Friday, January 4, 2008

Where I Want to go with Flat Fees

Credit a potential client with inspiring this post. For two months changing my fee structure has been under consideration. I had a mix of flat and hourly fees and I wanted to move towards flat fees. I wrote about the background to all this under the article Flat Fees. I think if you have not read that article, then you should to get the reason why I am making this change.

So this client calls last week but this was but one in a short line of the past few weeks. Each asked the same question: what is your hourly rate? None asked what I consider to be the important question: what will the case cost me? Clients shopping about for attorneys asking only about hourly rate are not getting the information they need to make a good decision about cost. At this time,I am evenly divided about the cause for this failure. The fault could lie with how my profession explains fees and it could lie with the naivete of the clients, or both.

The theory lying behind flat fees is giving the clients an idea of the total cost of a case. Hard to make the case that clients benefit from flat fees when they show no interest in the total cost of their case.

Then, too, I must follow what the Indiana Rules of Professional Conduct direct regarding fees.

Finally, the more a lawyer computerizes their practice then hourly billing becomes ever less profitable. For several years now I have worked on automating my document production. Why do this? First, I can make documents a fixed cost instead of a flexible, hourly cost. Second, I spend time with clients or on the unique aspects of their case instead of drafting routine documents. I am not sure that clients without experience with other lawyers understand the benefits they get.

With these premises in mind, I decided both to announce changing my fee structure for new cases and explain how fees gets set. Understand please I think there is only one thing more troublesome than setting a fee and that is the time spent in keeping time sheets.

During the years I had a bankruptcy practice, I used a flat fee system. I know of no other fee used by consumer bankruptcy attorneys, Locally, criminal defense attorneys use flat fees. I admit to finding the wider discussion about flat fee versus hourly billing a bit odd because for this area it is so common. What is needed an idea of what effort will be needed on a particular case.

I wrote a particular case and not a type of case. I need to know a good deal of facts about the case, about the type of person I will be working for and what I am working against. I mention the last two because of my pet theory about family law is that the law is generally straightforward and complications generally come from the people in the case. I can estimate the work generally needed for a particular type of case, but the people involved may increase the work and therefore the cost.

Here is an example: out of county case but with an out of state opposing party; the opposing party lacks the wherewithal to make an appearance in court; client is a sensible sort; and the fee quoted for this case is less than my usual fee. Why? On the facts given me, I see this: good facts supporting my client, a non-appearing opposing party requires no discovery (see more about this below), and about a quarter of the usual court time for this type of case. The fee reflects the effort I need to reach my client's goal and enough profit for paying my bills. I call that a fair fee.

Every case can be broken into the following parts: starting, pretrial, and trial. What needs done within these parts depends on the case. During the start, work differs between petitioners or respondents. Pretrial costs increase if there is discovery. Discovery means using certain tools to get information from the other side (and they from you). Discovery increases the cost of each case but outweighing that cost is having the information needed for adequate preparation for trial. However, family law cases make themselves amenable to less expansive discovery than an ordinary civil trial. I think I use the same Motion to Produce used by everyone in Madison County since Indiana adopted the Child Support Guidelines. I think trial is self-explanatory. Here too, I think the average time for family law cases where custody is not at issue can be easily estimated with confidence.

I wrote about documents above, and the most document intensive part of a case comes during discovery. The second most intensive comes with the initiating party filing the petition or affidavit that starts the case. With computers these documents can be standardized and turned out with no modification by the lawyer. I use a program, HotDocs, to automate my documents – common documents get automated. I know other offices use search and replace in preparing their documents. A close reading will show the difference, I am writing my contracts now to show a flat fee for each document in a case. How then will the client know what to pay? Ah, the wonders of word processors being able to create check boxes. This also means I am overhauling contracts I have worked with for over a decade.

I part ways with some advocates of flat fees when it comes to trial. Determining court time for cases other than cases involving custody can be done with a fair amount of ease but I am sticking with a hourly rate for trial preparation and court appearances. Since courts set hearings ahead of time for a determinate time, I think this works out the same as a flat fee. My exception to this will be where I am dealing with a child support enforcement prosecutor.

Please do not think that I am doing away the hourly rate altogether. I suppose there will be clients who prefer an hourly rate just as there may be clients who I prefer having on an hourly basis.

What I have not seen mentioned by anyone else writing about flat fees is payment by credit cards. I have been looking for the past month for a company to handle my taking of credit cards. I see a good fit between credit cards and flat fees.

I think this is the first time I ever expressly detailed how I set my fees. I suggest the next time you are seeking a lawyer, calling up and asking about fees that you remember this article of mine. Ask them how they bill for their services – hourly or flat fee. Ask how they determine their fees. Ask for their estimate of the total amount of fees for the case. Ask how they reached their estimate. Do not be put off with lawyers who say it depends on the facts. You will find the more complex a case the less concrete will be the estimate.

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