Legal Fees Revisited -- Again; A War on the Middle Class?

If I understand progressive thinking on the question of legal fees, it goes something like this: Flat fees are wrong. They are wrong because they mask the relationship between the a lawyer's work and the client's expense. Thus we cannot charge non-refundable retainers, and must be prepared to refund the unearned portion of fee when a client terminates the relationship before services are completed.

But these rules, seemingly equitable enough, aren't quite so benign. Thought through to their conclusion they will result in less access to legal services for the middle class. Here's why.

Lawyers who charge a flat fee make a calculated risk when they take on a client. The lawyer may agree to represent someone in a criminal case for a fee of $10,000. That fee might cover any and all work on the case up to an including trial. Just how does the lawyer come up with that fee and not some other number? After all, how can the lawyer know in advance how many hours it will take to resolve a case before he or she has even read the arrest warrant?

The simple answer is that the lawyer has no idea. Lawyering is based largely on experience, the comparing of like cases to like cases. Tell me your story, and, in a significant number of cases, I will have a pretty good idea what the state's case will look like. Chaos, like most other phenomenon, is distributed along a bell-shaped curve. A lawyer setting a flat fee assumes the risk that he has estimated how much time and effort it will take to resolve a case. When the lawyer is wrong, the lawyer typically bears the cost of his error.

The hostility of bar regulators to flat fees poses a challenge to lawyers representing the non-affluent, that vast majority of Americans for whom money is in short supply. When catastrophe strikes, these folks are not prepared. They marshal such resources as they have to meet the needs of the day. Typically, folks raw from the trauma of an arrest know what they can pay for fees at the first meeting with a lawyer. They've called family and friends to patch together their stake for legal fees. You can quote whatever fee you like; the client can only pay what he has to give.

Although I do not have empirical data to support this, I believe most small firms cross-subsidize the work they do for folks who make too much to qualify for a public defender, but who do not have enough money to pay for the representation they need. A client may have a drug case and only enough money to cover two or three court appearances, if the lawyer were to actually bill for the cost of his time. (Cost being a function of his overhead divided by the number of hours he or she foreseeably works in a week.) Thus, it is not uncommon in New Haven, I am told, for struggling lawyers to agree to represent defendants accused of felony drug cases for $1,500 or even less. There is simply no way a lawyer can promise to take a case to trial for $1,500 and do anything other than lose money representing the client. Hence, lawyers charge clients who can afford to pay a little more to cover the expenses of those who cannot afford to pay. Fees are a function of the cost of overhead and the balance in his firm's operating account.

Bar regulators seek, whether wittingly or not, to destroy this practice. In doing so, they will drive lawyers away from representation of those who cannot afford to pay realistic fees. The result will be more unrepresented middle class defendants, especially in a bad economy where money is tight.

I am not suggesting here that lawyers ought not to be required to give refunds for unearned fees. What I am suggesting is that a blanket bar on flat fees creates a disincentive to represent folks who cannot pay full freight. What's worse, the Rules of Professional Conduct have a built in assymetry that penalizes lawyers for giving some clients a break on fees.

Suppose in the hypothetical $10,000 fee case, the lawyer discovers that the case is far more complicated than foreseen, or that the client's demands are far in excess of what was anticipated or reasonable. In that case, the lawyer might find himself spending significantly more time on the case than anticipated. A case that was expected to take 50 hours to resolve might blossom into a 150 hour nightmare. If this happens, will the lawyer be able to withdraw from the case? Almost certainly not, a judge will rule. The judge will hold the lawyer to the terms of the fee agreement: $10,000 is the fee for all work required, even if that hourly rate diminishes to the point of forcing the lawyer to work at a loss. The lawyer bleeds silently.

That is at it should be. This is a profession. The client comes first.

But the practice of law is not a financial suicide pact on the part of lawyers. Bar regulators who seek to impose a reasonable fee requirement on all transactions between lawyers and clients create an incentive syystem in which lawyers are encouraged, as a matter of survival, to eschew representation of those on the cusp of solvency. That is a trend I regret and deplore. Bar regulators should deplore it too.

Comments: (3)

  • I just left court where a friend's brother got 57 ...
    I just left court where a friend's brother got 57 years in prison. They paid a lawyer 40k. That lawyer didn't try the case, the Fed PD did. The lawyer won't refund a penny, saying he'd earned every bit. Even though he didn't try the two week long case.
    How do you justify taking 40K from a family that has so little to spare? We talk about entitlement, well, there it is. This family cannot afford to hire an appellate attorney despite the fact that they have good issues for appeal. Why? Not because they gave up all their money to trial counsel who saw the case to the end, but because trial counsel refuses to part with any of it.
    Sorry, I'm feeling a bit bent out of shape about this. It's personal.
    Posted on June 18, 2010 at 6:35 am by mirriam
  • Norm: Your post is a metaphor for American life, u...
    Norm: Your post is a metaphor for American life, unfortunately. In every area of existence, more people are going to be pushed to the margins.
    mirriam: 40K is a generous legal fee in most criminal cases. Give me the name of the lawyer and proof that he's overbilled, and let the legal blogosphere do the rest. Since it's a federal case, PACER should show what work - if any - was done pre-trial. (This is Mike from Crime & Federalism.)
    Posted on June 18, 2010 at 8:03 am by Mike
  • As a former defendant I favor(ed) the flat fee bil...
    As a former defendant I favor(ed) the flat fee billing. I wanted a lawyer that could best represent my interests and that I had confidence in. A contract was signed for a sum of money that would cover the entire cost of my defense and appeal if necessary. It would cost the same amount of money if the case was settled with a phone call or if the warrant was not signed.
    This was fair to me.
    The amount of money was significant but I was getting a heralded attorney that would be with me throughout the ordeal for a set fee, no matter how short or long the period would be.
    As it turned out, it was long, actually very long. The outcome was positive and well worth the wait. I got the lawyering I expected.
    Was my fee fair? I think it was. I'm guessing that although my case involved many court appearances, there are just as many cases that are relatively short where a plea is accepted.
    I appreciated my representation but I'm not so sure I would have selected the attorney if he billed at X dollars per hour and could offer no real estimate on the cost of the case let alone the cost of appeals (if necessary).
    Posted on June 18, 2010 at 2:09 pm by Anonymous

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