Since the structure of payment to one’s attorney is created by contract, the number of different kinds of fee structures can be as vast as the circumstances merit. While the variations can be extensive regarding the method of calculating the costs of representation, there are still primarily three main types of attorney fee structures.
- Hourly Billing—This method can be very favorable for both attorneys and their clients because it most closely approximates the true cost of representation. As your attorney does work, he/she bills that time directly. This fee structure is very common in many litigation cases as the cost of litigation is difficult to approximate because much of the work to be completed is dictated by what the opposing party decides to do (for instance, the discovery process can be very expensive if the opposing attorney makes a lot of discovery requests or schedules a number of depositions). Conversely, hourly billing can save a client money if the opposing side does very little, especially if the other side does nothing and gets a default judgment enforced against it or decides to settle early on in the case.
- Flat Fee Billing—There are advantages to a flat fee structure as well. The benefit to the client is that the total cost of representation is definite from the beginning of the case, the detriment to the client is that for an attorney to take on a flat fee structure that attorney must account for certain eventualities in a given case and request a fee to cover those eventualities upfront. This means that the attorney might get paid more for doing less work if those eventualities do not occur.
- Contingency Fee Billing—Contingency Fees are popular in personal injury cases and other cases in which the damages are high enough for a law firm to wait to be paid on the back end of the case. A typical structure involves a law firm agreeing to represent a client with the promise that the firm will be paid a percentage of the damages awarded or settlement proceeds at the end of a case. The percentage is usually somewhat high to reward the firm for taking the risk of not being paid or for not being paid for a long period of time. A typical arrangement includes 33.33-40% of the proceeds of the case.
Litigation Costs—In addition to agreeing to the method of calculating attorney’s fees, agreements between an attorney and client will typically include provisions as to how costs will be paid. Costs in a litigation case include but are not limited to:
(a) filing fee to the court
(b) costs associated with serving the Defendants
(c) costs associated with discovery including depositions
(d) travel for attorneys
(e) paying expert witnesses, etc.
In addition, costs associated with enforcing a judgment against defendants can add up as well, including more filing fees for abstracts of judgment, filing fees for writ of garnishments, and fees for writ of executions. Litigation costs are sometimes fronted by a law firm in a contingency fee case, but reimbursed back to that firm before calculating the percentage of damages it receives on the back end.
Each case should be analyzed as to the needs of both the client and the law firm according to the specific circumstances. The parties can be creative in determining what will work out best for both sides, sometimes this includes combining a flat fee with hourly billing, flat fee with contingency, or reduced hourly billing with a reduced contingency fee percentage.
Partner, San Antonio Office
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