Welcome to the ShTexaslawyer.com Blog

In seventeen years I have never had to resort to a third party lawsuit funding group to complete a case. Personally I think these programs are a bad deal for plaintiffs and that clients and lawyers should avoid them. I have had a case or two where a client, against my strong advice otherwise, has gotten a cash advance on their case. Why do I think this is a bad idea? Because, it is a terrible interest rate, it ties up the closing of your case, and spends assets that should ultimately go to the client.

These services all essentially work the same. You are getting a loan, and your case is the collateral. The loan has a price tag in the form of a lien on the case that must be paid back before any money goes to the client. The companies rarely give a loan that is equal to any real value of the case, because they are not going to jeopardize their ability to recover. The structures vary from group to group, but they all expect to get more than the amount they give you up front.

When your case resolves your attorney must try to pay off all the medical bills, case expenses and attorneys fees, as well as the lien from your cash advance before the lawyer can give you any money. The problem is that the client usually wants more than is left over at that point. The client suffered the injury and the pain. The client feels like everyone is making money of the client’s pain, and that the client is getting nothing. It doesn’t matter to a client if they got a loan months or years ago, that money no longer exists in their mind. There is money from their case being parted out, and the client wants to be sure they got most of it. I don’t blame them. But the lien’s interest is in the accounting, messing up the final recovery to the client.

The problem only gets worse if the case hasn’t gone as hoped. Too often a fact comes up that nobody could foresee that changes a case’s expected outcome. The loan company isn’t going to care that your case went badly. If there was money paid on the case, the lender will want their contracted fee back.

You would avoid risky loans on your house, your car or anything else, avoid them on your case as well.

I keep hearing horror stories of what some attorneys will charge for their efforts. The prices charges astound me. I am equally astounded when I hear that someone actually paid the fee. Experience tells me to take everything I hear with a bit of doubt. But, when I am told by a client that a former attorney charged them $25,000 to do their divorce, I am flummoxed.

It is hard for me to imagine how the fees could get so high for just one side in a normal Texas family. Then I remember why I have ill feelings to wards most Family Law practitioners. Since the majority of my practice is based in contingency fee injury work, I don’t feel the need to live by the billable hour. In fact I really hate tracking my billable time in my hourly fee cases. Most Family Law lawyers live for the billable hour. The more they can allow a fight to run on, the more they can charge. I remember being in a mediation where every issue was almost worked out. The other attorney seemed irritated that we were close to resolving the case. A relatively minor issue of a few thousand dollars was the last thing to work out. We made our offer and the other attorney exploded. Frothing at the chance to finally get to bill for litigating the case he urged his client to get up from the table and walk out to put the whole case on trial. I looked at him and asked, “Are you suggesting that both parties should give up on a nearly finalized agreement, and go spend some seven thousand dollars each to fight over a four thousand dollar issue?” To my shock, he said “yes.”

I had forgotten that while I am focused on getting my clients what they want, resolving issues, and keeping their bills as low as possible, most Family Lawyers are only interested in more billable hours. Of course he was willing to urge his client to go to trial. He wasn’t going to spend money fighting over four thousand dollars, but if the fight didn’t happen he wouldn’t earn seven thousand dollars.

If you have an hourly lawyer, always keep an eye on what you really want, what it will cost to get it, and if the price of fighting for it is worth the fees you will pay. Don’t be a client spending seven thousand dollars to fight for a few thousand. It doesn’t make good business sense.

Paying for legal services is difficult. It isn’t an expense that most plan for in advance. You can use pre-paid legal services (although the people that call me are often unhappy with the quality of these services). There are legal aid benefits on many employment plans (I have heard complaints of these as well). There are legal services for the needy as well. Many lawyers require cash or checks, some will accept credit cards. Some offices accept payment plans as well. If you use a payment plan, keep in mind that your case could be delayed if you have not paid in full when things are ready to close. It is difficult for a lawyer to collect fees on a closed matter, so often they will delay closing until payment in full is accomplished.

In my offices, we have just set up the ability to accept most major credit cards. I hate the idea of being a part of creating debt for another person, but at least this way more people can get the help they need. If you have been looking at retaining me, but been unsure how you would pay for it, don’t hesitate to call. There may be something that can be worked out that will get you the help you need.

It is likely the worst part of any type of case. You need help, you know it, but it costs too much. This is the same problem faced by patients who need medical care, but can’t afford the service. For the “qualified poor” there are options. Legal Aid services exist in most communities to offer pro bono (free services) or reduced rate services. In criminal actions, if you can prove the need a lawyer will be appointed to help you. But if you are just above the stringent preset levels defining “need” or “poor” it seems like there is little hope.

Doctors and Lawyers are trained professionals who have high overhead costs and lots of education costs. As a result their rates are very high as well. Most wage earners consider $10.00 per hour or more to be good. Lawyers and doctors ask for hourly rates 20 times or more higher than that. The Texas State Bar encourages lawyers to provide reduced rate and pro bono services, but there is no requirement for such, nor is there any incentive. Under the Texas Constitution’s right to work provisions it is likely unconstitutional to require lawyers to provide free services. Even if it passed the constitutional issue, the problem would be who qualifies and how to get those services available for the people just over the poverty level.

Unfortunately there isn’t a real solution to the cost of a lawyer, other than shopping for the best deal. Just like there isn’t much luck in finding cheap medical care. If you need legal assistance and money is a major issue, do not give up. Call around. Rates vary wildly in the Texas market. Just because most are asking for $3,000.00 or more in retainer fees, and billing at $300 an hour or more doesn’t mean they all are. However, be careful in making your choices too. A discount lawyer may give you discount service. Some lawyers will accept payment plans; some will accept credit cards as well.

When looking at choosing a lawyer do the following:

1. Check out the lawyer you are considering at the Texas Bar website (http://www.texasbar.com/). There you can see if there have been grievances or other disciplinary actions against the lawyer you are considering.

2. Ask the lawyer how they bill their time. If they bill by half hour increments, be very wary. A 10 minute phone call will cost you as much as an hour phone call. A 61 minute phone call will cost you the same rate as two hours. What you want is 15 minute increments or less. On my hourly cases I bill in 15 minute increments, and often write off very short calls.

3. Ask the lawyer what are considered as expenses and if they are included in the fee. Many times a lawyer’s fee is only for the time spent working on the case. Filing fees, copies, parking, postage, paper and even supplies can be considered expenses. In my practice I don’t charge for my supplies. Basically I consider if I didn’t get a receipt for it, it isn’t a billable expense.

4. If you are quoted a flat fee, be sure what is included in that flat service. I have heard nightmare stories of pre-paid or flat fee services that never get finished because something was supposedly “unforeseen” and more money is required to finish the task. Also, make sure what constitutes a change that makes your case no longer a flat fee. In my practice, if I quote a flat fee, it only changes if another lawyer gets involved or the other side becomes uncooperative and we have to use third parties to keep the process moving.

5. Don’t be afraid to ask for a reduction. Sure, the lawyer won’t like it. The lawyer probably won’t reduce, but if you don’t ask it will never happen. It doesn’t happen often, but occasionally I have people try to negotiate my fee. I don’t resent them for trying. If they are negotiating a submitted bill, then I listen to their reasons and consider their justification.

If you already have a lawyer on an hourly fee based case, be sure to do the following:

1. Keep your own time log. If you have a record of the start and end of all calls, it is easier to verify if the time billed is correct.

2. Ask for at least a monthly bill. It is much easier to negotiate small discrepancies as they arise, than to try to negotiate an entire bill.

3. Try to keep your initiated contact with the lawyer at a minimum. The most common call by a client is the “Status Call”. This is a call where a client just what’s to know what is going on. These calls are usually very short, often less than three minutes. If you are being billed $300 per hour, at a half hour rate, that “what’s up” call could cost you $150.00! Now, sometimes it is true that if you don’t call, they may not push as hard as they should. Making these types of calls is a balancing act, if you have a lazy lawyer. If they aren’t working, and you have to make these types of calls repeatedly to get action, don’t be afraid to ask for a waiver of the cost of the call. You shouldn’t be the one driving all their effort.

I ran across a blog article regarding contingency fee cases at http://blogs.law.harvard.edu/ethicalesq/2007/08/29/why-do-lawyers-lie-about-contingency-fees/. The article was a tad old, being from August 2007. However, the site raised issues that bothered me.

First, I’ve never lied about my fees in contingent cases. There are no hidden costs. The fee I charge is 35% of the gross if I can settle the matter without a lawsuit. 40% if I have to file a suit, and 50% if there is an appeal. I point out to my clients that the fee is not inclusive of any expenses, but that I only count something as an expense if I have bill in my hand. I do not pass “overhead” costs such as folders or paper onto my clients. Lastly, I make a personal promise to my clients that I won’t take more of the proceeds of the case than them, after expenses have been paid.

With all that said, I think the article’s title was misleading. The biggest issue the author had with contingent fee cases was that he felt 1) attorneys can get more than the value of the work done to resolve the case, and 2) that clients don’t know they can fight to sign contracts at other fee rates. From there, the article became less informative, and more of a series of arguments. But, I want to address those two issues.

As to the potential of a windfall to the attorney, there is really only one way this can happen. It is possible that an attorney could sign up a case at a 1/3rd contingent fee, do very little work due to an obvious set of facts and terrible injuries, and end up getting paid thousands of dollars for only a few hours of real work. Yes, such a circumstance is unfair. Or is it?

Lawyers cannot know for certain what the value of every case they sign up will end up being. There are some averages they can look to, they can see problems that could diminish the value of a case, or factors that could increase the value as well. But, no lawyer can tell any single client what their case will ultimately be worth at the very beginning. There is too much that can go right or wrong as the case develops. As a result, the lawyer is taking on a case that he or she believes will have “some” value, and putting their effort into getting the most value possible from the case. The client directly benefits from this, as the lawyer cannot get more, without making the client more as well.

Signing a case has a lot of back loaded overhead in it. The lawyer has paid for his education, license, continuing education, taxes, staff, supplies, advertising, equipment, etc. long before any one case is signed. The lawyer has to cover those past costs as well as his future costs from what he signs up now. Additionally, each case will have its own particular costs. Some cases I have worked on had no expenses beyond staff time, equipment and supplies. Others have had thousands of dollars poured into them for experts, depositions and the like. As a result, the lawyer is taking on a calculated risk with every case.

Sure, if you base the fee earned solely on hours worked, sometimes lawyers are earning outrageous hourly fees, but if you look at the cases that don’t do well they have also worked for wages far below minimum wage. That is the nature of the gamble in contingency cases. Some will do well, some won’t. Some will eat up your budget, while others are practically free to work.

There are cases that are more likely to have higher returns than others. Dead loved ones, missing limbs and the like naturally have higher settlements that a minor whiplash case. Should the lawyer take a lower percentage just because the case could do really well? Maybe, then again there are other options available to clients, which gets into point number two.

Regarding contingent fee negotiations, I have seen lawyers charge a wide range of contingent percentages for the same types of work. I have heard of fees around 20 to 25% for auto cases, as well as having heard 40% across the board fees for any type of case. There is market competition. Clients do have a choice as to whom they want to hire. Some lawyers will reduce their fees to sign a contract, others will not. The issue for clients is do they want to risk the potential of a large fee, or risk why the lawyer they are hiring charges less. I heard a great comment along the lines of “you get what you pay for.” I once heard a person ask, do you want a discount lawyer to discount work, or do you want a full priced lawyer to do his or her fullest effort?”

In the end, the client has full control. The client decides whom they want to hire and what portion of the case they are willing to part with. Despite this argument over whether there is something wrong with contingent cases, we should all be glad there are such cases. Imagine if you were badly hurt, would be out of work, had mounting medical costs on an already strained budget, and the only way to get help was to pay an lawyer an retainer or an hourly rate? For all but the very wealthy, it would be impossible to afford representation, and the accident would become the beginning of the complete unraveling o f their lives. Thank goodness that you can hire a contingency fee based lawyer, otherwise you might not be able to hire a lawyer at all.