How Do I Pay My Lawyer? (Fee Agreements Explained)
Face it — you are terrified of lawyers, or at least their bills. If you went through a divorce, you probably paid a large amount of money up front (a retainer), then received a monthly bill. Since your case went on for quite some time, the cost impacted your monthly budget for months (or even years).
Perhaps you had a traffic ticket and had to pay a lawyer to handle it for you. Likely, the lawyer asked for the entire fee (a flat fee) up front. While you didn’t like having to fork over the money, you knew from the onset what your costs would be for that service.
There are many different types of fee arrangements for lawyers. In this blog, I discuss some of the primary types of fee arrangements, so you will be a more educated consumer.
Contingency fees are my bread and butter. In almost all of my cases, I am paid on a contingent basis, meaning I only get my fee paid when — and if — I win the case at trial or by settlement.
In a typical personal injury or medical malpractice case, fees are one-third (1/3) of the gross amount collected. For medical malpractice, one-third is the upper limit an attorney may charge without a special court order. But in many other types of injury cases, lawyers often charge up to forty percent (40%). Sometimes, the higher fee applies only if a case goes to trial. Our firm does not charge a higher fee in any case — we charge a straight one-third in all personal injury cases, even if we go to trial!
Keep in mind that fees are based on the “gross amount collected.” That means the fee is taken on the total settlement or verdict, not on the amount the client will receive.
Here’s an example: Assume your case settles for $9,000. Our fee is one-third, or $3,000. Assume we spent $300 in costs obtaining medical records and the police report. Let’s further assume your health insurance paid for your medicals at a reduced rate and paid $2,700 total, for which they must be reimbursed. I would negotiate that amount down to $1,800 (for example). You would receive the $9,000 less the fee ($3,000), costs of $300, and the subrogation paid to your insurer ($1,800). Your net tax-free take would be $3,900.
My firm also advances all the costs of litigation. While the client is theoretically responsible for repaying those, we do not pursue our own clients for them. If we don’t win, we eat the costs. The key here is that there is no risk for you — no settlement or verdict means you owe us nothing!
Hourly fees are the most basic type of legal fee. While this has long been the gold standard for most lawyers, things are changing rapidly in the marketplace.
In a typical hourly retainer, the lawyer states a charge on an hourly basis, such as $300 per hour. Often, the attorney will ask for a retainer (such as $3,000) to hold and use to pay the hourly fees as they are earned. Usually, there is a provision that the client agrees to replenish the retainer up to a predetermined level (for example, $3,000).
Here’s how it works in the classic divorce that I mentioned above: You run to your lawyer with $3,000. They use that to pay toward the work they perform at $300 per hour. When the retainer drops below a certain level, they request that you replenish the retainer.
Sometimes, costs are billed in advance (the client pays filing fees, for example), and sometimes they are billed later.
The uncertainty and open-ended nature of these agreements is making them far less popular than they used to be. Many legal experts are proposing a move toward other types of fee agreements.
Fixed Fee Agreements
Fixed fee arrangements are just as simple as they sound. You agree to pay your traffic lawyer $4,000 to handle your DUI all the way through trial. That means you pay $4,000 up front. The lawyer then does the work and defends you in your trial. Some fixed fee agreements have a provision that if a trial doesn’t occur and you accept a plea bargain, there will be a partial refund of your fees.
In fixed fee cases, the lawyer states what the fee is. The client accepts it.
As in all fee arrangements in Illinois, a fixed fee arrangement must be in writing and must be reasonable.
Limited Scope Representation
Limited scope representation is a new frontier for lawyers that is very popular for clients, especially those with limited resources.
Consider the divorce case mentioned earlier. If you are a person without that $3,000 retainer, you may find a lawyer willing to draft a marital settlement agreement and walk you through how to appear in court and file papers for a charge of $600. The rest is up to you.
Here’s another example of a limited scope representation fee: You are being evicted and need more time to move. You need to hire a lawyer to help with a motion for more time. The attorney may agree to draft the motion and explain how to file the motion and appear in court. The entire service is limited to drafting the document and explaining how to file it and present it in court. That limited scope service might cost you only $400 and prevent you being evicted before you find a new place to live.
In limited scope representation, the agreement should specify very clearly and understandably exactly what the lawyer will and will not do and exactly when the contract for retainer of their services expires or ends.
Recurring (Monthly) Fees
Recurring or monthly fees are another new type of fee arrangement that lawyers use to provide services in a way that benefits both the client and the lawyer.
You may have a business that hires and fires people regularly and needs a lawyer to draft employee contracts and employment handbooks, as well as handle the occasional lawsuit that arises for an alleged improper firing.
Your fee agreement may stipulate the lawyer will handle unlimited calls, emails, letters, appearances in court, lawsuits, employment agreements, and employee handbooks for a fixed monthly fee, whether any work is required that month or not. So, the lawyer may accept $1,500 monthly. The client pays this amount, knowing some months the business will not require much legal help, while in other months, the lawyer will be very busy. The arrangement keeps the lawyer “on call” for that company “just in case.”
One of the parameters being discussed in the legal profession is whether a lawyer should revise this type of agreement if several months pass and no work is required. As of now, there is no rule on this question, but many lawyers already do this type of self-policing.
Contact Chicago Personal Injury Lawyer Stephen Hoffman
As in all cases involving injury and potential liability, if you have been hit by a vehicle, immediately get medical treatment, report the crash to police and your own insurance company, and contact a lawyer with expertise in your type of case, such as auto accidents, bicycle accidents or pedestrians hit by cars.
If you've been in an accident or otherwise injured and have questions, contact Chicago personal injury attorney Stephen L. Hoffman for a free consultation at (773) 944-9737. Stephen has nearly 30 years of legal experience and has collected millions of dollars for his clients. He is listed as a SuperLawyer, has a 10.0 rating on Avvo, and is BBB A+ accredited. He is also an Executive Level Member of the Lincoln Square Ravenswood Chamber of Commerce.
Stephen handles personal injury claims on a contingency fee basis, which means you don’t pay anything upfront and he only gets paid if you do. Don’t wait another day, contact Stephen now.