THE CP LAWYER – Legal Fee Structures
The Process of Litigation Can Be Expensive, But
Legal Fee Structures Can Be Manageable
Medical malpractice cases are often complicated, lengthy and require extensive resources; the process can be expensive. Families faced with the financial demands of raising a child with physical and/or cognitive impairment often lack the funds to pay expensive hourly legal fees on top of the child’s regular expenses – especially since the case may take one to five years to fully litigate. Lawyers realize this dilemma and have the ability to offer alternative fee structures that make this expense manageable and affordable to every client.
Lawyers, too, have much at stake when representing a client’s interest. Because of the costs associated with pursuing these cases, a lawyer must carefully consider whether they will accept or decline the opportunity to represent a child in a medical malpractice complaint.
The lawyer must first determine whether the cost to pursue the case is more expensive to the client than the gain they will likely receive. A case may have merit, but the merit must be proven in a court of law. Some cases are easier to prove than others. Internal (by the lawyer and/or their staff) and external (by an outside medical expert) reviews of case merit can be costly when no guarantees of the outcome exist. Law firms incur significant expense and will spend countless hours in obtaining records, reviewing, investigating, interviewing and consulting medical experts to ascertain the circumstances surrounding the cause of the child’s cerebral palsy.
Cases tried or settled out of court also require filing fees, consultation, deposition costs, document retrieval, staff time, overhead and strategy. Out-of- pocket expense – not including attorney fees – to investigate, file and litigate a case can range from $1,000 to $75,000 or more. Staff time and overhead expenses are additional. As such, representing a client requires a substantial commitment by the lawyer, and a commitment by the client.
The fee structure must be reasonable and affordable to both the client and the lawyer. Lawyers can bill for their services in a myriad of ways, including:
- a flat fee
- an hourly rate
- a monthly retainer
- a contingency fee basis (a percentage of an award or settlement)
The contingent fee arrangement is almost universally used in these cases because of the extraordinary costs to fund the litigation, and the burden already imposed on the family by the harm caused. The contingent fee is sometimes necessary to “level the playing field” for the victim, who otherwise could not compete with the expensive lawyers and unlimited financial resources available to doctors, hospitals and their insurance companies.
By taking on a client’s case with a contingent fee arrangement, the lawyer’s right to be paid a fee becomes dependent upon successful outcome of the claim. The so-called, “no fee until you win arrangement,” provides high quality legal services to many clients who would not otherwise be able to afford these services. In this type of arrangement, the lawyer is at risk for loss of an investment of time and money if the case is not successful. Yet a meritorious case can and should reward the client, and the lawyer who has agreed to limit any right to compensation to a successful outcome for the client.
A medical malpractice attorney who represents a client in a birth injury case on a contingency fee basis is hedging a substantial risk. He or she is agreeing to a portion of the settlement upon successful litigation and not requiring any funds up-front from the client to pay for expenses due at various stages in the process. If the case is lost, a lawyer working under a contingency fee agreement will not receive compensation for his or her efforts. Therefore, this is a substantial investment risk for a lawyer and the law firm.
An initial consultation can help the client and the lawyer decide whether they would like to contract for services and under what terms. Both will agree on a fee structure for litigating and/or settling a case.
For more information on the initial consultation process, refer to “Initial Consultation.” Or, for a free Medical Legal Review offered by Ken Stern, call 1-800-692-4453.
Three Required Elements
When Contracting a Lawyer’s Services
All fee agreements and payment arrangements made between a client and a lawyer should, and may be required in certain states to, be agreed upon in writing. Legal firms generally require three elements to an engagement to represent a client when services are being contracted. They are:
- Retainer agreement – A retainer agreement is a formal contract between a client and a lawyer in which a client agrees to retain a lawyer and the lawyer’s law firm. The lawyer and their law firm are also formally agreeing to represent the client under the terms and conditions set forth in the fee agreement.
- Fee agreement – A fee agreement is a formal contract between a client and a lawyer which outlines the monetary responsibilities agreed upon for the services retained. A fee agreement contains three main elements:
- Fee structure – The fee structure is the basis on which the client agrees to pay the lawyer. This should not only include the legal services, but also detail how expenses will be incurred and paid. The terms and conditions should be discussed, understood, and agreed upon in writing before the lawyer provides legal services. Fee structures can range from a flat fee, an hourly rate, a monthly retainer, or a percentage of an award or settlement. Legal services can be paid up front, monthly, or on a contingency basis.
- Payment agreement - The payment agreement details when the funds are due. In some cases, payment is not required until the case is finalized, while other arrangements could require an upfront retainer fee and periodic payment plan.
- Affordability – Affordability is determined by the client. If an attorney agrees to litigate the case, the client will determine whether they feel the fee structure and payment plan is feasible, competitive, within reason, and consistent with the lawyer’s experience and success rate.
- Medical record release – A medical record release is a document signed by the client to authorize health care providers to release medical information to the attorney upon request. A lawyer will often have the client sign a medical record release when services are contracted. This allows the lawyer to obtain any additional needed records to prepare for successful litigation.
Ken Stern, Stern Law Group, PLLC, and/or their affiliated law firms, have agreed to represent clients on a contingency fee basis. If you would like to talk to Ken Stern, please call 1-800-692-4453.
Ken Stern, Stern Law Group, PLLC, and/or their affiliated law firms, generally use a contingency fee agreement in which the lawyer receives a percentage of the final judgment or settlement allowed by law, regulated by the state, and approved by the judge.
At Stern Law Group, PLLC, court costs and other additional expenses of legal action usually must be paid by the client. The percentage fee will be computed before or after expenses are deducted from the recovery in accordance with state laws.
Six Common Types of Legal Fee Structures
Common fee structures employed by other lawyers and law firms include:
- Contingent fee agreement - The lawyer is paid a portion of any settlement or judgment only if a settlement or judgment is reached in the client’s favor. Typically, this is a certain fixed percentage of the award or settlement. State regulations provide stipulations on this type of fee arrangement. This arrangement allows families to avoid the substantial upfront costs which are incurred while the case is being investigated and litigated. This may or may not include the various other expenses that arise during case preparation and/or a trial such as court costs, expert witness fees, travel costs, and administrative charges.
- Monthly retainer agreements – The client agrees to pay a monthly fee, for which the law firm bills against as services are rendered. The law firm will typically issue monthly invoices which contain hourly billing rates detailing the time utilized during the month by the legal staff. The bill will likely include any expenses incurred during the month, as well. The agreement should stipulate how the funds are approved and billed if more funds are required than what was retained for that month. It should also detail how funds are handled if not all of the monthly allotment was utilized for the month.
- Prepaid retainer agreement – Payments are issued to a law firm in advance for an agreed upon package of service care. The law firm will then provide billing statements showing expenses incurred against the payment already made. Procedures for overage or underage should be detailed in this type of agreement.
- Hourly fee agreement - Legal services are paid on an hourly basis, as needed. Lawyers provide a list of hourly rates for the various levels of personnel that may be required on the case. Monthly, the law firm will issue a bill for the previous month’s legal fees. Clients have a set number of days to pay the bill.
- Flat fee agreement – The lawyer and the client establish a fixed fee for the lawyer to litigate the client matter.
- Pro bono services – In some cases, lawyers will agree to take a case on a pro bono basis, meaning they will provide their services free-of-charge.
The Cost to Pursue Litigation
Legal fees are unique to each individual case. All legal fees should be reasonable, based upon the type of case, the difficulty of the case, the location, and any possible settlement or judgment. Other factors that influence rates include:
- The time and work needed for the lawyer’s staff to litigate the case
- The number of lawyers needed for the case
- The lawyer’s capability and reputation
- The number and type of experts that may be required during trial
- The amount of work a lawyer may need to turn down in order to represent the client’s case
In all fee agreements, it should be stipulated how expenses will be handled. These are generally thought to be outside the realm of cost associated with lawyer services, but are necessary to successfully litigate a case. Expenses can include, but are not limited to:
- Administrative expenses (copies, filing, packaging, postage, and delivery)
- Court filing fees
- Court reporter fees
- Court transcripts
- Document recovery
- Deposition fees
- Expert witness review and expense
- Medical exams
- Medical record recovery
- Summons and subpoena fees
- Travel expenses
In addition to the costs of the case, the fee structure should outline when and how payment is to be made.
Awards or settlements are often packaged in an investment vehicle, such as an annuity, to provide tax protections for the funds received. Special needs trusts may be devised to protect assets, provide structure, document preferences, and provide for contingencies unique to a child with special needs.
Before an arrangement is agreed upon, parents should consult a tax advisor, estate planner, or financial planner to take advantage of tax benefits, asset protection, wills and trusts, and address other concerns that protect and secure a child’s future care. These advisors may have advice that can actually enhance settlement talks.
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