Better Legal Billing: Win Win Client Options

In the old days of legal billing, lawyer’s invoices — usually a single page of elegant letterhead–contained only the phrase, “legal services rendered,” and a hefty dollar amount. No time breakdowns, no list of activities performed or equipment and supplies used–just a final, usually shocking, charge.
But client demands and the evolution of sophisticated billing software have led to more detailed invoices today. Itemized statements have triggered discussion among businesses about whether hourly billing is the best way to be charged for legal services. As the legal profession becomes more competitive and dependent on high quality customer service, lawyers need to embrace alternate billing methods.
Fixed or flat fees, contingency fees, non-refundable retainers with discounted hourly fees, blended hourly fees and variations on those themes are becoming increasingly common. But many law firms have been slow to join this trend — lawyers still perform approximately 95 percent of their corporate legal work on an hourly basis.
What does that mean for your small business? If your company is currently working with a law firm or looking for legal counsel, try requesting alternate billing options. While many law firms rarely initiate different options, they’ll negotiate when brought to the table. If you want something better than the old “bill by the hour” deal, try presenting one of these billing structures:
Project billing for routine issues
If your legal needs include large but repetitive tasks, consider a flat-fee approach, also known as project billing. If you need legal assistance on a large research project involving several repetitive tasks with a fair amount of predictability for cost estimation and time duration, request a dollar cap for predetermined services. Be sure to compare estimated costs at the equivalent hourly rate–a projected cap that far exceeds any likely bill is really no cap at all.
Once you get a project billing estimate, don’t hesitate to shop around. Making an informed decision — shopping around, comparing prices and services with other law firms — is good business sense, especially if you intend to hire a firm for a single project. If you anticipate establishing a long-term relationship, mention this as you’re negotiating a project amount — a firm may provide a better deal if it expects future work from your company.
Results-oriented options
Forget the image of personal injury attorneys taking a third of any verdict or settlement. Consider instead contingency fees — fees based on the outcome of the case and the performance of your counsel. Creative use of contingency fees can create efficiencies in even the most high-level corporate settings. If you retain a lawyer to help your company avoid litigation, couple a reduced hourly rate with a bonus for successfully lowering your litigation outlays.
You also can establish an incentive based on a percentage of money won or saved in trial. If you’re a defendant in a case where the plaintiff has a strong shot at a $1 million settlement, negotiate a flat fee if the case goes to trial, plus a bonus if the plaintiff ends up getting less than $1 million. If you’re a plaintiff and estimate your case is worth between $1 and $2 million, you might negotiate services for a flat fee plus a percentage of any settlement over $1 million.
Contingency fees turn the matter into a shared risk or shared incentive, making the law firm your business partner, not just representation. Contingency fees can work well with both flat fee and reduced hourly fee arrangements. Because a number of variations on the “pay-according-to-success” theme exist, you should ask firms for the options they’re willing to discuss.
Multi-layered tasks
If you’re shopping for a firm for substantial legal work involving a number of legal specialties, consider using blended hourly fees. Rather than each attorney billing at the usual hourly rate, the firm calculates in advance an “average” rate based on the anticipated time each attorney spends on the matter.
The value of this arrangement is twofold–it helps define responsibility in a project and it provides a fair price schedule for the client, who avoids paying a senior partner’s hourly rate for research that should be conducted by a junior associate
Legal “Insurance” Firms without in-house counsel that frequently hire legal services might consider contracting with a firm. In this legal billing option, firms and clients agree to a specific charge per month in exchange for a predetermined set of legal services. The contract fee permits the client to pick up the phone and talk to the attorney without needing to eye the clock. This approach works like a legal insurance policy. It encourages companies to contact their counsel on non-litigation, non-crisis matters, and to save money in the long run by engaging in more preventive legal action.

Just as in business, the impetus for change comes from consumer demand. The sooner businesses take the lead in securing more effectively tailored billing methods from their legal counsel, the sooner they’ll get better, more cost-effective legal assistance.

Legal Plan: Does Your Family Need Legal Protection?

We all know that America is home to the most litigious society on the planet. A woman spills a cup of coffee on herself and sues the restaurant claiming it was too hot. Or how about the Judge that sued the cleaners for $54 million for losing a suit. If that’s not crazy enough, how about the concert goer, who several years after the incident, sued the rock star for falling on her and injuring her with his buttocks. You can Google “outrageous law suits” and get over 3 million results that include stories even more ludicrous than these. When you consider that there are 3 lawsuits filed in America every second, is it any wonder why legal plans are becoming a big part of the financial and security protection for families and small businesses? Remember, sixty years ago it was uncommon to own a health plan. Today it is uncommon not to have one. And today, many European countries have as much as an 80% participation rate with legal plans. But in America, and Canada for that matter, less than 10% of people have a legal plan.

So a law suit is one thing, but what about the everyday common things that can cause our veins to pop out of our heads. Here’s one:

A father pays for his daughter’s wedding reception to be held at very nice ball room. A few hours into the event, the plumbing goes out. He calls the event manager to request emergency services, and they arrive with a port-a-potty. After the event, when he calls to register a complaint, they offer a small refund of about $100, about ten percent, arguing that the event was almost over anyway. They haggle back and forth, and the owner basically says take it or leave it. The father calls his legal plan provider law firm for assistance. After the law firm writes a letter on his behalf to the business owner, the father receives a refund in the mail for over half of the cost.

Here’s another:

While a neighbor is walking his rottweiler dog, he lets it loose to run and it attacks and kills another a chihuahua dog that was in its own yard. The neighbor quickly retrieves his dog and disappears. When the police are called, they basically tell the dead dog’s owners that there really isn’t much they can do, and that maybe they should call the county animal control. The deceased dog’s owner makes a call to the legal plan provider attorney, and is advised to request that the police take a report and to have the incident on record, and then call animal control with that report number to have them investigate. Subsequently, when animal control does investigate, they find that the attacking dog is not registered, takes it into custody, fines the owner and requires that they register their dog to get it back. Also, a the legal plan law firm writes a letter to the owner demanding a monetary amount for full restoration of the dead dog. The attacking dog’s owner complies.

Having a legal plan to address the small legal issues like these can be quite beneficial to families, especially for the relatively small cost that they charge. Most charge a monthly fee, with the average daily cost being less than the price of a cup of coffee at the local convenience store.

Most legal plan companies will generally provide you with the basics, like phone consultation, letters and phone calls on your behalf, contract and document review, and a general will. And some of the legal plan companies provide more extensive plans that will cover you, at no extra cost, for representation for things like motor vehicle moving violations, IRS Audits, and trial defense services. And even a few provide Identity Theft Protection.

Having legal representation in court for vehicle moving violations – lets call it what it is, speeding – can really be valuable when it comes to car insurance premiums. As it was described to me years ago, “It’s the points, dummy.”. For we all know that for every point on your driving record, or your teenager’s driving record for that matter, your insurance premium will go up – if they don’t drop you altogether. If you can find a plan that offers this coverage – and there are some out there – it could be a huge plus for you pockets.

I won’t even go into depth about dealing with an IRS audit. Plain and simple, when Uncle Sam comes calling, you better answer with a tax attorney.

And as you already read earlier, law suits are getting crazier by the day. And more are being filed than ever before.

So, in summary, when you know that the odds are greater that one will be in court than in the hospital in the next year, the question isn’t “Does your family need legal protection?”, the question is “Can your family afford not to have a legal plan?” After all, with these odds, it goes to say that it’s not if you are going to need an attorney, but quite frankly, when you are going to need one.

We Need a Justice System, Not a Legal System (an Inside Look)

In the United States, above all things, the legal system should be fair, but instead, it is big business.

Additionally, engaging the legal system should not be a major financial decision, but for millions of people in America, it is. Yet, it is also difficult to imagine that this grim reality was one of the original goals defined by those apt gentlemen who created and signed the Declaration of Independence as they chased the dream of a country that could consistently provide the opportunities of life, liberty and the pursuit of happiness in equal doses to all.

Unfortunately, the legal system that has evolved in the United States, does guarantee equal protection, representation or opportunity to each and every citizen. Perhaps, upon being founded, the legal system should have been foregone and instead replaced by the notions of a justice system. In a justice system, the fair assumption would be that justice as determined by reasonable peers, would prevail. In stark contrast to a justice system, the modern legal system permits those individuals with the most money to prevail. And this, quite simply does not often lend itself to any form of justice, regardless of how remote that form may long to be.

If a person Googles, “average cost per hour for an attorney”, that person will learn that an attorney in rural areas may earn between $100 and $200 per hour, while the slicker, big city attorneys are in the average range of $400 to $600 per hour. Extrapolating this information over a 40 hour work week for one year, the lowest paid full-time lawyers on the attorney totem pole are earning over $200,000 a year ($100 per hour x 40 hours per week x 52 weeks per year = $208,000). When considering this dim reality, it quickly becomes obvious that the average citizen does not possess the means to pay even the cheapest attorney for any significant length of time.

Upon further examination of the facts, we must consider salaries and wages. The minimum wage varies from state to state. As per the 2016 National Conference of State Legislatures, two states have now passed laws to raise the minimum wage to $15 per hour. California was the first state to pass such laws. This state has now formally required employers to pay $15 per hour by January 1, 2022. New York quickly followed suit, passing legislation requiring employers to pay $15 per hour by July 1, 2020. This means that once the minimum wage is actually increased, earners in each of these states, will be able to afford an inexpensive rural attorney for 39 days by spending an entire year of wages earned ($15 per hour x 40 hours per week x 52 weeks per year = $31,200 annually / $100 per hour for an attorney = 312 total hours / 8 hours per work day = 39 days). However, if someone in a big city needs to hire an attorney and is making $15 per hour, that person can afford an attorney for less than 10 days by spending an entire year of wages earned ($15 per hour x 40 hours per week x 52 weeks per year = $31,200 annually / $400 per hour for an attorney = 78 total hours / 8 hours per work day = 9.75 days). Clearly the minimum wage earner will not have fair or adequate representation, for any real length of time in the current legal (not justice) system, against any sizable entity whose coffers may be ever so scantily lined with rotting cash.

According to the U.S. Census Bureau, the real (inflation adjusted) median household income in the United States was $51,939 (or $24.97 per hour) in 2013. The United States Consumer Law Attorney Fee Survey Report for 2013-2014, published statistics on attorney’s fees by geographical region. It also separated small firms and large firms into different categories. The lowest average hourly rate available from any law firm in the United States, is $253 (available in the Pacific States of AK, HI and WA), which is billed by small firms. Whereas, the biggest average hourly rate required by law firms in the United States is $546, billed by large firms in North East (CT, MA, MD, ME, NH, RI and VT). This means that the average American income, at the cheapest average hourly rate in the United States, would be able to afford legal representation for less than 26 days ($51,939 annually / $253 per hour for an attorney = 205.29 total hours / 8 hours per work day = 25.66 days), while the lowly, average, full time attorney billing $253 per hour earns $526,240 per year ($253 per hour x 40 hours per week x 52 weeks per year).

And, if a person happens to be in need of legal representation or was falsely accused of a crime and is in need of a defense, that person faces a painful reality. But, don’t forget that this pendulum swings both ways, just ask O.J. Simpson, who perhaps bought his way out of a murder conviction by spending an exorbitant amount of money on attorney fees.

Also, please be aware that this disparity does not stop with these details. Moving away from the low and average range for attorney’s fees, forces our attention only in the upward direction. A large group of attorneys easily make over $1,000 per hour and many of those proponents of a fair legal system claim to bill at double that amount. For example, the notorious bankruptcy attorney Theodore Olsen (although I bet all of his friends just call him Teddy the Bankruptcy Bear) is on record for billing $1,800 per hour, according to court filings in the LightSquared Inc., wireless network bankruptcy case filed in 2012. But the thick, brown, gravy train doesn’t stop to even glance at that billable fee as it trucks on down golden plated tracks. Berge Setrakian and Ralph Ferrara were both reported to make approximately $12.5 million in 2011. Again, simple math tells us that a person earning $12.5 million, who works 40 hours a week for 52 weeks per year, is earning $6,009.62 per hour, which makes a teacher’s salary pale in humble comparison.

Additional figures that do not bode well for most Americans in need of legal representation are the following supplementary facts. As per the U.S. Embassy.gov website, the average time for a jury trial is 4 days for civil cases and 5 days for criminal cases (at least, in 2009). However, cases do not start in trial and they often take a substantial amount of time to get there. To help illustrate this point, a person must first be arraigned. After arraignment, the preliminary hearing phase usually takes 5 to 6 days. In the case of misdemeanor charges, the next step in the legal system is the motions and hearing phase. This typically takes 3 months, but may also exceed 2 years, during which time an attorney is billing the client to file court documents and respond to documents filed by the opposition’s legal team. Based on this reality, the average American may run completely out of cash long before the case ever makes it to trial, in which case, justice is not part of the destination and possibly never even made it onto the legal landscape map.

For business, this dynamic is even worse, because numerous states permit an individual to file “pro per” on behalf of a business. This means an individual or owner chooses to represent him/herself, even though state laws might clearly require a business to be represented by an attorney in a court of law. In systems such as these, the individual may file the case on behalf of a company and begin paying court fees only to learn at a later date that an attorney is required to move the case forward. These legal systems actually cause financial harm and damage to the suffering individual in addition to the actual damages that motivated the case to be filed in the first place. With a minimal amount of expectations, one should be able to assume that engaging the legal system, unto itself, should not inflict a greater financial wound on the already injured party, but it does.

That said, it isn’t just the structure of the laws that make a mockery of the legal system, it is also the system itself. Fortunately, in an effort to dive deeper into the vastness of this overwhelming problem, we may also turn to the US Federal Government for more insight. Twice each year, it publishes statistics on the Federal Court System. Please note however, that these statistics do not include any of the non-federal courts, such as the state and municipal courts.

First, understand that there are 9 different Federal Court Systems:
1. U.S. Courts of Appeals
2. U.S. Court of Appeals for the Federal Circuit
3. U.S. District Courts – Civil
4. U.S. District Courts – Criminal
5. Federal Probation System Courts
6. U.S. Bankruptcy Courts
7. Federal Pre-Trial Service Courts
8. U.S. District Courts – Grand and Petit Jurors
9. the U.S. Federal Courts.

And, let’s not forget that the first court on that lists, consists of thirteen different courts:
1. U.S. Court of Appeals for the First Circuit
2. U.S. Court of Appeals for the Second Circuit
3. U.S. Court of Appeals for the Third Circuit
4. U.S. Court of Appeals for the Fourth Circuit
5. U.S. Court of Appeals for the Fifth Circuit
6. U.S. Court of Appeals for the Sixth Circuit
7. U.S. Court of Appeals for the Seventh Circuit
8. U.S. Court of Appeals for the Eighth Circuit
9. U.S. Court of Appeals for the Ninth Circuit
10. U.S. Court of Appeals for the Tenth Circuit
11. U.S. Court of Appeals for the Eleventh Circuit
12. U.S. Court of Appeals for the District of Columbia
13. Supreme Court of the United States (Court of Last Resort)

After a quick glance, it becomes quite apparent that an individual not only needs an attorney to understand the laws and the intention of those laws, a person may also need the assistance of an attorney to grasp the purpose of each of these courts and the appropriate place to begin seeking “justice” by filing a case in the proper court, since there are soooooo many to choose from.

Truly, it is unfortunate that a person literally has no individual rights unless that person knows the law and most Americans can’t afford to pay an attorney to know the law. So then, how free is the land of the free and the home of the brave when freedom and fair legal representation require money to attain?