How Attorneys Are Paid.

At the Sipos Law Firm, we recognize that paying attorney fees is like paying for an unexpected dental work: It may be necessary, but it’s seldom a desirable expense. Still, it's an important topic, and not wise to avoid. We promise to be open and respectful toward you concerning our financial arrangements. We know you work hard for your money and we are committed to earning the fees you pay us.

Many people ask, “How much will I need to pay in attorney fees for my case?”  The answer is almost always a frustrating, “It depends.”  And indeed, it depends on many things. The starting point is the fee arrangement between the attorney and client. Different common fee arrangements are described below. Next, it depends on the client’s personality; does the client want to be extra-conservative to reduce expenses, extra-aggressive to maximize the likelihood of success, or something in between? Another critical factor is the personality of the opponent; will they seek a quick resolution or engage in scorched-earth litigation? Other important factors include the underlying nature of the lawsuit (a breach of contract case might be more straightforward than a negligence case), the nature of the issues in dispute (a case with undisputed facts might be quicker than one where every fact is disputed), the amount in controversy (courts limit the length and activity allowed in a lawsuit depending on how much the case is worth), the forum where the case is heard (federal courts might be more expensive than state courts, state courts might be more expensive than arbitration). And the list goes on. Unfortunately, it is notoriously difficult to predict how much any particular case will cost.

Lawyers typically get paid in one of four ways: (1) on an hourly basis, (2) on a set-fee basis; (3) on a contingency basis, or (4) some combination of the foregoing. These are generalized characterizations and can be modified. The ideal arrangement often depends on the type of case and is generally subject to negotiation between the attorney and client, with the ultimate structure determined by agreement between the attorney and client.

When working on an hourly basis, an attorney is paid at a set rate based on the amount of time spent working, regardless of the result. For example, an attorney with an hourly rate of $250 would be paid that rate for all time spent working on the matter. If the case results in a victory, loss, or anything in between, the fee remains the same. Most attorneys working on an hourly basis require an upfront retainer to commence representation, and these are held in a trust account until earned. For example, if an attorney requires a $3,000 retainer, the client is expected to provide that amount before work commences. If during the first month the attorney works 6 hours on the case at an hourly rate of $250, then at the end of the month the attorney can use $1,500 funds held on retainer to pay the invoice. The client is often expected to replenish the retainer when it falls below some pre-determined level. This arrangement is common with almost all types of matters, including where the client is a plaintiff, defendant, or just needs assistance with a discrete project.

When working on a set-fee basis, an attorney is paid a set amount for a discrete task, regardless of the result. Examples of this might include an attorney agreeing to draft and negotiate a contract for $500, or an attorney agreeing to prepare, file, and serve a complaint for $800. The attorney would perform the agreed task and then have no additional involvement unless agreed to separately. The fee remains the same regardless of whether the case results in a victory, loss, or anything in between.  It is common for the fee to be paid on a retainer basis before work commences. This arrangement is somewhat uncommon, but might make sense where the client desires only limited assistance.

When working on a contingency basis, an attorney is paid nothing unless the client obtains a recovery, and then the attorney is paid a certain percentage of the amount recovered. For example, if the contingency fee is one-third of the recovery and an attorney helps a client obtain a $60,000 payment from an opposing party, then the attorney will receive a $20,000 attorney fee. The client pays no fee unless the attorney is successful. This arrangement is common when a client is plaintiff with a realistic expectation of receiving a financial recovery. It is difficult to use a contingency arrangement when a client is a defendant because often the best outcome in such cases is no payment by the defendant, and a percentage of nothing is not an attractive fee for the attorney.

This is a generalized description of the primary types of attorney fee arrangements. Any of the above models could be modified according to individual circumstances. For example, it is possible to have a modified hourly-contingency agreement, where the attorney works at a discounted hourly fee and a reduced contingency fee. Or it is possible to have a modified set fee-contingency basis where the attorney is paid no more than a set amount plus a reduced contingency fee.

We invite you to speak with us about your particular case to help determine a fee structure that is appropriate for your circumstances.