Attorney's fee

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Attorney's fee is a chiefly United States term for compensation for legal services performed by an attorney (lawyer or law firm) for a client, in or out of court.

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Fees may be an hourly, flat-rate or contingent fee. Recent studies suggest that when lawyers charge a flat-fee rather than billing by the hour, they work less hard on behalf of clients and clients get worse outcomes. [1] [2] [3]

Attorney fees are separate from fines, compensatory and punitive damages, and (except in Nevada) from court costs in a legal case. Under the "American rule", attorney fees are usually not paid by the losing party to the winning party in a case, except pursuant to specific statutory or contractual rights.

Overview

The phrase is a legal term of art in American jurisprudence (in which lawyers are collectively referred to as "attorneys", a wording practice not found in most other legal systems). Attorney's fees (or attorneys' fees, depending upon number of attorneys involved, or simplified to attorney fees) are the fees, including labor charges and costs, charged by lawyers or their firms for legal services provided by them to their clients. They do not include incidental and non-legal costs (e.g., expedited shipping costs for legal documents). Generally (Nevada being an exception), attorney fees are tabulated separately from court costs, and are also separate from fines, compensatory and punitive damages, and other monies in a legal case not enumerated as court costs.

The analogous concept has differing names and applicability in common law systems such as in most of the Commonwealth of Nations, and in civil law systems such as those of most of Europe and many former European colonies. For example, in a court case under English law, the fees of solicitors and barristers (two types of lawyer) are combined with court costs and various other expenses into a combined "costs", while non-court solicitor expenses may be separately billed as per-hour charges, and those of barristers as daily brief fees. The losing party in a case in most common law systems pays for the costs (including fees) of both parties.

State laws or bar association regulations, many of which are based on Rule 1.5 of the American Bar Association's Rules of Professional Conduct , govern the terms under which lawyers can accept fees. [4] Many complaints to ethics boards regarding attorneys revolve around excessive attorney's fees. [5]

In some American jurisdictions, a lawyer for the plaintiff in a civil case can take a case on a contingent fee basis. A contingent fee is a percentage of the monetary judgment or settlement. The contingent fee may be split among several firms who have contractual arrangements amongst themselves for referrals or other assistance. Where a plaintiff loses, the attorney may not receive any money for his or her work. In practice, historically tort cases involving personal injury often involve contingent fees, with attorneys being paid a portion of the pain and suffering damages; one commentator says a typical split of pain and suffering is one-third for the lawyer, one-third for the physician, and one-third for the plaintiff. [6]

The contingent fee has been described as the ‘poor man’s key to the courthouse". [7] Whereas, corporations or wealthy individuals can afford to hire attorneys to pursue their legal interests, the contingency fee affords any injury victim the opportunity, regardless of ability to pay, to hire the best attorney in his or her field. Most jurisdictions in the United States prohibit working for a contingent fee in family law or criminal cases.

In the United States, an up-front fee paid to a lawyer is called a retainer. Money within the retainer is often used to "buy" a certain amount of work. Some contracts provide that when the money from the retainer is gone, the fee is renegotiated. This is to be differentiated between a retainer in Commonwealth states, where a retainer is the contract that is initially signed by a client to engage a lawyer. Money may or may not be paid upfront, but the lawyer is still "retained".

Amount of fees

Attorney fees are negotiated between the attorney and client, subject to any limits imposed by state law and the general principle that an attorney fee must be reasonable. Although fee agreements in most cases can be oral agreements, it is good practice for lawyers to enter formal written fee agreements with their clients, and to clearly describe how fees are calculated. [8]

Hourly rates

The range of fees charged by lawyers varies widely from one city to the next. Most large law firms in the United States bill between $200 and $1,000 per hour for their lawyers' time, although the fees charged by smaller firms are much lower. The rate varies by location as well as the specific area of law practiced. Typically insurance defense firms have lower hourly rates than non-insurance firms, but are compensated by having steady, regular paying work provided. Regional urban centers such as Salt Lake City will average $150 per hour for an associate's time on a basic case, but that fee will increase for larger firms. Within large firms in the United States, billable hours are considered a measure of productivity with a minimum of about 1,800 required or expected of associates. [9]

In the United States, lawyers typically earn between $100,000 and $200,000 per year, although earnings vary by age and experience, practice setting, sex, and race. [10] [11] [12] [13] [14] Solo practitioners typically earn less than lawyers in corporate law firms but more than those working for state or local government. [15]

Many surveys of hourly rates are done. The American Intellectual Property Law Association (AIPLA) commissions a survey of its members every two years and it publishes these in what it calls a "Report of the Economic Survey". The latest one is dated June 2007. Rates are collected for 14 geographic areas and by associate or partner. [16] Many courts have followed the rates shown by these AIPLA surveys and they are highly regarded for intellectual property litigation.

The State Bar of Oregon [17] and the Colorado State Bar have published surveys of rates for various areas of their states which are available online. [18]

Perhaps the most widely followed set of rates are what is called the Laffey Matrix available from the United States Attorney's Office for the District of Columbia. These have been available since 1982 and are updated annually. Hourly rates are shown by years of experience. For June 1, 2006, to May 31, 2007, the rates are as follows: 20+ years of experience, $425 per hour; 11–19 years, $375; 8–10 years, $305; 4–7 years, $245; 1–3 years, $205; and paralegals and law clerks, $120. [19] The Laffey Matrix appears to be growing in acceptance by many courts throughout the United States, but the matrix must be adjusted to account for higher or lower costs for legal services in other areas.

Hourly rates are increasing almost every year and some lawyers charge substantially higher than the rates shown by the Laffey Matrix. The first American attorney to regularly charge a four-digit hourly fee ($1,000 and higher) was Benjamin Civiletti in late 2005. [20]

Contingent fees

A contingent fee, or contingency fee, is an attorney fee that is made contingent on the outcome of a case. A typical contingent fee in a tort case is normally one third to forty percent of the recovery, but the attorney does not recover a fee unless money is recovered for the client. States prohibit contingent fees in certain types of cases. For example, most states forbid contingent fees in criminal cases. States typically require that a fee agreement that involves a contingent fee be reduced to writing and signed by the client.

Other fee arrangements

With the ongoing recession of the 2000s, corporate clients began driving attorneys increasingly toward alternative fee arrangements (AFAs), which can include flat fees (per matter), fixed fees (for a "book" of matters), success bonuses, and other options. [21] Recent studies suggest that when lawyers charge a fixed-fee rather than billing by the hour, they work less hard on behalf of clients and client get worse outcomes. [1] [2] [3]

Regulation of attorney fees

In some types of cases, such as workers' compensation cases, attorney fees may be limited by statute, or subject to judicial review. Contingency fees in personal injury and medical malpractice cases are often capped by state law. [22] In other cases, attorney fees may be subject to review for reasonableness. For example, in class action cases the court in which the case is resolved will review the attorney fees of class counsel for reasonableness. [23]

In a landmark 1985 decision, Walters v. National Association of Radiation Survivors, the U.S. Supreme Court held that statutory restrictions on attorney's fees are subject only to highly deferential rational basis review, when challenged as limitations upon the First Amendment right to freedom of speech and the Fifth Amendment right to due process. [24] In other words, if the legislature can articulate any rational basis for restricting attorney's fees, the court must defer to the legislature's considered judgment, and it would take an "extraordinarily strong showing" for a court to decide otherwise. [24] The Court then held that Congress had a rational basis for restricting attorney's fees in veterans' benefits cases to $10. [24] In 2006, the statute at issue in Walters was heavily revised so as to remove the $10 attorney's fee restriction for most veterans' benefits cases. However, the principles articulated by the Walters court remain the law of the land for attorney's fees in general. [25] [26]

Long before the Walters case, conservatives in the United States had begun to put forward tort reform proposals to restrict attorney fees, which gained traction in the 1970s. Medical malpractice tort reforms often include maximum limits on plaintiffs' attorney fees, such as the percentage schedule in California's Medical Injury Compensation Reform Act of 1975. In 2004, Florida passed a constitutional amendment limiting contingent fees in medical malpractice cases. [27] [ clarification needed ]

Although some people have objected to these laws as an unfair restriction on freedom of contract, Justice William Rehnquist shot down that argument in his majority opinion for the Walters court. [24] Rehnquist implied that there was no principled way for the Court to overturn such laws as a violation of freedom of contract without returning to the now-discredited paternalism of the Lochner era, in which the Court had routinely invoked freedom of contract as an excuse to overturn laws regulating minimum wages and child labor. [24] Justice John Paul Stevens filed a dissenting opinion in which he specifically attacked the majority opinion on that point, among others; he began and ended his dissent with the accusation that the majority "does not appreciate the value of individual liberty". [24]

Who pays

Most countries operate under a "loser pays" system, sometimes called the English rule (in English law it is described as "costs following the event"). Under the English rule, the losing party pays the successful party's legal costs (including lawyers' fees), as well as other court costs.

United States

The United States is a notable exception, operating under the American rule, whereby each party is generally liable only for costs (e.g., filing fees, motion fees, fees for service of process, etc.) but not the other side's attorney's fees unless a specific statute or rule of court provides otherwise. [28] Some tort reform advocates propose adopting a "loser pays" rule in the United States. Federal district court and Court of Appeals judges award costs to the prevailing party under Federal Rules of Civil Procedure 54. [29]

In some jurisdictions, statutes may permit judges and juries to independently impose "loser pays"; for example, a judge may say: "I am ruling for the plaintiff on the amount of $[sum] plus all court costs and attorney fees". But generally, state court judges have no common law authority to award such fees against the losing party. Some settlement agreements, arbitration agreements and other extrajudicial contracts may also stipulate a loser-pays arrangement.

A number of federal laws provide for an award of attorney fees for a prevailing plaintiff, such as:

Note that these "fee shifting" awards are a characteristic of the law enforced and do not necessarily depend upon the court in which they were brought; state courts can and do sometimes hear lawsuits brought under federal law. So if, for example, a person brings a civil rights action in state court and wins, he may be entitled to an award of attorney fees.

Most states have statutes under which attorneys' fees may be awarded to a prevailing plaintiff, such as an action on a contract where the contract contains a provision allowing recovery, or an action brought under consumer protection laws. Both plaintiffs and defendants are sometimes awarded attorneys fees in divorce and child custody actions, although this is an unusual circumstance, since such awards are made under the court's power to divide property or award alimony and child support.

A majority of states allow generally for an award to any party in a lawsuit, if another party has forced him to expend money on attorneys fees to defend against a claim utterly or substantially lacking any possible merit and brought in bad faith (frequently called "abusive litigation" or a "frivolous lawsuit"). For example, in Georgia, a trial court must award attorneys fees if a party has brought a claim "with respect to which there existed such a complete absence of any justiciable issue of law or fact that it could not be reasonably believed that a court would accept the asserted claim, defense, or other position". [30] Meanwhile, a trial court may, but is not required to, award attorney's fees if a party has made a claim "that lacked substantial justification or...was interposed for delay or harassment, or if [the opposing party] unnecessarily expanded the proceeding by other improper conduct". [31]

There are many ways of calculating prevailing-party attorney fees. Most courts recognize that actual costs may be disproportionate and inequitable. Thus, many jurisdictions rely on other calculations. Many courts or laws invoke a lodestar' calculation: reasonably expected billable hours multiplied by a reasonable hourly rate, sometimes multiplied by a factor reflecting the risk or complexity of the case. Courts in class actions frequently award fees proportionate to the damages recovered. In 2013, a federal court awarded class counsel attorneys' fees totaling over $90 million for a $1.25 billion settlement in In Re Black Farmers Discrimination Litigation. [32] The Class Action Fairness Act of 2005, which, among other provisions, regulates the fees that can be awarded in a class action, was passed in response to concerns that courts were not adequately overseeing the award of such fees.

The overriding principle in awarding attorney's fees is reasonableness. Courts may reduce attorney's fee awards they find to be unreasonable and excessive. [33] [34]

See also

Related Research Articles

In legal terminology, a complaint is any formal legal document that sets out the facts and legal reasons that the filing party or parties believes are sufficient to support a claim against the party or parties against whom the claim is brought that entitles the plaintiff(s) to a remedy. For example, the Federal Rules of Civil Procedure (FRCP) that govern civil litigation in United States courts provide that a civil action is commenced with the filing or service of a pleading called a complaint. Civil court rules in states that have incorporated the Federal Rules of Civil Procedure use the same term for the same pleading.

At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at law, the loss must involve damage to property, or mental or physical injury; pure economic loss is rarely recognised for the award of damages.

A lawsuit is a proceeding by one or more parties against one or more parties in a civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used with respect to a civil action brought by a plaintiff who requests a legal remedy or equitable remedy from a court. The defendant is required to respond to the plaintiff's complaint or else risk default judgment. If the plaintiff is successful, judgment is entered in favor of the defendant. A variety of court orders may be issued in connection with or as part of the judgment to enforce a right, award damages or restitution, or impose a temporary or permanent injunction to prevent an act or compel an act. A declaratory judgment may be issued to prevent future legal disputes.

In English civil litigation, costs are the lawyers' fees and disbursements of the parties.

Attorney–client privilege or lawyer–client privilege is the common law doctrine of legal professional privilege in the United States. Attorney–client privilege is "[a] client's right to refuse to disclose and to prevent any other person from disclosing confidential communications between the client and the attorney."

A contingent fee is any fee for services provided where the fee is payable only if there is a favourable result. Although such a fee may be used in many fields, it is particularly well associated with legal practice.

<span class="mw-page-title-main">Personal injury</span> Legal term for an injury to a person

Personal injury is a legal term for an injury to the body, mind, or emotions, as opposed to an injury to property. In common law jurisdictions the term is most commonly used to refer to a type of tort lawsuit in which the person bringing the suit has suffered harm to their body or mind. Personal injury lawsuits are filed against the person or entity that caused the harm through negligence, gross negligence, reckless conduct, or intentional misconduct, and in some cases on the basis of strict liability. Different jurisdictions describe the damages in different ways, but damages typically include the injured person's medical bills, pain and suffering, and diminished quality of life.

<span class="mw-page-title-main">Lester Brickman</span> American law professor

Lester Brickman is an emeritus professor at the Benjamin N. Cardozo School of Law of the Yeshiva University and a legal scholar. He is one of the founding faculty members of the Cardozo, recruited by Yeshiva University in 1976 from the University of Toledo College of Law. On May 31, 2016, Professor Brickman received the Monrad Paulsen Award of the Cardozo School, upon his retirement from teaching. He taught contracts, legal ethics and Land Use and Zoning at the Cardozo School of Law. He is the author of a book, Lawyer Barons: What Their Contingency Fees Really Cost America, a detailed critique of perceived abuses and excessive costs of the American tort system, with proposals for reform. Brickman is a graduate of Carnegie Mellon University. He holds a juris doctor degree from the University of Florida and an LLM degree from Yale Law School.

The Laffey Matrix is a fee schedule used by many United States courts for determining the reasonable hourly rates in the District of Columbia for attorneys' fee awards under federal fee-shifting statutes.

In the field of law and economics, the English rule is a rule controlling assessment of lawyers' fees arising out of litigation. The English rule provides that the party that loses in court pays the other party's legal costs. The English rule contrasts with the American rule, under which each party is generally responsible for paying its own attorney fees. The English rule can make it easier for a poor person to bring suit, but by the same token it gives everyone more risk of being sued.

A personal injury lawyer is a lawyer who provides legal services to those who claim to have been injured, physically or psychologically, as a result of the negligence of another person, company, government agency or any entity. Personal injury lawyers primarily practice in the area of law known as tort law. Examples of common personal injury claims include injuries from slip and fall accidents, traffic collisions, defective products, workplace injuries and professional malpractice.

<span class="mw-page-title-main">Tort reform</span> Legal reforms aimed at reducing tort litigation

Tort reform consists of changes in the civil justice system in common law countries that aim to reduce the ability of plaintiffs to bring tort litigation or to reduce damages they can receive. Such changes are generally justified under the grounds that litigation is an inefficient means to compensate plaintiffs; that tort law permits frivolous or otherwise undesirable litigation to crowd the court system; or that the fear of litigation can serve to curtail innovation, raise the cost of consumer goods or insurance premiums for suppliers of services, and increase legal costs for businesses. Tort reform has primarily been prominent in common law jurisdictions, where criticism of judge-made rules regarding tort actions manifests in calls for statutory reform by the legislature.

The Civil Rights Attorney's Fees Award Act of 1976 is a law of the United States codified in 42 U.S.C. § 1988(b). It is often referred to as "Section 1988." It allows a Federal court to award reasonable attorney's fees to a prevailing party in certain civil rights cases. The Act was designed to create an enforcement mechanism for the nation's civil rights laws without creating an enforcement bureaucracy, because the prospect of being awarded attorneys' fees is thought to incentivize attorneys to bring civil rights cases on behalf of plaintiffs.

<span class="mw-page-title-main">Retainer agreement</span> Contract retaining future work

A retainer agreement is a work-for-hire contract. It falls between a one-off contract and permanent employment, which may be full-time or part-time. Its distinguishing feature is that the client or customer pays in advance for professional work to be specified later. The purpose of a retainer fee is to ensure that the employed reserves time for the client in the future when their services are needed.

Commissioner v. Banks, 543 U.S. 426 (2005), together with Commissioner v. Banaitis, was a case decided before the Supreme Court of the United States, dealing with the issue of whether the portion of a money judgment or settlement paid to a taxpayer's attorney under a contingent-fee agreement is income to the taxpayer for federal income tax purposes. The Supreme Court held when a taxpayer's recovery constitutes income, the taxpayer's income includes the portion of the recovery paid to the attorney as a contingent fee. Employment cases are an exception to this Supreme Court ruling because of the Civil Rights Tax Relief in the American Jobs Creation Act of 2004. The Civil Rights Tax Relief amended Internal Revenue Code § 62(a) to permit taxpayers to subtract attorney's fees from gross income in arriving at adjusted gross income.

<span class="mw-page-title-main">Legal financing</span>

Legal financing is the mechanism or process through which litigants can finance their litigation or other legal costs through a third party funding company.

Legal protection insurance (LPI), also known as legal expenses insurance (LEI) or simply legal insurance, is a particular class of insurance which facilitates access to law and justice by providing legal advice and covering the legal costs of a dispute, regardless of whether the case is brought by or against the policyholder. Depending on the national rules, legal protection insurers can also represent the policyholder out-of-court or even in-court.

A private attorney general is an informal term originating in common law jurisdictions for a private attorney who brings a lawsuit claiming it to be in the public interest, i.e., benefiting the general public and not just the plaintiff, on behalf of a citizen or group of citizens. The attorney may, at the equitable discretion of the court, be entitled to recover attorney's fees if they prevail. The rationale behind this principle is to provide extra incentive to private attorneys to pursue suits that may be of benefit to society at large. Private attorney general suits are commonly, though not always, brought as class actions in jurisdictions that permit the certification of class action lawsuits.

Unbundled legal services, also known as limited scope representation and discrete task representation, is a method of legal representation in which an attorney and client agree to limit the scope of the attorney’s involvement in a lawsuit or other legal action, leaving responsibility for those other aspects of the case to the client in order to save the client money and give them more control. Unbundled legal services, limited scope retainers or discrete task representation are available in multiple jurisdictions, including the United States, as well as the Canadian provinces of British Columbia and Ontario. One common use of unbundled legal services is family law, as a case is often too complex for a pro se litigant to handle alone but the cost of full-service legal representation is often prohibitive.

Chicago Options Associates (COA) is a finance company in Chicago, Illinois which specializes in trading options and futures contracts. It was founded in 1987 by Oliver R. W. Pergams and Michael E. Davis. In 1994 Davis was its chief executive officer, hiring then-graduate student Jimmy Wales as research director; Wales served in this position until 1998.

References

  1. 1 2 "Brian Leiter's Law School Reports". leiterlawschool.typepad.com. Retrieved 2016-05-06.
  2. 1 2 Schwall, Benjamin (2015-06-25). "High-Powered Attorney Incentives: A Look at the New Indigent Defense System in South Carolina". Rochester, NY: Social Science Research Network. SSRN   2623202.{{cite journal}}: Cite journal requires |journal= (help)
  3. 1 2 Amanda Y. Agan. "Research". sites.google.com. Retrieved 2016-05-06.
  4. ↑ Cornell Law School web site, ABA Model Rules of Professional Conduct (2004), Rule 1.5: Fees
  5. ↑ Gabriel Chin & Scott Wells, Can a Reasonable Doubt have an Unreasonable Price? Limitations on Attorney's Fees in Criminal Cases, 41 Boston College Law Review 1 (1999)
  6. ↑ O'Connell. (1981). "A Proposal to Abolish Defendants' payment for Pain and Suffering in Return for Payment of Claimants' attorneys' fees" Archived 2014-04-16 at the Wayback Machine . University of Illinois Law Review.
  7. ↑ American Bar Association ; “Providing Keys to the Courthouse Without Giving Up Full Recovery” by Nicole Liguori Micklich, in Construct!, Volume 2, No. 15, Winter 2006
  8. ↑ Carr, David C. (October 2010). "Attorney Fees: Five Keys to Ethical Compliance". GPSolo. Archived from the original on 2 October 2017. Retrieved 1 October 2017.
  9. ↑ Steven J. Harper (March 28, 2013). "The Tyranny of the Billable Hour" (op ed). The New York Times. Retrieved March 29, 2013.
  10. ↑ United States Census Bureau, American Community Survey
  11. ↑ United States Census Bureau, Current Population Survey
  12. ↑ United States Department of Labor, Bureau of Labor Statistics, Occupational Employment Statistics
  13. ↑ After the JD II
  14. ↑ Michael Simkovic, Why the New York Times Should Correct Remaining Factual Errors in Its Law School Coverage, Brian Leiter's Law School Reports
  15. ↑ "Attorney Compensation Report 2018". Martindale. MH Sub I, LLC. Retrieved 19 March 2019.
  16. ↑ See http://www.aipla.org for more information, although the Surveys are not made available online, but must be purchased.
  17. ↑ "2008 Hourly Rate Survey". Oregon Bar Association.
  18. ↑ "2010 Economic Survey" (PDF). Colorado Bar Association. Archived from the original (PDF) on 2012-10-14.
  19. ↑ "United States Attorney's Office for the District of Columbia". Archived from the original on 2007-02-21. Retrieved 2007-02-21.
  20. ↑ Andy Soltis, "Lawyer Rai$es the Bar – First-ever 1G/hr. Fee," New York Post , 13 December 2005, 23.
  21. ↑ "GCs, Law Firms, and Flat Fee Arrangements: A Matter of Trust". typepad.com.
  22. ↑ "Ethics: Contingency Fees for Lobbyists". National Conference of State Legislatures. March 2013. Retrieved 1 October 2017.
  23. ↑ Eisenberg, Theodore; Miller, Geoffrey P. (March 2004). "Attorney Fees in Class Action Settlements: An Empirical Study". Journal of Empirical Legal Studies. 1 (1): 27–78. doi:10.1111/j.1740-1461.2004.00002.x.
  24. 1 2 3 4 5 6 Walters v. National Ass'n of Radiation Survivors, 473 U.S. 305 (1985).
  25. ↑ Department of Labor v. Triplett, 494 U.S. 715 (1990) (applying Walters to attorney's fee restrictions in Black Lung Benefits Act of 1972).
  26. ↑ Johnson v. Daley, 339 F.3d 582 (7th Cir. 2003).
  27. ↑ "Flsenate Archive: Statutes & Constitution > Constitution". flsenate.gov.
  28. ↑ Treiman, Dov (20 August 2019). "The Current State of Attorney Fees". New York Law Journal. Retrieved 6 December 2019.
  29. ↑ FRCP 54(d)
  30. ↑ O.C.G.A. § 9-15-14(a).
  31. ↑ O.C.G.A. § 9-15-14(b).
  32. ↑ "In Re Black Farmers Settlement Update 48". MySettlementClaims.com.
  33. ↑ Gladstone, S.F. (1979). "Judicial Power over Contingent Fee Contracts: Reasonableness and Ethics". Case Western Reserve Law Review. 30: 523.
  34. ↑ Percival, Robert V.; Miller, Geoffrey P. (Winter 1984). "The Role of Attorney Fee Shifting in Public Interest Litigation". Law and Contemporary Problems. 47 (1): 233–247. doi:10.2307/1191442. JSTOR   1191442.

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