1 Is Your Lawyer s Bill Too High? How to Avoid (and Resolve) Fee Disputes How Lawyers Charge Avoiding Fee Disputes Sources of Fee Disagreements Dealing with a Fee Dispute CITIZENS LEGAL GUIDE
2 Is Your Lawyer s Bill Too High? How to Avoid (and Resolve) Fee Disputes Questioning an attorney about your bill isn t easy, but you should not pay inaccurate or inflated charges. If you think your lawyer is charging too much, you re not alone. State and local bar associations across the country consistently report that fee disputes are among the most frequent complaints they receive against attorneys. HALT is dedicated to empowering legal consumers, and learning how lawyers charge and how to deal with possible overcharges are critical skills that you should have even if you never need to use them. HOW LAWYERS CHARGE Lawyers charge three basic kinds of fees flat, contingent and hourly. You need to understand how each of these billing systems works to know what you are agreeing to pay when you hire an attorney. For a detailed explanation of how lawyers charge, see HALT s Citizens Legal Guide Understanding Attorney Fees: So You Can Keep Legal Costs Down. Lawyers charge three basic kinds of fees flat, contingent and hourly. You need to understand how each of these billing systems works to know what you are agreeing to pay when you hire an A flat fee is usually for a single job, such as drafting a attorney. will, and requires you to pay a specified amount, such as $500, when the job is completed. In a flat fee agreement, the client is also usually responsible for expenses such as filing fees and court costs. A contingent fee is usually for a case against another person or her insurance company, such as a personal injury claim, and requires you to pay a percentage of your recovery, for example one-third, if the lawyer wins your case. In a contingent fee agreement, the client may also be responsible for additional expenses, such as expert witness fees and deposition transcripts. An hourly fee is most common and can be used for any kind of legal representation, from document preparation and contract negotiation to courtroom litigation and appeals. In an hourly fee agreement, the client s bill lists each attorney s hours and multiplies them by that attorney s hourly rate (more senior lawyers always charge higher rates). Law firms using hourly fees will also try to charge clients for every conceivable expense, including copying, messenger services, postage, travel and consultants.
3 Finally, lawyers often ask clients to pay a retainer for their services. Depending upon the agreement, this charge may be an advance payment of the lawyer s fee or it may be an additional fee. As you can see, attorneys fees are complicated and can easily become very contentious, especially if there is a breakdown in attorney-client communications. While some fee disputes are the result of a lawyer padding his bill, many are actually misunderstandings or simple bad math. This Citizens Legal Guide explains the steps you should take to reduce the chance that you and your attorney will get into a fight over legal fees, and how to protect your rights and fairly resolve any disagreements you may have with your lawyer. AVOIDING FEE DISPUTES There are four simple, common-sense steps you can take to minimize the likelihood that you will get in a fight with your lawyer over his charges. First, find the right lawyer, someone who is competent, honest and trustworthy. Second, discuss fees in advance; be sure that you understand and are comfortable with your financial obligations. Third, get a signed fee agreement so both you and your lawyer are on the same page. Finally, confront problem immediately, so they can be resolved before they become full-blown battles. Find the Right Lawyer. While there are no guarantees, taking the time to find the right attorney someone who has expertise and experience in the area of law you need, a good reputation among fellow colleagues and former and current clients, and a clean disciplinary record will help you get off to a good start and may offer some insurance against fee disputes occurring later on. Investigating the attorney you re planning to hire, before you sign on the dotted line, is very important. Too many people enter into an attorney-client relationship without discussing their lawyer s fee up front. Thanks to a growing number of searchable, online databases such as avvo.com and nolo.com you can obtain reliable and objective information about many attorneys online, including how they charge for their services. For example, if you visit nolo.com s lawyer directory, you can learn how much lawyers typically charge, whether they will participate in fee arbitration or counsel pro se litigants and whether they are in good standing with the state bar. Nolo s directory also offers some reassurance about the lawyer you ll be dealing with because all must take a pledge to treat clients well by communicating regularly, using written agreements and issuing timely billing statements. Avvo.com actually rates lawyers on a ten point scale (1= extreme caution 10= superb ) and provides fee rates, endorsements by other lawyers and client references. Discuss Fees in Advance. Too many people enter into an attorney-client relationship without discussing their lawyer s fee up front. Ironically, most of us including lawyers would never dream of hiring an accountant or any other service provider without first asking about the fees involved. The reason is simple. You cannot know if you are paying the going rate or even a competitive rate, if you don t know what you are going to be charged. If your lawyer fails to bring up the subject of fees during an initial consultation, you should. Whether your attorney is proposing a flat, contingent or hourly fee, you need to understand your obligations and to be comfortable with them. If you have any questions about your lawyer s fee, be upfront about it. If a retainer is going to be charged, be certain you understand what it is advance payment or additional fee. Lawyers are expensive, and they know it. Responsible attorneys are often willing to work with you to help you meet this financial burden by negotiating a different fee or payment schedule (for example, ask for a smaller upfront retainer, or extend your payment due dates).
4 Make sure that you and your attorney are on the same page and actually agree on your financial obligations. You are hiring a lawyer because you need legal services from a professional you can trust. If you are not comfortable discussing fees with your lawyer, maybe you should be looking for a different lawyer. No single factor is more important to avoiding fee disputes than a detailed fee agreement that spells out the terms of your Get a Signed Fee Agreement. No single factor is more important to avoiding fee disputes than a detailed fee agreement that spells out the terms of your relationship with your lawyer and the fees you can be charged. A fee agreement is often called a retainer agreement, because the client pays a retainer when it is signed. A good fee agreement includes the services to be provided, the rights and responsibilities of you and your lawyer, how legal fees and expenses will be be charged. calculated, how often you will be billed, how the lawyer can be terminated and how disputes will be resolved. Never hire a lawyer without a written agreement. Without a signed document, any fee dispute becomes an argument about he said, she said. Walk away from attorneys who are evasive about fees or refuse to commit them to writing. For sample key clauses that should appear in every attorney-client agreement, read HALT s Citizens Legal Manual, Using a Lawyer: And What To Do If Things Go Wrong. relationship with your lawyer and the fees you can Confront Problems Immediately. If problems develop, don t ignore them and hope that they will go away; respond immediately. Keeping the lines of communication open, informally and formally, can go a long way toward making sure problems don t escalate. If you are unsure about a charge, feel that you ve been overcharged, or have other concerns, question it right away. It could be a simple math error or an unintentional mistake on a bill. Your quick attention gives your lawyer a chance to explain or to correct the situation, so you can go forward confident that your attorney actually is competent, honest and trustworthy. SOURCES OF FEE DISAGREEMENTS Fee disputes can be triggered by internal law firm practices that are unfair to clients, such as overstaffing, uncompensated staff turnover, unnecessary research, and redundant expert witnesses and consultants. They can also reflect lax financial controls for expenses, overhead costs, and travel and entertainment. They may even be caused by outright fraud, i.e., charging for more hours than were actually worked. Overstaffing. Some firms assign too many lawyers to a case or project just to fulfill billable hour quotas. If you think too many lawyers are working your case, raise your concern and insist the firm reevaluate its strategy on your case. Uncompensated staff turnover. Be aware of staff changes that can shoot up the cost of your case. If you discover that the lawyer handling your case has moved on, you shouldn t have to pay extra to reeducate a new lawyer about your legal matter. Unnecessary research. Some firms constantly reinvent the wheel on each new engagement in order to bill as many hours as possible. If you are being billed for research in an area the firm already claims expertise in, question it. Keep a lid on expenses by asking the lawyer to anticipate in advance what expenses will run and by including a stipulation in your agreement that you cannot be charged over the Redundant expert witnesses and consultants. The use of expert witnesses and consultants may help your case, but not always. Don t hesitate to ask why more than one (or two) expert witnesses are needed, if that s what your lawyer proposes. estimate without prior approval. Uncontrolled expenses. Another way a lawyer s bill can increase is when expenses are not watched carefully. Keep a lid on expenses by asking the lawyer to
5 anticipate in advance what expenses will run and by including a stipulation in your agreement that you cannot be charged over the estimate without prior written approval. If your attorney is traveling on your behalf, hold him or her to the same standards you would hold yourself when traveling for business or pleasure. Insist Excessive overhead costs. Not long ago, law firms routinely absorbed the cost of overhead the cost of keeping an office running from heating and air conditioning to subscribing to LexisNexis or WestLaw and filing clients papers. Some lawyers now try to pass these costs on to clients by billing for every expense the firm incurs. Clients should challenge charges that obviously cover a firm s routine overhead. Deluxe travel and entertainment. If your attorney is traveling on your behalf, hold him or her to the same standards you would hold yourself when traveling for business or pleasure. Insist on a complete breakdown of travel charges air and ground transportation, hotel expenses. and meal expenses. Specify what air class you believe is appropriate. Unless you ve agreed ahead of time, you shouldn t pay for a first-class or business-class seat for your lawyer. Make clear in advance what you will not pay for. Some examples include in-room movies, bar bills, any expense over $5 without a receipt, and laundry and dry cleaning. on a complete breakdown of travel charges air and ground transportation, hotel and meal Bill padding or overbilling. Unfortunately, some lawyers intentionally try to rip off clients by padding their bills. While overbilling is difficult to prove, if you believe you ve been overcharged, raise it with your attorney. For example, if your lawyer charged you for more phone call conversations in a month than you have actually participated in, you need to challenge it. You should also raise questions if you are being charged at your lawyer s hourly rate for work that is obviously clerical, or for items that seem vague. DEALING WITH A FEE DISPUTE The unfortunate truth is that even when we take pains to protect ourselves with signed fee agreements and close monitoring of our case, fee disputes can still occur. If you find yourself in a fee dispute, start with a phone call to your lawyer. If that doesn t work, promptly write a letter that s cordial and succinct. If the letter doesn t resolve your dispute, consider arbitration. Only when all of these approaches fail should you consider a lawsuit. If the amount Call Your Attorney. If the amount in dispute is relatively minor, your best bet is to pick up the telephone and try to resolve it. Politely explain what the problem is and what you propose as a solution. Hear what your attorney has to say. If you cannot come to a mutual agreement on how to resolve the billing issue, decide if it s really worth pursuing. If the answer is yes and you have included a stipulation about fee dispute resolution in your contract, inform your attorney that you plan on requesting either mediation or arbitration. If the dispute is over a more substantial amount, you will need to write a letter to document your efforts to resolve it amicably before taking more formal steps. in dispute is relatively minor, your best bet is to pick up the telephone and try to resolve it. Write a Letter. If after careful review of your bill, you conclude that you ve been overcharged, write a letter to your attorney questioning specific items that seem unnecessary. You should be firm but indicate a willingness to compromise. Suggest a specific dollar amount you consider fair. It is to your advantage to be reasonable and willing to negotiate. In your letter, remind your lawyer about estimates, what was said about fees earlier, or what seems fair to pay for the work being done for example, you don t want to pay your lawyer s hourly rate for work that is clerical such as photocopying. You want your letter to be thoughtful and concise, not confrontational or disjointed. Ask for a written response by a certain date (two weeks is typical) and keep a copy of your letter for your files.
6 Here is a sample. Jane Doe 123 The Street Anytown, NY Mr. Dewey Law Offices of Dewey 123 Law Street Anytown, NY Dear Mr. Dewey: I am writing about the bill I received for your services dated October 7, As I told you when we spoke on the telephone yesterday, I do not agree with the charges of $450 for copying expenses. Your previous estimate indicated that copying expenses would not total more than $100. The representation agreement we signed also states that you will obtain my consent before incurring any copying expenses over a $100 limit. I was not notified that any additional copying expenses would be necessary and did not give my written approval for these charges. Please reduce my bill to $100 for copying as you originally estimated and as we previously agreed. I am eager to resolve this matter as soon as possible so we can continue to work together, and would appreciate a written response within two weeks. Sincerely, Ms. Jane Doe Sometimes the amount in dispute can be in the thousands, especially if your attorney is working for a contingent fee basis. For example, in one case, a law firm computed its 1/3 contingency fee on a $600,000 award as $200,000, but corrected it to $180,000 when their client pointed out that under the signed representation agreement, the fee is computed after deducting the $60,000 in expert witness fees and other costs she had to pay. In another case, a client was charged $34,000 for legal services on a property sale. After receiving the bill, he asked for an accounting of the hours spent on the case. It turned out the firm had spent 112 hours on his case and charged $14,000 for this time at the firm s normal rate of $125 an hour. The additional $20,000 charge has been based entirely on the value of the property sold in the transaction. The client disputed the bill, pointing out that he had never agreed to pay an amount based on the value of the property transaction. The law firm reduced his bill to $14,000. In a less clear-cut case, a client took issue with the number of hours she was billed for her case and wrote
7 the law firm a letter outlining her understanding of the quantity, quality and nature of the legal services she had received. She explained what she believed to be the fair value of the services, based on the firm s hourly rate of $120, then added an extra percentage to show her good faith. She suggested cutting the original bill by 25 percent. The firm accepted her offer. If you and your lawyer agree If you and your lawyer agree to compromise, make sure a new bill is issued to reflect your agreement. Also, use this opportunity to discuss what you should do if other problems occur between you. This will show your commitment to an ongoing working relationship. If you cannot come to an agreement after telephoning or sending letters, the next step to consider is arbitration. to compromise, make sure a new bill is issued to reflect your agreement. Arbitrate the Dispute. State and local bar associations offer voluntary or mandatory arbitration. Voluntary, the more common, requires that you and your attorney agree to participate in binding arbitration. Either side is free to refuse. In mandatory arbitration, the lawyer is required to submit to binding arbitration if you request it. California offers a hybrid of the two systems. The lawyer has to participate, but if one side doesn t want binding arbitration, an advisory opinion is issued. Your first step is to contact your state bar association to determine what kind of program it offers and how you can apply. You can obtain the necessary form by calling or writing your state bar association or by downloading it from the bar s website. Learn more about these programs by viewing the results of the HALT 2007 Lawyer-Client Fee Arbitration Report Card online at Who Will Hear My Case? If your case is accepted by the bar, you will be given the names of the arbitrators who will hear your case. In most states, if the dispute with your attorney is above a certain dollar amount, say $10,000, a panel of three arbitrators will be appointed to hear the case. Many programs now include at least one non-attorney arbitrator on the panel of three. Keep in mind that the attorney arbitrators practice within the same state and therefore may be the colleagues of your attorney. If you feel as though an arbitrator may have biases, under most systems you may challenge their appointment. How Does the Process Work? Once the arbitrators have been selected, the committee will notify both you and your attorney of the hearing date. In most circumstances, you are allowed to have an attorney represent you during the arbitration, but attorney representation is not required. Both you and your attorney will be allowed to present your sides of the story. Typically, you are allowed to bring in witnesses and documents to prove your argument. The process is much more informal than courtroom proceedings and usually takes a few hours. Although rules of procedure vary among states, in most circumstances you will be notified of the decision within 30 days. The decision will be final and binding, thus enforceable in a court of law. What If My Attorney Refuses to Arbitrate? In some jurisdictions, if your attorney refuses to arbitrate, the bar association will help you. For example, it may offer an advisory opinion for you and your attorney to consider, give you free advice, or even appoint a free lawyer to help you file a lawsuit against your first attorney. The arbitrator s decision. If the arbitrators find that your attorney overcharged you and that you should be reimbursed, that attorney is legally obligated to do so. The reverse is also true if the arbitration committee finds that you owe your attorney money, you are required by law to pay. A binding decision cannot be appealed in court if you do not agree; it can be appealed, however, if you prove a procedural error was made. If your attorney still does not comply despite his legal obligation, some states will impose disciplinary sanctions upon him. A few will even provide you with a lawyer to take your attorney to court. However, in most circumstances you personally must take your attorney to court to enforce the decision. Sue in Court. If less formal methods for resolving your fee dispute fail, there is still the courtroom. But suing a lawyer in any court, outside of a small claims court, is a risky proposition. Threatening to sue a lawyer is usually not an effective way of resolving a fee dispute. Instead, threats are likely to cause an irreparable rift. Besides, it can take three years or more for a lawsuit to be settled, and your lawyer knows it. Time will not be on your side.
8 The one possible exception to this rule is suing in small claims court where rules are less formal, and where cases and judgments are rendered more quickly. You can sue in these simplified courts if the amount in dispute between you and your attorney falls within the jurisdiction of small claims court. The maximum amount that can be disputed in small claims varies among states, but most range between $3,000 to $7,500. To find out the maximum amount in your state, contact your state s small claims court or visit The next step is to obtain a complaint form from your state court and notify your attorney that you are taking him or her to small claims court. For a complete explanation of the small claims court process and how to present your case in court, consult HALT s Citizen Legal Manual, Small Claims Court: Making Your Way Through the System. Join Our Fight for Reform Since 1978, HALT has provided a powerful voice working on your behalf in Washington and across the nation to help Americans navigate the legal system with or without a lawyer. We need your help. Join us and help HALT allow more people to settle their legal affairs simply and affordably. Where to Find More Information More information about the attorney-client relationship is available on HALT s website, in HALT s Everyday Law Series and in HALT s Citizens Legal Guides I Have a Problem with My Lawyer and Where Do I Go for Legal Help? Glossary of Terms Attorney Discipline: Act by a state bar grievance committee or court sanctioning a lawyer for violating the state s code of professional responsibility. Breach of Contract: Reason for suing based on failure to live up to a legally binding promise, such as the terms of an attorney-client relationship. Contingency Fee: Attorney s fee based on a percentage of the amount awarded to the client. If no amount is awarded, no fee must be paid, although the client will be required to pay legal expenses. Expenses: Charges for a lawyer s work other than fees, typically including long-distance telephone charges, photocopying, court filing fees and expert witness fees. Fee Arbitration: Out-of-court forums for settling fee disputes between attorneys and clients. Most state and local bar associations have established fee arbitration committees. Hourly fee: Lawyer s fee based on the amount of time worked on a case. The fee is the hourly rate multiplied by the number of hours worked. Mediation: Informal alternative to suing in which both sides to a dispute meet with a neutral third party (mediator) to negotiate a resolution. The resolution is usually put into a written agreement that is signed by both sides. Retainer: Money asked by the lawyer before beginning work on a case, often considered a deposit for a portion of the work to be done. The money may be used to cover expenses or the lawyer s fee or simply to reserve the lawyer s services for a specified time period or a lawsuit. The unused portion may or may not be refundable.