(cont. from this past Thursday’s blog post – “Finding the Right Attorney, Part 3 of 4: Passion”)
In my first post from this “Finding the Right Attorney” four-part series, I had laid out four distinguishing features for finding the right attorney and those were: (1) EXPERIENCE; (2) PERSONABILITY; (3) PASSION; and (4) AFFORDABILITY. We’ve covered the first three and now we’re on the home stretch with the last but not least: AFFORDABILITY, short and sweet.
The first thing that comes to mind when any one thinks of an attorney is a big ‘ole dollar sign, or maybe a couple of them, because most of us feel that attorneys are super expensive to retain, either because their hourly fee rates are out of this world or because there’s no way to keep them accountable to the hours that they bill and charge their clients for. And so, it makes sense that your body tenses up or your throat clamps up because of the exorbitant fees you’re imagining that you would have to pay. So, how do attorneys charge their clients? Generally – in 4 basic ways.
Hourly – The most traditional form of payment structure attorneys have been using for years is the hourly arrangement. Be it $200 an hour or $500 an hour, most attorneys stick to this system because it ensures that the attorneys are compensated in full for all time spent working on their client’s matter and this makes sense. Yet, on the client end, who’s to say that attorneys aren’t billing realistic hours for time spent on client matter? I mean, there’s no way for the client to verify and gauge whether the number of hours billed is realistic and accurate. And so, the story goes, that a lot of people, because of the fear in paying costly attorneys fees, avoid seeking legal help and/or representation and resort to self-help legal fix methods, subjecting themselves to even more legal trouble and higher attorneys fees because they will have to bail themselves out of the mess they ended up worsening. (And I’ll do a whole other talk on Legal Zoom and other similar websites that aim to streamline the practice of law, and how, although they claim to keep you out of legal trouble with their help, they end up hurting you in the long run.) Now, I understand the fear and burden of paying, but the bottom line is that you need an attorney and the only alternative around this “how do I verify that my attorney is billing hours correctly” dilemma is to really pick an attorney you trust, and this is where all the previous three factors for choosing an attorney come into play: experience; personability; and passion. Experience – When you narrow down your attorney candidates to people with experience, you’ve already done some of your due diligence by eliminating all of those attorneys who would have probably ended up billing you hours for the time that they took to learn the area of law or type of case that your matter concerns. Personability – Although not as strong as the factor of experience in being a due diligence checkpoint for attorney accountability in attorneys fees, the conclusion you make about an attorney and whether he/she is someone who is personable and whom you could work with, should NOT be overlooked. Unless you already know that you don’t have good discernment or can’t read people well, give some credit to yourself, because all of your life experiences and lessons have shaped you to be a pretty good decisionmaker when it comes to weeding out the good people from the bad. And that’s why it’s so important to see if the attorney you’re considering is someone who is personable and whom you can trust. Quickly, before I move onto the other two payment structures, I’ll give you a general range of reasonable hourly fees for attorneys: newbie attorneys who just passed the bar (aka the lawyer’s test) SHOULD NOT BE charging more than $150 an hour; they know NOTHING at this point, so why pay $200 an hour for a first year attorney? I think it’s ridiculous. (Make sure you know which attorney the billed hours account for!) As a general rule, I think it’s reasonable that an attorney adds $50-$75 an hour to his/her hourly rate as each year passes. Now, of course, this would have to plateau and stop at some point … and that plateau point would probably be 7-10 years.
Contingency – This is the second most common payment structure that attorneys use, as it generates lump sum compensation for work that might not be duly compensated for, if just billed according to time. The types of cases that are usually taken on contingency basis, are personal injury cases, where the attorney usually takes a 30-40% cut from the compensation awarded in car accidents, wrongful death, medical malpractice and other cases; and celebrity representation cases, where the attorney usually takes a 5% cut from the contract deals that he/she has worked on and/or represented the actor, singer, producer, director, studio or other major personality A lot of clients absolutely love this payment arrangement as they aren’t required to pay anything upfront and the notion of an expensive attorney is quickly thrown out the window. And some attorneys love this arrangement as well, but this kind of backend contingency arrangement really only works where the attorney knows that there will absolutely be an award (personal injury case) or profit (entertainment deal), so that the attorney can actually receive a cut and be compensated for his/her work. Thus, most attorneys make sure that the backend is worth it (aka the money reward at the end is guaranteed and big enough) for them to agree with this payment structure.
Mixed – Nowadays, some attorneys combine both the hourly fee structure and the contingency structure and do this by slashing both the hourly fee and the backend percentage share. For example, an entertainment attorney who would normally just take 5% from his actor client’s paycheck later, could also charge a reduced hourly while then reducing his backend percentage cut to 4%. Although this arrangement isn’t commonly seen in entertainment law, it is gaining some traction in personal injury law, where an attorney might charge a certain amount upfront and then reduce his/her backend percentage cut.
Flat Fee – A few years ago, there was a big trend on how attorneys should try to implement flat fee payment structures as well, as that gave prospective clients a better grasp and picture of what to expect when it came to attorneys fees. So, for example, an attorney could implement a flat fee system for drafting contracts, where he/she could charge $400 for a simple contract, or $800 for a complex contract, instead of charging this for hourly. And these quoted flat fees would be based upon the attorney’s own assessment of how many hours (approximately) it would take him/her to do simple contract drafting or more complex contract drafting. So, as long as these attorneys are accurately assessing the time spent and are putting out flat fees relative to this time spent, then that’s fine. Thus, this kind of flat fee arrangement would be perfect for a landlord to have as a lease agreement is pretty straightforward, with all terms stipulated by the landlord anyway. Now, in the entertainment industry, this flat fee arrangement doesn’t work well, as a contract rarely becomes a contract just after one draft, but probably after many more drafts because of the different parties involved. As such, most entertainment attorneys do not use this flat fee structure. I tend to use flat fee a few times though because I have a soft heart for laymen (aka you guys, the clients).
In any case, I went through all the different payment structures to give you an idea of how attorneys charge. For attorneys who charge hourly, honestly, I would say that there’s absolutely no reason for you to hire someone who bills at over $500 an hour, unless the attorney is an entertainment attorney or securities attorney and you need their help. For contingency, the standard takeaway for is 30 to 40% for personal injury attorneys and 5% for entertainment attorneys. For attorneys who charge mixed or on a flat fee structure, I would encourage you to ask the attorneys the rationale for their fee structures and make sure there’s a basis for doing so.
And that’s it for this week. See you next week. Have a great weekend! =)
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