Understanding alternative legal fee arrangements

By:  Lori T. Williams, Owner/Managing Attorney of Your Legal Resource PLLC

Many people are afraid to seek legal advice for fear of the cost of retaining counsel. While free consultations are often available, the cost of retaining counsel may still be prohibitive for some consumers of legal services. Legal aid serves one segment of the population, but for those who don’t qualify as low income earners eligible for legal aid the cost of paying out of pocket for legal fees can be prohibitive.

Since 2008, in response to a sluggish economy, alternative fee arrangements have been proposed as an affordable alternative to the high cost of legal fees.   However, the concept is still slow to catch on, and is not widely adopted by legal practitioners and law firms across the Country. Click here for a recent article from The Am Law Daily on this topic.

Some of the available options for alternative fee arrangements include flat fee billing, rather than by the hour. Or in litigation cases alternative fees to hourly billing might be a combination of a small retainer in advance of litigation and a contingent fee paid to the attorney upon successful recovery of monetary damages.

There are risks to law firms when they agree to handle a legal matter on a flat fee, especially in litigation cases.  It can be difficult for the lawyer to accurately estimate how long a matter will take to conclude.  If the lawyer estimates incorrectly, he or she could end up working a lot of hours for free.  Corporate clients have been in favor of moving to flat fees so they can budget legal into their overall expenses. However, what about the individual who has an unanticipated legal expense such as a divorce or bankruptcy, or gets sued as a small business owner?  These types of expenses can cause a real hardship for an individual or small business owner.

Even though alternative fee arrangements are not yet widely accepted, clients can have a discussion with their attorney to find out what fee options exist.  A lawyer’s time and a client’s budget need to be examined in most legal matters, as one of the factors in determining whether there is a good fit.

For those of you who retain lawyers for legal advice or representation, what are your thoughts in this matter?

• Have you ever tried to work out a flat fee or blended fee arrangement with your attorney?
• If so, how did it work out for you?

Attorneys:  Share what has worked for your firm when it comes to alternative fee arrangements and specify whether you are a solo or small firm practitioner, or in a medium or large firm.