Alternative Fee Arrangements at The Lanier Law Firm
At The Lanier Law Firm, we recognize that a one-size-fits-all fee agreement is a thing of the past. Every case has unique circumstances, which means that a standard contingency fee or hourly fee may not be appropriate in every situation.
Instead of working only with the standard contingency fee or hourly fee agreements that are common throughout the field of law, The Lanier Law Firm’s portfolio of alternative fee agreements is intended to accommodate the attorneys and their clients. Alex Brown, managing attorney of Business Litigation, states, “Our best incentive is to get positive results, not bill hours.”
We structure our fee agreements with the aim of achieving results rather than billing our clients for countless hours. Alternative fee agreements incentivize our attorneys in a way the standard fee agreements fail to do. Brown comments further, “we can really do whatever fee arrangement makes sense to both parties. I mean, whatever you can think of, we’re open to.”
Below is an overview of the standard fee agreements used throughout the legal field and a brief look into the alternative fee arrangements we have implemented in our practice.
What are the standard fee agreements?
Three types of fee agreements are common in the legal field: an hourly fee, a contingency fee and a flat fee. These standard fee agreements are relatively well understood in the legal community.
For example, if a lawyer’s hourly fee is $600 and they spend five hours researching statutes for a case, the fee will be $600 multiplied by five, or $3,000.
Generally, attorneys who have more experience or who specialize in a specific field will charge a higher hourly rate than those just out of law school. Many lawyers estimate how many hours they will likely bill before accepting a case.
A flat fee is a set rate that an attorney charges to litigate a case. No matter how long the case takes or how many hours the attorney spends working on it, the rate will be the same.
Flat fees are standard when an attorney handles a simple divorce case or reviews a contract. But flat fees are uncommon in more complex lawsuits.
Unlike an hourly fee, a contingency fee means that the attorney will take a fee only if they win the case. If they do not collect any compensation, the client does not have to pay the attorney any fee for their services. The client sometimes pays for certain expenses, such as filing fees and postage, regardless of the outcome of the case.
If the attorney wins the case, they will portion a fee out of the total amount awarded. For example, a client and their attorney may agree to a contingency fee of 25 percent. If the attorney wins $100,000 in compensation for the client, they will receive $25,000 in fees.
Contingency fee percentages can vary from attorney to attorney. However, a common contingency fee is between 33 percent and 40 percent of the total award.
Personal injury attorneys typically work on contingency, as do some other attorneys. However, the American Bar Association prohibits contingency fees in some circumstances. For example, an attorney cannot enter into a contingency fee agreement for a divorce case or when working with a criminal defendant.
Alternative Fee Agreements
Reverse Contingency Fee
We calculate a reverse contingency fee by charging the client a percentage of the amount of money that the client saves in litigation expenses. In practice, the attorney will ask the client what they expect to pay in litigation fees, and the attorney takes a portion of any litigation fees that they save for the client.
For example, suppose a client faces a $15 million lawsuit. That client declares that they think they should have to pay only $10 million. If the attorney settles the case and the client is ordered to pay only $5 million, the attorney takes a portion of the $5 million that the client saved in legal fees.
A primary benefit of reverse contingency fees is that they provide an incentive to the attorneys to reduce the costs as much as possible. The less the client must pay to the other party, the more the attorney earns. This saves the client money and lowers overall costs in ways that contingency fees and hourly fees don’t.
“It’s not just something that’s a concept, it’s something that we’ve done before,” Brown reassures. The Lanier Law Firm has successfully used reverse contingency fees for clients. Most notably, a large pharmaceutical company facing a multimillion-dollar lawsuit hired us to represent them. Rather than charging an hourly rate, our attorneys accepted a percentage of the money they saved the client.
Hybrid Fee Agreements
The Lanier Law Firm has also successfully leveraged hybrid fee agreements in which the client pays a low hourly rate in addition to a smaller contingency fee.
With a reduced hourly fee, the attorneys will not make a profit without winning the case and collecting a contingency fee. When a client has a straightforward case, it’s not in their best interests to pay a contingency fee because this arrangement would mean that an attorney would take roughly 33 percent of the compensation for a short and simple case.
In this situation, a hybrid fee agreement saves the client money and serves as an incentive to the attorney.
Restrictions on Fee Agreements
Have questions about alternative fee agreements?
At The Lanier Law Firm, our attorneys successfully use alternative fee agreements. If you are an attorney who thinks an alternative fee agreement may be in your and your client’s best interests, reach out to us.
Whether you handle business clients, family law, or personal injury claims, we can provide you with tips and guidance for using alternative fee agreements.