and paid.  The client previously had a bad experience with another law firm and related to me that his business was overcharged. To make matters worse, the lawyer made errors and charged the client to fix those errors.

Let me start by saying that errors can occur.  There can be a miscommunication or a mistake. Unfortunately (or fortunately for the sake of my family) lawyers are human.  With that, there can be no assurance that mistakes will not occur.

What should never occur, however, is the client bear the financial responsibility for fixing those errors.  If there is a mistake in a document or some other matter for which the lawyer is solely responsible, a client should not be charged to fix that error. It’s that simple and straightforward.

The same client relayed to me that there was confusion with the former law firm’s requirement of a retainer.  Many law firms, mine included, will require a retainer. A retainer is necessary, particularly with a new client, to ensure that the lawyer’s time will be compensated.  There is often a great deal of discretion in a retainer. For example, my retainers for litigation matters are significantly higher than for other matters. The reason for this is that with litigation there is often a great deal of upfront work that is required.  Similarly, there can be immediate out-of-pocket expenses that are incurred. As a result, those retainers are often higher.

With retainers, you should know that until the legal fee is earned (i.e. the work performed) the money remains that of the client.  As lawyers, we are required to maintain trust accounts to hold that money. With retainers, some lawyers require that the initial amount of the retainer remains intact.  In other words, the full amount of the retainer must be replenished as soon as legal fees are earned by the lawyer. Other lawyers require that a base of a retainer always be maintained.  Still other lawyers will bill against the retainer and then simply invoice the client for legal fees incurred beyond the initial retainer.

As it relates to invoices, what you receive from your lawyer should have sufficient information for you to understand the work performed and the charges incurred.  If you have questions, you should raise them within the billing cycle (typically 30 days). I have, unfortunately, heard that some lawyers will charge for their time in reviewing bills with clients.  I think this is a terrible practice and would encourage clients to avoid paying such bills.

Billing is typically done on the basis of time.  For example, at Gordon Law, we typically bill by the tenth of the hour (or every six minutes).  On occasion, depending on the nature of the work, we will bill based upon a particular project or scope of work.  A good example of this is the formation of a corporation or an LLC. Typically, we do that on a flat legal fee that covers both the out-of-pocket costs from the State of Nevada as well as our legal fees. Some businesses prefer project billing and we attempt to accommodate them.

Unfortunately for smaller businesses who may not have the budget for litigation, it is fairly rare for a business litigators to take matters on a contingency basis.  Typically, such legal fee arrangements are exclusively in the personal injury arena. Nevertheless, while determining the best lawyer for your case, you should ask if there are some non-traditional billing models your lawyer will accept.

The discussions concerning fees can be uncomfortable.  However, recall that your lawyer should work for you. As such, you should ask questions about how you are being billed and make sure that you fully understand the billing policies of your lawyer.

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