Chapter 6 Legal Fees

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Chapter 6Legal Fees
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Types of Legal Fees

• Retainer
• Hourly
• Flat
• Contingency
• Statutory
• Combination

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Ethical Limits of Legal Fees

• Fees must be reasonable
• Fees must not be unconscionable

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Reasonable Fee Factors

• Experience, reputation, and ability of the
  lawyers
• Novelty or difficulty of case
• Other Employment Opportunities
• Amount Involved and Results Obtained
• Time and Labor Required
• Clients informed consent to the fee
• Customary Fees
• Professional Relationship with Client

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Types of Retainer Fees

• True Retainer
• Nonrefundable Chargeable
• Nonrefundable Nonchargeable
• Refundable Chargeable

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Hourly Rate Fees

• Fees computed by multiplying attorney or
  paralegals hourly rate time the number of hours
• Most common type of fee
• May be used for most all types of cases

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Blended Hourly Rates

• Blended hourly rates are an average of each
  timekeepers hourly rate
• Attorney 300 per hr
• Associate 200 per hr
• Paralegal 100 per hr
• Total 600
• 600 ? 3 200 per hr

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How to Determine Hourly Rates

• Salary Overhead Profit ? Billable hours
  Hourly Rate
• 175,000 (salary) 87,500 (Overhead) 48,750
  (profit) 311,250
• 311,250 ? 1,500 (billable hours) 208 per hour

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Another Methodto Determine Billing Rates

• Determine estimated total overhead and profit for
  firm for one year
• Determine number of billing attorneys and
  paralegals and target billing rate for each
• Estimate reasonable billable hours (1,500) per
  year
• Determine gross billings for the year
• Adjust the rate, the number of hours or amount of
  overhead and profit

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Contingency Fees

• Fee is dependant or contingent on the outcome
  of the case
• Can be used is variety of cases but most common
  in
• Personal injury
• Collection
• Malpractice
• Ethical restrictions in Domestic Relations and
  Criminal Cases

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Contingency Fee Statutory Requirements

• Fee agreement must be in writing
• Must include how costs are determined
• Special Rules for MICRA Actions
• Must use net recovery method
• Limits on costs that may be charged
• Medical care and office overhead not deductable

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Calculating a Contingency Fee

• Gross Fee Method
• Judgment 15,000
• Attnys fee (1/3) - 5,000
• Subtotal 10,000
• Costs - 1,000
• Total to Client 9,000
• Total to Attorney 6,000

• Net Fee Method
• Judgment 15,000
• Costs - 1,000
• Subtotal 14,000
• Attnys fee (1/3) - 4,667
• Total to Client 9,333
• Total to Attorney 5,667

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Variations on Contingent Fee Arrangements

• Percentage increase at various times in the case
• Sliding scale fee decreases as recovery
  increases
• Reverse contingent fee for defense
• Based on the amount the client saves
• Combination of hourly rate and contingent fee
• Client agrees to pay hourly rate may be reduced
  rate
• Attorney entitled to a percentage of the recovery
• Client may be entitled to credit for fees paid

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Reverse Contingency Fee

• Based on the difference between the amount at
  issue and the amount of final recovery
• Used by defense firms
• Amount of potential liability 500,000
• Amount of recovery 200,000
• Fee 1/3 of savings 300,000
  100,000

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Contingency/Hourly Combination

• Client agrees to pay firm hourly at 200 per hour
• Client agrees to pay one-third contingent fee
  based on recovery less hourly rate paid
• Firm bills and client pays 35,000
  in hourly fees
• Case settles for 1,000,000
• Attorneys fee 1/3 of 1,000,000
  333,333
• Less Hourly fees paid 35,000
• Net Fee to Attorney 298,333

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Types of Fixed or Flat Fees

• Per Case
• Per Service
• Fee covers the services regardless of outcome
• Typical for routine services
• Estate planning, corporate formation
• criminal, divorce, bankruptcy

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Determining Flat Fees

• Factors considered are the
• Time it takes to complete a case
• Timekeepers hourly rate
• Attorneys time 1 hr. _at_ 200
• Paralegals time 3 hrs. _at_ 100 300
• 200 300 500
• The flat fee should be 500

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Statutory Fees

• Fees are set by a statute
• Most common statutory fees
• Probate Cases
• Also, attorneys fees that can be charged in
  default judgments
• Set forth in local court rules

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Statutory Fees California Probate Code

• 4 of the first 100,000
• 3 of the next 100,000
• 2 of the next 800,000
• 1 of the next 9,000,000
• ½ of the next 15,000,000
• Over 25,000,000 reasonable fee determined by
  the court

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Calculation of Probate Fees

• Estate is determined to have a value of
  5,000,000
• Fee calculated as follows
• 4 of first 100,000 4,000
• 3 of next 100,000 3,000
• 2 of next 800,000 16,000
• 1 of next 4,000,000 40,000
• Total statutory fee 63,000

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Combination Examples

• 20 contingency plus 150 an hour
• Hourly billings may be credited against recovery
• 1,500 flat fee plus 25 contingency
• Nonrefundable (true) retainer plus hourly
  billings
• 33 1/3 contingency plus 5,000 premium depending
  on case success (ie. recovery over 100,000)
• Capped fee total fees not to exceed a specified
  amount
• Must consider what happens if the fees exceed the
  cap

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Firms also Charge for Costs Advanced

• Filing Fees
• Expert witness fees
• Deposition costs
• Appraisal fees
• Photocopies
• Travel and meals

• Faxes
• Long distance telephone calls
• Postage
• Supplies
• Outside services

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Other Fees and Charges

• Secretaries
• Clerks
• Messengers
• Temporary employees
• Fixed percentage of monthly fees for overhead

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Lodestar and Multipliers

• Lodestar is based on the amount of hours
  reasonably spent and applying the attorneys
  hourly rate thereto
• Multiplier compensates the attorney for risk
  factors

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Types of Liens

• Attorneys Lien - lien on a judgment or other
  recovery
• Created by the written fees agreement
• Most often seen in contingent fee agreements
• Retaining Lien - lien on clients papers, money,
  or other property in attorneys possession
• Ethical issues regarding enforcement of lien
• Other Lien - Promissory note secured by a deed on
  the clients real property
• Ethical issues

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Paralegal Ethics

• Paralegals may not set fees.
• Paralegals should not quote fees.
• Attorneys cannot share fees with Paralegals.

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Chapter 7Timekeeping
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Hours are Placed in Two Categories

• Billable hours
• Directly applied to clients matters
• 75 to 85 of the day
• Nonbillable Hours
• Not applied to clients matters.
• 2 types exist creditable and noncreditable

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Creditable Nonbillable Hours

• Serving on law firm committees
• Pro bono work
• Management functions
• Administrative tasks
• Training

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Noncreditable Nonbillable Hours

• Educational activities
• Personal matters
• Association work

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Tenths of an Hour

• 1-6 minutes .1
• 7-12 minutes .2
• 13-18 minutes .3
• 19-24 minutes .4
• 25-30 minutes .5

• 31-36 minutes .6
• 37-42 minutes .7
• 43-48 minutes .8
• 49-54 minutes .9
• 55-60 minutes 1.0

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Seven Purposes of Time Records

• Billing clients
• Recovery and justification of fees
• Compensating hourly employees
• Calculating employee productivity
• Firm planning
• Monitoring Work in Process
• Projecting profitability
• Forecasting income

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Time Sheet Information

• Timekeepers name
• Date
• File name
• Client name or number
• File number
• Amount of time expended
• Description of work

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Time Sheet Entries

• Descriptive
• Review answers to interrogatories
• Conference w/attorney re trial notebook
• Telephone call to client re deposition
• Research fraud issues on breach of contract
• Inserted discovery responses in discovery database

• Not Descriptive
• Review file
• Conference w/attorney
• Telephone call
• Research
• Worked on computer

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Work Description Codes

• C/W Conference with
• CT Court trial
• CH Court hearing
• D1 Draft pleadings
• D2 Draft correspondence
• D3 Draft memorandum
• D4 Draft other
• DP Deposition
• N/C Nonchargeable

• P Preparation of
• R Research
• R1 Review pleadings
• R2 Review correspondence
• R3 Review memorandum
• R4 Review other
• RV Revision of
• TC Telephone conference

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Billing Process

• Timesheets/records prepared by attorney/paralegal
• Data entry into time and billing program
• Pre-bill generated for review
• Final bills generated
• Management reports generated and mailed
• Aged accounts receivable
• Attorney/paralegal productivity reports
• Case type productivity reports
• Work in process reports

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Time Records in Contingency Cases and Other Types
of Fees

• Contingency Fee Cases
• Recover fees in fee disputes
• Calculate the profitability of a case
• Determine a cases settlement value
• Calculate the amount of lien if terminated
• Probate Cases
• Flat Fee Cases

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Corporate Legal Departments Use Time Records

• Bill clients
• Management reports
• Justify additional staff and budget increases
• Court-awarded legal fees

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Government Legal Offices Use Time Records

• Management reports
• Provide statistics
• Prepare budgets

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Paralegal Timekeeping Ethics

• Do not bill clients for work not performed
• Do not pad time sheets
• Do not double bill
• Remember It is the supervising attorneys
  responsibility to make the decision to charge or
  not charge a client.

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Timekeeping Tips

• Keep a time sheet handy
• Record the largest amount of time
• Record the time when it is spent
• Do NOT estimate time
• Be accurate
• Be descriptive and concise
• Record all time including nonbillable time
• Develop To-Do lists

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Computerized Time Accounting

• There are many time and billing computer programs
  available specifically for law firms.
• SaaS Software as a Service
• Applications are hosted by a vendor
• Made available to customers via a network
• Vendor provides technical operation, maintenance
  and support
• Vendor charges a monthly fee