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Legal Fees, Timekeeping, and Billing

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1 Legal Fees, Timekeeping, and Billing
Law 20 Legal Fees, Timekeeping, and Billing

2 Objectives Differentiate between timekeeping and billing.
Recognize major types of legal fee agreements. Know the difference between billable and non-billable time. Explain the concept of value billing. Discuss how the billing process works and what it entails. Differentiate between an earned and an unearned retainer.

3 Kinds of Fee Agreements
Hourly Rate Fees Fee for legal services that is billed to the client by the hour, at an agreed-upon rate Contingency Fees Collected if the attorney successfully represents the client Flat Fees Billed as a flat or fixed amount Retainer Fees Court-Awarded Fees Prepaid Legal Services Value Billing

4 Hourly Rate Fees Attorney/Legal Assistant Hourly Rate
The attorney/legal assistant hourly rate is based on the attorney’s or legal assistant’s level of expertise and experience in a particular area Client Hourly Rate Based on only one hourly charge for the client, regardless of which attorney works on the case and what he or she does on the case Blended Hourly Rate Fee is one hourly rate that is set taking into account the blend or mix of law office staff working on the matter. The “mix” may include associates, partners, and, sometimes, legal assistants working on the matter Activity Hourly Rate Based on the type of service or activity being performed E.g. court appearances have a higher hourly rate than taking a telephone call

5 Contingency Fees Attorney is entitled to a certain percentage of the total amount of money awarded to the client. If case is not won, and no money is recovered, the attorney collects no legal fees Still entitled to be reimbursed for all expenses incurred Typically used in representing plaintiffs in personal injury cases, workers’ compensation cases, civil rights cases, and medical malpractice cases Must be in writing

6 Flat Fees Used in preparing wills, uncontested divorces, and bankruptcies. Used when the legal matter is simple, straightforward, and involves few risks

7 Retainer Fees Earned Retainer Unearned Retainer
The law office or attorney has earned the money and is entitled to deposit the money in the office’s or attorney’s own bank account, and can use it to pay the attorney’s or law office’s operating expenses Unearned Retainer Monies that are paid up front by the client as an advance against the attorney’s future fees and expenses as a kind of down payment. Until the monies are actually earned by the attorney or law office, they belong to the client. Unearned retainers may not be deposited in the attorney’s or law office’s normal operating checking account. Unearned retainers must be deposited into a separate trust account and can be transferred into the firm account as it is earned. The written fee agreement should state what kind of retainer is being required. When a fee agreement refers to paying a “nonrefundable” retainer, this usually means it is an earned retainer. Flat fee rates are also usually an earned retainer

8 Retainer Fees (con’t) Trust or Escrow Account Cash Advance Retainer
Separate bank account, apart from a lawoffice’s or attorney’s operating checking account, where unearned client funds are deposited Cash Advance Retainer Unearned monies that act as an advance against the attorney’s future fees and expenses. Until earned by the attorney, it actually belongs to the client. The cash advance is a typical type of unearned retainer.

9 Retainer Fees (con’t) Retainer for General Representation
Used when a client, such as a corporation or entity, requires continuing legal services throughout the year. The client pays a sum of money and receives services for the rest of the year. This is usually an earned retainer. Case Retainer Fee that is billed at the beginning of a matter, is nonrefundable, and is usually paid to the office at the beginning of the case as an incentive for the office to take the case. This is an earned retainer. Pure Retainer Paid up front and obligates the law office to be available to represent the client (usually a corporation) throughout the time period agreed upon; the firm also agrees not to represent any of the client’s competitors.

10 Court Awarded Fees In certain federal and state statutes, the prevailing party is given the right to recover from the opposing side reasonable attorney’s fees. The amount of the attorney’s fees is decided by the court. Court-awarded fees are provided for in federal civil rights law, antitrust, and civil racketeering statutes, to name a few.

11 Prepaid Legal Services
Plans that a person can purchase that entitle the person to receive legal services (as set out in the plan) either for free or at a greatly reduced rate.

12 Value Billing Represents a type of fee agreement that is based not just on the time required to perform the work but also on the complexity of the matter and the expertise of the attorney required to perform it. Typically provides that the attorney and client reach a consensus on the amount of fees to be charged.

13 Ethical Considerations for Legal Fee Agreements
Fee Agreement in Writing Model Rules at 1.5(b) states: (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. If there is a factual dispute regarding a fee between a client and an attorney, the evidence is typically construed in the light most favorable to the client.

14 Ethical Considerations (con’t)
Contingency fee agreements must be in writing according to Model Rule 1.5(c): 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. 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.

15 Ethical Considerations (con’t)
No Contingency Fees in Criminal/Domestic Relations Cases a. 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.

16 Reasonable Fees No matter what the fee agreement says, only a “reasonable” fee can be collected Model Rules at 1.5(a), factors used to determine “reasonableness” include: (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; (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.

17 Other Ethics of Timekeeping and Billing
State Bar Oversight of Fee Issues Fraud and Criminal Charges Criminal fraud is a false representation of a present or past fact made by the defendant, upon which the victim relies, resulting in the victim suffering damages.

18 Other Ethical Problems
Hard ethical billing problems that come up include the following: Billing two clients for the same time, or “double billing”—This happens when the timekeeper is traveling for one client and works on another client’s case during the travel, for instance. The prudent thing to do is to bill one client or the other client for the time, or to split the time between the cases, but it is not prudent to bill both cases as full time. When billing by the hour, is there an ethical obligation to be efficient?—Law offices should not “milk” their clients. Law offices and timekeepers should work efficiently. If the attorney or legal assistant works so inefficiently that the fee is no longer reasonable, a violation of the ethical rules will have taken place. Should legal assistants bill for clerical or secretarial duties?—Legal assistants cannot bill clients for clerical duties. Should the client pay for the mistakes of the law office?—The prudent thing to do is to not bill clients for mistakes. Clients come to attorneys because attorneys are the experts. Should a task be assigned to less expensive staff when possible?—Yes; clients should not have to pay for attorney time when the work can be provided by a legal assistant.

19 Legal Expenses In addition to recovering legal fees, may be also entitled to recover from clients reasonable expenses that are incurred by the office in representing the client. Copying costs, postage, long-distance phone calls, court fees, and travel expenses

20 Timekeeping Manual and Computerized Timekeeping
Billable v. Non-Billable Time Billable: actual time that a legal assistant or attorney spends working on a case, which is directly billed to a client’s account Non-Billable: cannot be directly billed to a paying client Pro bono work is legal services that are provided free of charge to a client who is not able to pay for the services.

21 Timekeeping (con’t) Minimum Billable Hours Recording Time
typically between 1,400 and 1,800 Recording Time Typically billed in 6 minute intervals or in quarters

22 Recording Time Six-Minute Intervals
0–6 minutes =.1 hour 31–36 minutes = .6 hour 7–12 minutes = .2 hour 37–42 minutes = .7 hour 13–15 minutes = .25 hour 43–45 minutes = .75 hour 16–18 minutes = .3 hour 46–48 minutes = .8 hour 19–24 minutes = .4 hour 49–54 minutes = .9 hour 25–30 minutes = .5 hour 55–60 minutes = 1.0 hour Quarter Intervals 0–15 minutes = .25 hour 16–30 minutes = .50 hour 31–45 minutes = .75 hour 46–60 minutes = 1.0 hour

23 Timekeeping Practices
Timekeeping Tips: Find out how many hours you must bill annually, monthly, and weekly up front, and tracking where you are in relationship to the quota. Find out when time sheets are due. Keep copies of your time sheets. Record your time contemporaneously on a daily basis. Record your actual time spent, and don’t discount your time. Be aware if billable hours are related to bonuses or merit increases. Be ethical. Be aware of things that keep you from billing time.

24 Timekeeping and Billing Cycle
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 the computer.

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