CHOOSING CIVIL LITIGATION COUNSEL

Billing Arrangements

How often and how much you are going to be billed in any given case can have a big impact on the choices you make in any litigation context. Law suits can be a significant expense, and also a significant cash flow problem when in some contexts very large expenditures are required in very short periods of time. Most typically, litigation lawyers bill by the hour, but other forms of billing such as contingency fees and even flat fees can sometimes be found. Regardless of what form of billing is offered, you need to know how much you can expect to pay, and how often.

Billing by the Hour
Most commonly, litigation lawyers bill their time by the hour. Determining the hourly rate is dependent upon a lot of factors, including the level of expertise and experience of the lawyer, the nature of the case, and the resources the firm in which the lawyer practices may have at the lawyer's disposal. Often the lawyer will be assisted by other professionals such as other lawyers, law clerks, or articling students, each of which will have their own billing rate. How much is the cost of any particular piece of work depends upon who is doing it. But don't assume that a person with a lower billing rate necessarily can do a given task for less cost. Depending on the nature of the task, greater experience may result in a lower cost simply because with experience, the job can be done more quickly and effectively. True efficiency means getting the right tasks into the hands of the right people.

Billing by the hour lends a certain level of predictability to legal costs, but only within the confines of the lawyer's ability to predict how long a given task will take. That is often a difficult thing to do in litigation, since what you have to do often is dependent upon what the opposing party does, and this is not always easy to predict.

Critics of this method of billing might say that it places an incentive on lawyers to spend more time, rather than less, on given tasks. The more time spent, the more money the lawyer makes.

Good litigation lawyers will put the client's interests first, but at the same time will put in the time it takes to do a good job at what they do. On an hourly billing system, taking the time to do a better job costs more, and those who bill using this method might just as easily respond: "You get what you pay for."

Lawyers who bill by the hour may be looking to issue accounts on a regular basis - often monthly - when work has been done on a file. Sometimes other time intervals or systems can be put in place, so it is good to discuss this.

Contingency Fees
Contingency fees are fees that are payable, in whole or in part, when a claimant is victorious in a legal proceeding. In their purest form, the lawyer will bear the expense of the cost of a lawsuit until trial, and will render an account only if and when the claimant wins and collects. When that does happen, the lawyer will typically collect a fee that is substantially greater than what would have been earned if billing were done on an hourly basis.

These kinds of fees are practical where the claimant has a strong case, so the likelihood of winning is an incentive for the lawyer to take the case, and where the claimant may not have the financial means to pay a lawyer by the hour. The lawyer takes the risk of a loss (in which case the lawyer doesn't get paid) but gets a corresponding reward of a very high fee in the event the case is won. Typically, this kind of fee arrangement is seen in class actions and in personal injury cases. This kind of fee arrangement does not lend itself as well to situations where the likelihood of success is doubtful, and not at all where you as the client are a defendant, since there has to be a source of funds arising from the lawsuit to ultimately pay the lawyer.

Contingency fees can be the right solution in the right case, but they have their disadvantages too. Most importantly, the amount paid to the lawyer at the end of the day is likely to far exceed the amount that would otherwise be paid. Apart from that, the structure of the arrangement means in effect that the lawyer is working partly for him or herself, in a way that is different from an hourly fee billing arrangement. The incentives in decision making are different when a loss means the lawyer will not get paid.

A further complication can arise when a client on a contingency fee arrangement decides to change counsel part way through a case. The lawyer will want to protect his or her investment in the suit, and that may be something that leads to a dispute and can interfere with the orderly transfer of the file to a new lawyer. If you are considering a contingency arrangement, you should discuss this possibility with your lawyer at the outset, and make sure you understand how it will work if you decide to change counsel.

Flat fees
A flat fee is a fixed amount which a lawyer will be paid for a given task or proceeding. They are relatively rare, but not unheard of, in the litigation context. They are not practical in a typical case simply because the amount of work, and the reaction of the opposing party, are unpredictable and consequently the lawyer doing litigation on flat fee basis is running a significant risk of losing money if completion of the proceeding turns out to take longer than expected. On the other hand, if the flat fee is high enough, and the proceeding is brought to a conclusion quickly and efficiently, the lawyer can earn more than the lawyer otherwise would have on an hourly billing basis.

The chief advantage to flat fees from a client's perspective is that they provide predictability on what the cost is really going to be. But they have their disadvantages. The biggest one is that the incentive to the lawyer is to bring matters to a conclusion as quickly as possible in order to maximize the return for the time spent, and minimize the prospect that money will be lost because the time taken to do the job substantially exceeds what is accounted for by the flat fee. Good lawyers will do the job if the job requires it, but even the most scrupulous of lawyers will have a hard time putting his or her "heart into it" when continuing to do the work is a losing proposition for the lawyer.

Lloyd's view: Typically, I bill on an hourly rate. I try to make things more predictable for my clients by talking to them when it appears fees are going to be more than expected due to unexpected developments. I try not to put more time into a given task than it's worth, and at the same time, when I do go the extra mile, I expect to be paid for my efforts. In short, you pay for what I do, and I don't scoop an extraordinary amount of the award if I win your case for you. To my mind, this arrangement lends the greatest degree of comfort and predictability to both the client and the lawyer, in most circumstances. There are exceptions to every rule, however, and you need to choose a billing arrangement that's comfortable for you and your lawyer in any given case. Sorting out what you pay for, how, and when, is a significant part of intelligent litigating.

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