Legal Fees, Legal Fees, Timekeeping &Timekeeping &

BillingBilling

Part 1 of 2Part 1 of 2

Chapter 5Chapter 5

Pages 266-290Pages 266-290

Track your day activity.Track your day activity.

Timekeeping vs. BillingTimekeeping vs. Billing

Timekeeping: Timekeeping: the process of the process of tracking time for the purpose of tracking time for the purpose of billing clients. billing clients.

Billing: Billing: the process of issuing the process of issuing invoices for the purpose of invoices for the purpose of collecting monies for legal collecting monies for legal services performed and being services performed and being reimbursed for expenses.reimbursed for expenses.

Why paralegals need to know Why paralegals need to know timekeeping & billing:timekeeping & billing:

1) In most law practices you are required to track 1) In most law practices you are required to track your time and it can be charged to the case you your time and it can be charged to the case you are working on. are working on.

2) Many law practices have quotas or minimum 2) Many law practices have quotas or minimum billable hour requirements. billable hour requirements.

3) Most law practices are for profit so billing is 3) Most law practices are for profit so billing is crucial to the success of the practice. crucial to the success of the practice.

4) Paralegals are sometimes put in charge of 4) Paralegals are sometimes put in charge of actually running the timekeeping and billing actually running the timekeeping and billing systems, including managing timekeeping process systems, including managing timekeeping process and generating bills. and generating bills.

5) If you are a contract paralegal or an 5) If you are a contract paralegal or an independent/freelance paralegal then you need to independent/freelance paralegal then you need to be prepared to generate bills & bill time to earn a be prepared to generate bills & bill time to earn a living.living.

Types of Legal Fee AgreementsTypes of Legal Fee Agreements

Hourly rate fee: Hourly rate fee: fee that is billed fee that is billed to the client by the hour at an to the client by the hour at an agreed upon rate. agreed upon rate. • Can include several types of hourly ratesCan include several types of hourly rates

Attorney/Paralegal ratesAttorney/Paralegal rates Client hourly rateClient hourly rate Blended hourly rateBlended hourly rate Activity hourly rateActivity hourly rate

Attorney/Paralegal Hourly RateAttorney/Paralegal Hourly Rate

Fee based on the attorney’s or Fee based on the attorney’s or paralegal’s level of expertise and paralegal’s level of expertise and experience in a particular area. (See experience in a particular area. (See figure 5.2 on pg. 270)figure 5.2 on pg. 270)$200-$500 Partners$200-$500 Partners

$125-$200 Associates$125-$200 Associates

$60-$125 Paralegals$60-$125 Paralegals

Client Hourly RateClient Hourly Rate

Fee based on one hourly charge for Fee based on one hourly charge for the client, regardless of which the client, regardless of which attorney works on the case and what attorney works on the case and what he/she does on the case.he/she does on the case.• Pre negotiated “fixed rates” that do not Pre negotiated “fixed rates” that do not

change based on years of experience or change based on years of experience or title. title.

Paralegals $100/hrParalegals $100/hr Attorneys $225/hrAttorneys $225/hr

Blended Hourly Rate FeeBlended Hourly Rate Fee

An hourly rate that is set taking into An hourly rate that is set taking into account that blend or mix of account that blend or mix of attorneys working on the matter. attorneys working on the matter. • Could include associates, partners and Could include associates, partners and

paralegals.paralegals.• One rate for ALL One rate for ALL

Makes the bill much easier for a client to Makes the bill much easier for a client to read.read.

Activity Hourly RateActivity Hourly Rate

Fee based on the different hourly Fee based on the different hourly rates, depending on what type of rates, depending on what type of service or activity is actually service or activity is actually performed. performed. • Court appearances $300/hourCourt appearances $300/hour• Legal research by attorney $225/hourLegal research by attorney $225/hour• Telephone calls by attorney $150/hourTelephone calls by attorney $150/hour• Drafting by paralegal $80/hourDrafting by paralegal $80/hour

Contingency FeeContingency Fee

Fee collected if the attorney successfully Fee collected if the attorney successfully represents the client. represents the client. • Certain percentage of the total amount of Certain percentage of the total amount of

money awarded to the client. money awarded to the client. Personal InjuryPersonal Injury Worker’s Comp casesWorker’s Comp cases Employment casesEmployment cases Medical malpractice Medical malpractice

• The individual may not have the means to hire The individual may not have the means to hire a lawyer in the first place. Contingency fees a lawyer in the first place. Contingency fees range from 20% - 50%.range from 20% - 50%.

Contingency Fee continued:Contingency Fee continued:

Must be in writing (all legal fee Must be in writing (all legal fee agreements should be in writing). agreements should be in writing).

Check state rules for caps on Check state rules for caps on maximum %’s of recovery. maximum %’s of recovery.

Very risky. Very risky.

Flat FeeFlat Fee

A fee for legal services that is billed A fee for legal services that is billed at a fixed amount. at a fixed amount. • Will preparationWill preparation• DivorceDivorce• Name changeName change• BankruptcyBankruptcy

Retainer FeesRetainer Fees

Retainer fees are monies paid by the Retainer fees are monies paid by the client at the beginning of a case or client at the beginning of a case or matter. There are several types of matter. There are several types of retainers:retainers:

ALL ARE EITHER EARNED OR UNEARNED. ALL ARE EITHER EARNED OR UNEARNED.

Earned v. Unearned RetainerEarned v. Unearned Retainer

EarnedEarned: money that is entitled to be : money that is entitled to be deposited into the attorney’s own deposited into the attorney’s own bank account or into the office’s bank account or into the office’s operating account. operating account.

UnearnedUnearned: kept in client trust and : kept in client trust and may be refunded to the client. This is may be refunded to the client. This is actually the client’s money. actually the client’s money.

Escrow/Trust AccountEscrow/Trust Account

A separate bank account apart from a A separate bank account apart from a law office’s or attorney’s operating law office’s or attorney’s operating account. This is where unearned account. This is where unearned client funds are deposited and kept. client funds are deposited and kept.

Types of RetainersTypes of Retainers

Cash Advance Retainer: unearned $ Cash Advance Retainer: unearned $ that acts as an advance against the that acts as an advance against the attorney’s future fees and expenses. attorney’s future fees and expenses.

General Representation: typically General Representation: typically used when a client such as a used when a client such as a corporation or entity requires corporation or entity requires continuing legal services throughout continuing legal services throughout the year. Similar to a flat fee, but it’s the year. Similar to a flat fee, but it’s not limited to a specific area of work. not limited to a specific area of work.

Types of Retainers Cont’d:Types of Retainers Cont’d:

Case Retainer: a fee that is billed at Case Retainer: a fee that is billed at the beginning of a matter, is not the beginning of a matter, is not refundable to the client and is refundable to the client and is usually paid at the beginning of the usually paid at the beginning of the case as an incentive for the office to case as an incentive for the office to take the case. take the case.

Types of Retainers Cont’d:Types of Retainers Cont’d:

Pure Retainer: A fee that obligates Pure Retainer: A fee that obligates the office to be available to represent the office to be available to represent the client throughout the time period the client throughout the time period agreed upon. agreed upon. • Very rareVery rare• Office typically must agree to not Office typically must agree to not

represent any of the client’s competitors represent any of the client’s competitors or to undertake any type of adverse or to undertake any type of adverse representation to the client. representation to the client.

Court-Awarded FeesCourt-Awarded Fees

Fees given to the prevailing parties Fees given to the prevailing parties pursuant to certain federal and state pursuant to certain federal and state statutes. statutes. • Civil rights lawCivil rights law• AntitrustAntitrust• Civil RacketeeringCivil Racketeering• Many othersMany others

Prepaid Legal ServicesPrepaid Legal Services

A plan that a person can purchase A plan that a person can purchase that entitles the person to receive that entitles the person to receive legal services either free or at a legal services either free or at a greatly reduced rate. greatly reduced rate. • Corporation/Labor Unions (Give a Corporation/Labor Unions (Give a

prepaid legal service plan to their prepaid legal service plan to their employees as a benefit). employees as a benefit).

BREAKBREAK

What is value billing?What is value billing?

A type of fee agreement that is A type of fee agreement that is based not on the time spent to based not on the time spent to perform the work but on the basis of perform the work but on the basis of the perceived value of the services to the perceived value of the services to the client.the client.

Value BillingValue Billing

Arguments against hourly billing:Arguments against hourly billing:• The client never knows the total legal fee.The client never knows the total legal fee.• Clients avoid contact with attorney/paralegal Clients avoid contact with attorney/paralegal

because they will be charged. because they will be charged. • Clients have trouble seeing the relationships Clients have trouble seeing the relationships

between the staff and the enormous fees.between the staff and the enormous fees.• Hourly billing encourages lawyers and paralegals Hourly billing encourages lawyers and paralegals

to be inefficient (the longer it takes to peform a to be inefficient (the longer it takes to peform a job, the more $ they bill)job, the more $ they bill)

• Force attorneys and paralegals to bill a quota # Force attorneys and paralegals to bill a quota # of hours a year, which puts a tremendous of hours a year, which puts a tremendous amount of pressure on the individual paralegal amount of pressure on the individual paralegal and attorney. and attorney.

The Ethics of Timekeeping & BillingThe Ethics of Timekeeping & Billing

Timekeeping and Billing errors were Timekeeping and Billing errors were once considered once considered “misunderstandings” or perhaps “misunderstandings” or perhaps “clerical errors.” Now, state bar “clerical errors.” Now, state bar associations have set high standards associations have set high standards to govern legal billing.to govern legal billing.

(See “Billing Abuses of (See “Billing Abuses of Lawyers”article.)Lawyers”article.)

Team Discussion:Team Discussion: You work for a large firm. The firm has You work for a large firm. The firm has

always done financially well, but given the always done financially well, but given the current economic situation things aren’t current economic situation things aren’t going well. There is a great deal of going well. There is a great deal of pressure for you to meet your billing pressure for you to meet your billing requirements of 1,800 hours even if no requirements of 1,800 hours even if no one has work for you. The firm will not one has work for you. The firm will not accept the answer, “No one is giving me accept the answer, “No one is giving me any work.” You are being encouraged to any work.” You are being encouraged to go up to each attorney’s office and drum go up to each attorney’s office and drum something up. Discuss the ethical something up. Discuss the ethical situation in which you are being placed situation in which you are being placed and how you may handle it.and how you may handle it.