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

Is Your Lawyer’sBill 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 ischarging 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 un-derstand how each of these billing systems works to know what you are agree-ing 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.”

A flat fee is usually for a single job, such as drafting a will, and requires you to pay a specified amount, such as $500, when the job is completed. In a flat fee agree-ment, the client is also usually responsible for expens-es 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 prep-aration 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 ex-pense, including copying, messenger services, postage, travel and consultants.

Lawyers charge three basic

kinds of fees— flat, contingent and hourly. You need to under-stand how each of these billing systems works to know what you are agree-ing to pay when

you hire an attorney.

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 communi-cations.

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 law-yer 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 guaran-tees, taking the time to find the right attorney—some-one who has expertise and experience in the area of law you need, a good reputation among fellow col-leagues 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 dis-putes occurring later on.

Investigating the attorney you’re planning to hire, before you sign on the dotted line, is very important.

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, wheth-er they will participate in fee arbitra-tion or counsel pro se litigants and whether they are in good standing with the state bar. Nolo’s directory also of-fers 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 com-petitive 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 differ-ent fee or payment schedule (for example, ask for a smaller upfront retainer, or extend your payment due dates).

Too many people enter

into an attorney-client

relationship without

discussing their lawyer’s fee up

front.

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.

Get a Signed Fee Agree-ment. 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 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.

Confront Problems Immediately. If problems de-velop, 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 esca-late. 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 FEEDISAGREEMENTS

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 actu-ally 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 turn-over. Be aware of staff changes that can shoot up the cost of your case. If you discover that the lawyer han-dling your case has moved on, you shouldn’t have to pay extra to reeducate a new law-yer about your legal matter.

Unnecessary research. Some firms constantly reinvent the wheel on each new engage-ment 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.

Redundant expert witnesses and consultants. The use of expert witnesses and consul-tants 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.

Uncontrolled expenses. Another way a lawyer’s bill can increase is when expenses are not watched care-fully. Keep a lid on expenses by asking the lawyer to

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.

Keep a lid on expenses by asking the

lawyer to antici-pate in advance what expenses will run and by

including a stipulation in

your agreement that you cannot

be charged over the

estimate without prior approval.

anticipate in advance what expenses will run and by including a stipulation in your agreement that you can-not be charged over the estimate without prior written approval.

Excessive overhead costs. Not long ago, law firms routinely absorbed the cost of overhead—the cost of keep-ing an office running—from heating and air conditioning to subscribing to LexisNexis or WestLaw and filing cli-ents’ papers. Some lawyers now try to pass these costs on to clients by billing for every expense the firm incurs. Cli-ents should challenge charges that obviously cover a firm’s routine overhead.

Deluxe travel and enter-tainment. 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 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.

Bill padding or overbilling. Unfortunately, some law-yers 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 WITHA 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.

Call Your Attorney. If the amount in dispute is relative-ly 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 dis-pute resolution in your contract, inform your attorney that you plan on requesting either mediation or arbitra-tion. 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.

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 let-ter, 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 cleri-cal—such as photocopying. You want your letter to be thoughtful and concise, not confrontational or dis-jointed. Ask for a written response by a certain date (two weeks is typical) and keep a copy of your letter for your files.

If your attorney is traveling on

your behalf, hold him or her to

the same stan-dards you would

hold yourself when traveling for business or pleasure. Insist on a complete breakdown of

travel charges—air and ground transportation, hotel and meal

expenses.

If the amount in dispute is

relatively minor, your best bet is to pick up the telephone and

try to resolve it.

Here is a sample.

Sometimes the amount in dispute can be in the thou-sands, 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 represen-tation 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

Jane Doe 123 The Street Anytown, NY 12345

Mr. DeweyLaw Offices of Dewey123 Law StreetAnytown, NY 12345

Dear Mr. Dewey:

I am writing about the bill I received for your services dated October 7, 2011. 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

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 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 commit-ment to an ongoing working relationship. If you cannot

come to an agreement after telephoning or sending let-ters, the next step to consider is arbitration.

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 www.halt.org.

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 ap-pointed to hear the case. Many programs now in-clude 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 circum-stances, 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 in-formal 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 at-torney.

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 commit-tee 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 ap-pealed, however, if you prove a procedural error was made. If your attorney still does not comply despite his legal obligation, some states will impose disciplin-ary 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.

If you and your lawyer agree

to compromise, make sure a new bill is is-sued to reflect

your agreement.

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 var-ies 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 www.halt.org. 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

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Where to Find More Information

More information about the attorney-client relation-ship is available on HALT’s website, www.halt.org, 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 charg-es, 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 multi-plied 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.