Practical Law Office Management 3 rd Edition Thomson

Practical Law Office Management, 3 rd Edition, Thomson Delmar Learning Chapter 5 Legal Fees, Timekeeping, and Billing © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Kinds of Fee Agreements - Hourly 1. • 2. • 3. • 4. • 2 Attorney/Legal Assistant Hourly Rate Client Hourly Rate Blended Hourly Rate Activity Hourly Rate © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Kinds of Fee Agreements • • • 3 1. 2. 3. 4. 5. Contingency Fees Flat Rate Court-Awarded Fees Value Billing Prepaid Legal Services © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Kinds of Fee Agreements - Retainers • 1. Earned Retainer for General Representation – Case Retainer – Pure Retainer – • 2. Unearned Retainer – 4 Cash Advance Retainer © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Fee Agreements – Preferably in Writing • The Model Rules at 1. 5(b) states: – 5 (b) The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client. © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Contingency Agreements – Must Be in Writing • The Model Rules at 1. 5(c) states: (c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial, or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. 6 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Contingency Agreements – Must be in Writing Model Rule 1. 5(c) (continued) • The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination. 7 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Contingency Agreements Contingency fees cannot be used in criminal and domestic-relation proceedings, according to Model Rule 1. 5: – d) A lawyer shall not enter into an arrangement for, charge, or collect: (1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or • (2) a contingent fee for representing a defendant in a criminal case. • 8 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Contingency Fees 9 • • • Written Contingency Fee Agreement Provides Attorney receives: • 20% of any money recovered (plus legal expenses) before case is filed; • 25% of any money recovered (plus legal expenses) after case is filed but before trial; • 33% of any money recovered (plus legal expenses) during trial or after appeal. • • • Settlement Case is settled for $10, 800 after case is filed but before trial. Attorney has $800 worth of legal expenses. • • • • Calculation of Contingency Fee 1. Legal expenses are paid first. Settlement of $10, 800 Minus Legal Expenses - 800 Balance $10, 000 2. Contingency fee is calculated as follows: Total recovery minus legal expenses Attorneys 25% Contingency Fee ($10, 000 x 25% = $2, 500) TOTAL TO CLIENT 3. Total Fees and Expenses to Attorney Reimbursement of Legal Expenses $ 800 Contingency Fee TOTAL TO ATTORNEY $10, 000 - 2, 500 $ 7, 500 $ 2, 500 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED. $ 3, 300

Only a “Reasonable” Fee Can be Collected • No matter what the fee agreement says, only a “reasonable” fee can be collected. Model Rule 1. 5 Fees • (a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following: • (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; • (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; • (3) the fee customarily charged in the locality for similar legal services; 10 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Only a “Reasonable Fee” Can be Collected Model Rule 1. 5(a) (continued) • • • 11 (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent. © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Timekeeping and Billing • • • 12 State Bar Oversight of Fee Issues Fraud and Criminal Charges Legal Expenses Timekeeping Billable v. Non-Billable Time © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Timekeeping and Billing Six-Minute Intervals 0 -6 minutes =. 1 hour 31 -36 minutes = 7 -12 minutes =. 2 hour 37 -42 minutes = 13 -15 minutes =. 25 hour 43 -45 minutes = 16 -18 minutes =. 3 hour 46 -48 minutes = 19 -24 minutes =. 4 hour 49 -54 minutes = 25 -30 minutes =. 5 hour 55 -60 minutes = 13 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED. . 6 hour. 75 hour. 8 hour. 9 hour 1. 0 hour

Timekeeping and Billing Quarter Intervals 0 -15 minutes =. 25 hour 16 -30 minutes =. 50 hour 31 -45 minutes =. 75 hour 46 -60 minutes = 1. 0 hour 14 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Billable Hours Expected for Legal Assistants Billable Hours Per Week / (Annual Max) Percent 6 -10 hours (520 hours) 1% 11 -15 hours (780 hours) 1% 16 -20 hours (1, 040 hours) 4% 21 -25 hours (1, 300 hours) 9% 26 -30 hours (1, 560 hours) 31% 31 -35 hours (1, 820 hours) 31% 36 -40 hours (2, 080 hours) 17% 41 -45 hours (2, 340 hours) 1% More than 45 hours 7% Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report 15 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Average Legal Assistant Billing Rates Region Legal Assistant 2004 Average Billing Rate New England/Mideast $93 Great Lakes $95 Plain States $77 Southeast $91 Southwest $89 Rocky Mountains $79 Far West $106 Source: National Association of Legal Assistants, 2004 National Utilization and Compensation Survey Report 16 © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.

Timekeeping and Billing Cycle • • 17 a) Client and attorney reach an agreement on legal fees. b) Attorneys and legal assistants perform legal services and prepare manual time slips. c) Time slips and out-of-pocket expense slips are entered into the computer. d) Pre-billing report is generated and reviewed by managing attorney. e) Client billings are generated and mailed. f) Management reports are generated. g) Client payments are entered in computer. © 2007 Thomson Delmar Learning. ALL RIGHTS RESERVED.