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Thursday, January 9, 2014

CONTINGENCY FEE, RETAINER FEE, FIXED FEE— WHAT DO THESE MEAN AND HOW MUCH IS MY LAWYER GOING TO CHARGE?


Okay, I admit it.  We lawyers use so many different terms for the different types of fees we charge, if you didn’t know what a wholesome and compassionate bunch we are you might suspect that we’re throwing legalese about just to distract you while our staff reaches into your pocket book.

Ask Roxy understands your confusion.  On my own website I try to be very clear about my pricing.

I’ll break it down for you here:





Initial Consultation fee.  The first fee you usually pay a lawyer is an initial consultation fee. Many lawyers offer the initial consultation at a set rate; some offer it for free as a sort of loss leader to get your business. I’ll let you in on a little secret here: whether or not that initial consultation should be offered at a reduced rate is a point of controversy on lawyer list-serves so if you ask for a reduced or free initial consultation and the lawyer gets all weird on the phone it could be because that lawyer is just coming off of some heated debate on the topic where they righteously proclaimed that they would never do another free consultation.  But now, talking to you, they’re stumbling over their words because maybe one free consult here or there wouldn’t be so bad for business…

Apart from any fee you may pay for your first meeting with a lawyer, you probably will be charged either a Fixed, Hourly, Retainer, Contingency or Statutory Fee thereafter. 

Fixed fee. This type of fee, sometimes called a standard fee, is commonly used in routine legal matters. For example, a lawyer may charge all clients the same amount to draw up a simple will or handle an uncontested divorce. Legal clinics often use this kind of fee arrangement. Here is the trick: Before agreeing to a fixed fee, find out what it does and does not include. To do this properly you need to look closely at what other charges might be added to the bill if you decide to purchase “ extras.” This is especially true with the low fees you find online. As a lay person you might not know what you really need until you get into the process and then are confronted with having to pay extra fees for things that would have been included in a bid by a full service attorney who knew that you would need those “extras” from the start.

Hourly fee. Many lawyers charge by the hour, and the amount can vary from lawyer to lawyer. You can ask the lawyer to estimate the amount of time your case will take, but it is a very difficult question to answer. For one thing, how often a client calls and wants to talk about the case can be a strong determining factor in the final bill. The lawyer can’t know that about you from the start. Also, especially in litigation or the resolution of disputes, circumstances may change, and your case may take much longer to handle than the lawyer initially expected.

Retainer fee. This is the most confusing term in lawyer fees because different lawyers mean different things by it. Definitely make sure to find out what your lawyer means by “retainer fee.”

A retainer fee can be used to guarantee that the lawyer will be available to take a particular case. The fee you pay is to reimburse the lawyer for having to turn down other cases in order to remain available. It does not cover the cost of any work you want the lawyer to complete. With this kind of retainer fee agreement, if you end up asking the lawyer to do work you will be billed additionally for the legal work that is done. If the fee agreement is a true non-refundable retainer agreement, you may not be able to get your money back — even if the lawyer does not handle your case or complete the work.

A retainer fee also can mean that the lawyer is “on call” to handle the client’s legal problems over a period of time. Certain kinds of legal work might be covered by the retainer fee while other legal services would be billed separately to the client. Similar to the flat fee, above, it is really important to look at the small print here because services that have you pay a monthly retainer fee for a lawyer to be on call often don’t require the lawyer to actually do much more than talk to you or review very short documents.

Finally, a retainer fee sometimes is considered a “down payment” on any legal services that the client will need. This means that the legal fees will be subtracted from the retainer until the retainer is used up. The lawyer would then bill you for any additional time spent on your case or ask you to replace the retainer.

Contingency fee. This kind of fee is often used in accident, personal injury or other types of cases in which someone is being sued for money. It means that you will pay the lawyer a certain percentage of the money you receive if you win the case or settle the matter out of court. If you lose, the lawyer does not receive a fee. Either way, though, you will have to pay the court costs and certain other expenses. And, depending on the circumstances, these charges could be quite high. Ask the lawyer for an estimate of such costs. In some cases, the lawyer may pay some of these costs for you when they are due, using money that you receive from the case.

Important tip: If you agree to a contingency fee, make sure the written fee agreement spells out the lawyer’s percentage and whether his or her share will be figured before or after other costs are deducted. This can make a big difference: 
Suppose, for example, you were awarded $20,000 in a personal injury case and your lawyer was entitled to 40 percent. Court costs and other expenses amount to $2,000. If your lawyer’s share is figured after the $2,000 is deducted, the lawyer will receive 40 percent of $18,000 — or $7,200; you will receive $10,800. But, if the lawyer’s share is figured before costs are deducted, the lawyer will get 40 percent of $20,000 — or $8,000; then, after the $2,000 in costs is deducted from the remaining amount, you will get $10,000.

Contingency fee agreements must state, among other things, whether you will be required to pay the lawyer for related matters (matters not specifically covered in the written fee agreement) that might come up as a result of your case, like if some third party files a cross-suit. In many cases, the agreement also must note that the attorney’s fee is set by the attorney and the client — not by any legal statute or law, which brings us to the last type of fee.

Statutory fee. This most often comes up in the context of probate, for which the legislature has set statuary limits on the fees a lawyer can charge.  I have more info on the statutory fees for California probates on my probate blog post.


I think that about covers it. 

The most important thing to remember is that a savvy Ask Roxy reader always reads the retainer agreement they sign with their lawyer. These are not one-size-fits all agreements and different lawyers do have different ideas of what should be included in the fees, estimates, costs, share of winnings, and other details. It is perfectly acceptable to ask to see a sample retainer agreement before you come in for a consultation so you have time to review it before you feel any pressure to sign.  





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