Potential clients need to know that lawyers have a variety of incentives to help clients with their legal problems. Among the incentives is the chance to make a living as a lawyer. Lawyers have college (four or more years) plus law school (three or more years) of education, study and postponement of their earning years invested in preparation to be available to help our clients, whatever the legal matter is.
The types of incentives can be the feelings of satisfaction in helping a person resolve a legal issue, or the improvement of a professional’s reputation in a case which gets the kind of notice that affects the reputation and esteem of the lawyer. Some lawyers are reported to enjoy getting paid for their efforts at helping clients. Lawyers who over a long period do not regularly get paid usually stop practicing law.
Clients also have incentives for engaging legal services. The client may have recently been sued, been involved in an accident, been charged with a crime, or may have decided to take control of a situation by obtaining business counseling or planning their estate. Whatever the triggering event, the lawyer will appreciate the call (if not, call someone else) as it allows the lawyer to show the skills and experiences she has worked for years to acquire to you as a potential client, and if hired to use those skills for your best interests.
To make all that come about the lawyer and client need to come to agreement on the compensation to be paid for the lawyer’s (or law firm’s) services. Lawyers operate under a rule on legal fees based on the American Bar Association’s Model Rules of Professional Conduct. All states, except California use the rules or some variation of them as their code of ethics. Rule 1.5 governs Legal Fees, and this is Indiana’s version. The primary factor in the rule is that a lawyer shall not charge a fee that “is unreasonable.” There are eight other factors listed, which cover 14 actual factors.
As long as the fee arrangement fits the Rule 1.5 guidelines (and several cases that interpret the Rule) the lawyer and client are permitted to enter into any fee agreement they can work out. The three syles of fee agreements are described in the link to an earlier post.
The structure of a fee agreement can shift the risks in the case from the client to the lawyer, so long as both parties understand what is happening. With a risk shift to the lawyer, there are possible rewards and penalties which follow to the lawyer. As the lawyer accepts risks, the risks to the client diminish. Most clients appreciate a reduction in the risks of legal work.
So, why are value priced fees appropriate for clients in so many types of cases, and why not in all cases? The risks for each side changes with an agreement for flat fees. for instance in a personal injury case, lawyers who skillfully choose their caseload will accept a percentage of the recovery as a fee. If there is no recovery (the legal outcome that fulfills the scope of services offered), the lawyer takes no fee. If the case settles promptly, the full fee will be taken by the lawyer, as agreed.
In these and other types of legal matters with a value priced flat fee the potential client gets the advantage of knowing the scope of services or outcome that will be provided, and the total fee to be paid. That means that when the scope of services is completed, the lawyer is done and gets paid or keeps the fee. It also means that if the scope of services changes in a manner not foreseen, or agreed to when setting the fees, the fees may change (properly with a Rule 1.8 explanation and opportunity). Finally, if the lawyer does not complete the scope of services, some or all the fee shall be refunded if prepaid.
The flat fee establishes that it is the lawyer’s incentive is to complete the services quickly for the benefit of the client, and also for the lawyer. The lawyer loses any improper reason to create or increase unnecessary conflict with the opponent or her lawyer, as it will not help to increase the profit for the lawyer, since time spent is not a variable in the fee equation. But the fee needs to be based on a proper value pricing analysis, since a lawyer who consistently quotes a fee that is inadequate for the scope of services finally provided will not stay in the profession too long.
The greatest reward for a client in working out a value priced flat fee is the transparency that occurs. If a legal representation is quoted at an hourly rate, the client will have little indication of what the final cost will be. In an hourly rate fee there are two components to the final fee, the rate times the time spent on the matter. There is no protection for the client from unnecessary expansion of the dispute in order to build hours to bill.
We can discuss the components of an hourly fee in an upcoming post. I look forward to your comments.