Understanding Lawyers' Fees

Knowing how your lawyer tallies up your legal tab can help you negotiate a 'fee adjustment' that favors your wallet.

By Marc Diener • Nov 16, 2004

Opinions expressed by Entrepreneur contributors are their own.

Just because lawyers are high-rent professionals doesn'tmean you can't negotiate with them. Many will"adjust" their fees (before or after the fact) if youknow what to ask for. Here are some of the ways your attorney mighttry to make 2 + 2 = 5:

  • Hourly or daily rates:
  • I believe there's an innatefairness to billing by time--provided your attorney doesn'tdrag his feet or over-lawyer to pump up his or her receivables.Prevent this by insisting he or she: 1) gets your express, prior,written approval before specific tasks are undertaken and 2) sendsbills frequently enough so you can attempt to control costs.
  • The minimum billing unit:
  • One attorney I know used to brag aboutbilling 10 hours by lunchtime using quarter-hour minimums! Watchthe clock. Obviously, the smaller the minimum unit, the better foryou.
  • Double billing:
  • When two or more hourly professionalsstart jawboning, it gets really expensive, really fast. Doublebilling may be legit when different specialists are needed. Othertimes, you're financing some rookie's education.Don't.
  • Padded bills:
  • These are common. After all, eight andthree-quarters hours could just as easily be nine or even 10 hours.It's tough to police. Know that in big firms, there's a lotof pressure on young members to bill hours. Watch for large roundnumbers. Question each entry. Keep track of time as much you can:phone calls, meetings you attend and so on. Compare your numbers tothe ones on your bill.
  • Bills that are too general:
  • A two-line invoice for 226 hours callsfor a detailed breakdown. It's your right to check forinaccuracies, double billing, padding and the like.
  • The percentage:
  • Sometimes called a contingency, thepercentage was the subject of last month's column. Compare itagainst an hourly rate to see which works better for you. Whenlitigators are involved, a contingency is often the way to go: norecovery, no fees.
  • The flat fee:
  • Certainty is the selling point here.The problem, however, is fixing the amount. Unless it's astandard service in a competitive market, professionals willprotect themselves by quoting really high and excluding certainservices. So think twice: A well-controlled hourly rate may bebetter. And if you do opt for a flat fee, hold back enough cash tomake sure your job is finished. Here are some variations:
  • The retainer:
  • In its pure form, the retainer is aset amount that assures your lawyer's availability for acertain period of time. Sometimes it's applied against futurefees. It may also refer to a returnable advance made for servicesto be rendered. It depends on the professional, so be clear.
  • Value billing:
  • This is very stylish these days. Inessence, the fee is based on the value of the service to theclient. Sometimes it's negotiated in advance; other times,after the fact. Obviously, it requires lots of good faith on bothsides.

A speaker and attorney in Los Angeles, is author of Deal Power.

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