Sunday, August 26, 2018
After the death of Barbara Bush, we all knew what it meant when John McCain's family announced on Friday that he had discontinued medical treatment. Just as with Mrs. Bush, however, that didn't make the news of his death yesterday any easier to hear. I'd like to take this post to talk about John McCain and two of the things that we in the Trenches can learn from him.
First and foremost, if you know your core values, it doesn't matter what anyone else does. You will always follow your own star. Mr. McCain was offered the opportunity to be released by the Viet Cong only a year into his captivity. He declined it because he knew it was because of who his father was, and that it would be used to break others who had been held longer but who didn't have well-known parents. In other words, early release violated his personal ethics, so he didn't do it, even though it meant he was held almost 5 years longer than he could have been, in that hell-hole known as the Hanoi Hilton. I don't think I need to talk about Mr. McCain's action in voting against the repeal of the ACA, against the mandates of his political party, because it was wrong. (I don't care if you agreed with him. It took guts and conviction to stand his moral ground against his political party).
Here in the Trenches, there will be people who do the wrong thing. They exaggerate or outright lie. They manipulate the children. They hide money. It's wrong to do that. Yet, often it seems nothing bad happens to those people, that there are no consequences for bad behavior. It's so tempting when faced with unpunished bad behavior to engage in it as well. It takes a strong person to stay true to your inner self when your world is in chaos. It takes strength to say no to short-term satisfaction. John McCain knew the cost of not being true to himself - it's a looking yourself in the mirror for the rest of your life kind of thing. If he can do it, so can you.
Second, he knew that mistakes don't have to define you. John McCain's first marriage ended after his return from Vietnam. Some of that was caused by the trauma of that captivity. Some of it was caused by his infidelity. Yet, you never heard about that during any of his campaigns. I think that was, in large part, because he didn't hide it. He owned it. He moved on from it. I am certain he felt guilt and regret, but he did not let them overshadow the rest of his life. He made other mistakes as well, notably failing to speak his mind about the removal of the Confederate flag from the Capital building in Columbia, South Carolina, and his mistakes during the Keating scandal. All of us make big mistakes, luckily usually not in a national forum; he owned up to them and used them to inform his future actions and to teach the rest of us what humility looked like.
Here in the Trenches, folks do a lot of things of which they're not proud. Some of those things are big; some of them are not. Some people kick themselves endlessly about what they could have done differently. Some people let what they did wrong brand them for life. Of course, there are those who behave badly who feel no guilt or remorse and we're not talking about them. The point is to face what you did wrong, what you didn't do right and deal with it. Use it as a learning moment. Embrace it. Then us it to instruct your future self, move on and let the rest of your life show the rest of the world who you really are. R.I.P. Senator John McCain. Here in the Trenches
Saturday, August 18, 2018
Whew! You made it to part four. Thanks for reading. This part of How Much Will My Divorce Cost? is the hardest to think and write about. This week, we're talking about fixed fees and value billing. Why is this subject so difficult? There are a couple of reasons. From the client's perspective, most of them have never been in the Trenches. They have no idea of the value of legal services. They all think that their case will be easier and take less time than other cases. Plus, it seems like a lot of money to pony up. From the attorney's perspective, they fear that without the hourly rate as a disincentive, clients will call them one million times a day, and monopolize their time, or (shudder) drop in unannounced multiple times a week. It's also too much work to either figure out a fee that averages out to be reasonable or to sit down and have a deep conversation with the client about value and scope of service.
As we've done in the other parts of this series, let's start with definitions. A fixed fee is a set amount of money that an attorney charges, either for set periods of the case being active or for discrete portions of the case, as opposed to a flat fee, which is a set fee for the entire case. Let me give you more detail. In a fixed fee, the attorney might charge the client $4000 for every 3 months the case is active, due and paid in full at the beginning of each period. If you settle the case within the 3 month period, then depending on the attorney and the length of time remaining in the time period, the client may or may not receive a refund of the pro rata unused portion. An attorney might also charge a client per stage of the case, due and paid in full when that stage starts. For example, the client might be charged for the initial litigation filings, then for discovery (information gathering), then for a hearing (which is generally a short court appearance), then for mediation, then for depositions, then for trial, and then post-judgment matters. Each stage has its own fixed fee depending on how much time, skill and legal knowledge are required. Fixed fees tend to apply across the board, with not a lot of customization.
Value billing is perhaps the most difficult of all the types of fees for the client to understand and the attorney to explain. Value billing is simply that - deciding on a value to the case which adequately addresses the time and skill required of the attorney, and which the client believes is acceptable. This kind of billing is difficult for a whole lot of reasons. First, the client has to have a realistic vision of legal fees and the value of legal services. That's difficult for most clients in the Trenches because the Trenches are usually the first and only time most people are ever involved in the legal system and have no concept of the reasonableness of a lawyer's fee. Remember, part of reasonableness is the norms of the community, and they don't know what those are. Second, The attorney has to assess the case in greater detail than they normally do in order to determine what the attorney thinks is reasonable. This assessment requires the attorney to do quite a bit of background work (at no remuneration) before setting the fee in order to determine the scope of the representation. This second point is difficult on a couple of fronts: first, the client is usually anxious to hire counsel and may not want to wait to have an attorney under contract; second, the attorney may not want to put that kind of time into a lower dollar case. Third, the client and the attorney have to have an extremely detailed discussion of the extent and terms of the representation. Having this kind of discussion when the client is emotional and overwhelmed is a challenge, but doable.
So I retain the format of the other posts, here are the pros and cons:
- The client knows what the representation will cost. The attorney knows how much revenue the client will generate.
- The client can budget for the fee due dates. The attorney has the certainty they will be paid and on time and their receivables will decrease.
- A fixed fee may be cheaper in the long run than an hourly rate. The attorney has the incentive to be more efficient.
- A fixed fee rewards the client who settles their case early. A fixed fee may mean the client is as motivated to settle as the attorney.
- If the case turns out to be very complicated or time-consuming, the client doesn't need to worry it will increase fees. The attorney can be creative without worrying if their creativity is costing the client too much money.
- The client will feel free to share all important information with their attorney without concern for cost. The attorney will have all the information they need to best represent the client's interests.
- The fee the client pays aligns with their need. The client may be willing to pay a premium for certainty.
- The client may not have sufficient sources of cash or credit to pay a substantial fixed fee. The attorney may lose clients who don't have the money up front, but who could pay over time.
- A fixed fee may be more expensive than an hourly rate, depending on the complexity of the case and the length of time to completion.
- Knowing that there is another deadline for infusion of cash may cause a client to settle their case under unfavorable terms. Knowing a client lacks the funds to continue may also pressure the attorney to settle.
- The client may cause compassion fatigue in the attorney by calling all the time. Why won't the client stop calling?
- This method may also inhibit creativity in order to get the case done before the next stage or installment of payment.
- The client is well-informed about the scope of the representation to be provided by the attorney. The attorney has thought out the scope of representation and the intricacies of this particular case.
- There are no surprises in the fee. Everyone knows what is expected of whom.
- The client feels they are getting value for their money. The attorney knows the value the client places on their expertise.
- The client sees the plan for the treatment of their case. The attorney develops the plan for the client's case early, before representation begins.
- The client gets the best from the attorney because money is no longer a consideration. The attorney can be as creative as they need to be without worry over cost to the client.
- The client knows whether they can afford the attorney. The attorney knows they're getting paid.
- The representation begins with the client and attorney working as a team. The client plays an active role and has a stake in the representation from the beginning.
- It's the goal, not the fee that determines the cost. It's the goal, not the fee that determines the cost.
- The client doesn't have to worry about how much time the case takes. The case takes the time it takes.
- The client may lack the knowledge to adequately assess the value of the attorney's services. The attorney may oversell the value of their services.
- The client may not have sufficient sources of cash to pay the attorney. The attorney may lose clients who don't have the money up front, but who could pay over time.
- A fixed fee may be more expensive than an hourly rate, depending on the complexity of the case and the length of time to completion.
- The client may be too emotionally overwrought to decide whether a value-based fee is reasonable. The attorney has to assess carefully the client's capacity to understand and make decisions.
- The client can't hire the attorney or know the fee at the initial meeting. The attorney will have to put in significant time for no pay to decide the fee, with no guarantee they'll be hired.
- Sometimes the lawyer may charge a wealthy client more than a client of more limited means for the same work.
Saturday, August 11, 2018
For purposes of this post, I'm going to define a flat fee as an all-inclusive, one-time fee that covers your case, soup to nuts, no matter the facts. For example, some attorneys charge a flat fee for an uncontested divorce. That fee covers preparation of the pleadings, necessary orders, and court appearance. If any other issues come up, say that the divorce isn't really uncontested, that is not covered, and many times the attorney defaults to an hourly rate. Some attorneys charge a flat fee for a contested divorce, or for drafting a separation agreement.
A capped fee is when the attorney says that they will charge their hourly rate, but if the total bill reaches a certain dollar amount, they will stop charging. So, if the attorney agrees to cap the bill at $20,000, once the hourly billings hit $20,000, the client doesn't owe any more money.
What are the pros and cons of each?
Flat Fee Pros
- The client knows exactly how much they will be charged. The attorney knows exactly how much to charge the client.
- The client knows up front whether they can afford the attorney. The attorney knows up front if the client can afford them.
- The client pays up front and then they're done paying. The attorney gets paid in full before starting work.
- If the work is simple, then the fee represents the value of the work performed. The work performed in a flat fee arrangement is usually work the attorney has done many times, so they aren't taking any risk and are probably making money.
Flat Fee Cons
- The client doesn't always know what their case entails at the start of the representation. The attorney may find there are unforeseen facts or circumstances that make a flat fee impossible or impracticable.
- An unforeseen circumstance may cause the case to be more expensive than the flat fee. The attorney may end up having an uncollectible fee if the cost exceeds the flat fee.
- The client doesn't understand how the fee was set because it wasn't set with them in mind. The attorney is resentful because the fee turned out to be too low for the amount of time and effort expended.
- If the fee is set too low, the client may feel that the attorney isn't giving their case the attention it needs. If the fee is set too low, the attorney may not give the case the attention it needs.
- If the fee is set too high, the client may feel taken advantage. If the fee is set too high, the attorney may gain a windfall.
- The client and the attorney need to have a frank and detailed discussion about the scope of work, but they don't The attorney and the client need to have a frank and detailed discussion about the scope of the work, but they don't.
Capped Fee Pros
- The client knows the maximum amount they will be charged. The attorney knows the maximum amount the case is worth.
- Well, that's it for the pros.
Capped Fee Cons
- This is the worst of all worlds, for both the client and the lawyer because it is essentially an hourly rate in which the lawyer simply doesn't get paid for their time if it exceeds the cap. Why is this bad?
- The client doesn't really get a windfall, because if the fees exceed the cap, there is a real risk the attorney may put the work on the back burner. The attorney has no incentive to make that client a priority once they reach the cap.
- There is no personalization of the fee to the client. There is no personalization of the fee to the client.
- Just like hourly fees, there is no discussion about expectations and scope of work. The attorney has no idea if they're making money, and in all likelihood, they are losing money.
- Because the only upside of a capped fee is for the client, the attorney who offers this kind of fee is either a friend or a relative of the client, or really insecure about the reasonableness of their fee. The client doesn't want an attorney who has no confidence in the reasonableness of their fee.
Sunday, August 5, 2018
Thanks for wading through Part One of this series. Gird your loins for Part Two.
There are four main ways an attorney in the Trenches can bill for services: hourly rate, flat fee, capped fee, fixed fee/value billing. There are also combinations of the two, such as an hourly rate with some items charged as a flat fee, but we're not going to be talking about those.
Most clients who enter the Trenches hire an attorney and pay an hourly rate. What that means is that the attorney charges for the time it takes them and their staff to complete a task. It has the benefit to the client that they know how much the attorney charges per hour. It has the benefit to the attorney that they know that everything that they do for the client it quantified. Beyond that, what are the pros and cons of using an hourly rate here in the Trenches?
- The client knows that every time they call the attorney, they are going to be charged. The attorney knows that the client knows that every time they call, they'll be charged, so they won't call too much and monopolize the attorney's time.
- The client knows exactly what they are going to be charged for the time the attorney spends on their case. The attorney knows how much to charge for every task. because it all gets charged the same.
- The client just has to be concerned with paying the monthly bill for their attorney's fees. The attorney can spread out receipts because they're based on time, not the case.
- The client doesn't have to come up with a large sum of money up front. The attorney can get a client signed up for not a lot of money, so more people will retain the attorney.
- A more expensive attorney probably takes less time to do a task, so they're no more expensive than a cheaper attorney who takes longer. A more experienced attorney can charge a higher rate.
- The client can determine what is and is not important to them based on the fee. The client has no knowledge of what is appropriate to do or not to do and so a decision on process based on the hourly rate for the services may not be informed.
- The client knows that every time they call the attorney, they are going to be charged, so they don't call the attorney. The attorney doesn't know vital information because the client didn't want to be charged to provide it.
- The client has no ability to budget for legal fees because they vary based on the amount of work done. Because the client has no ability to budget, the attorney may not get paid in full each month.
- The client has no control over the amount of fees charged in a month. The attorney controls the amount of fees charged in a month by the amount of time they spend on a case.
- The client doesn't want the attorney to pursue an issue because they don't have the money. An attorney may limit the issues they pursue if they know the client has limited means (it shouldn't happen, but sometimes it does).
- Every task is worth the same, no matter if it involves high skill and creativity, or simply churning out a form. Every task is worth the same, no matter if it involves high skill and creativity or simply churning out a form.
- Because a client is charged for time spent by the attorney, time spent waiting for a hearing, waiting for a judge, waiting for the other side in mediation, all increase the client's cost because they're being charged for the waiting. The attorney feels pressure to do work for other clients while waiting so they don't charge the client they're waiting for, and miss an opportunity to connect and learn more about the case.
- The attorney has no incentive to be efficient; being inefficient is more profitable.
- The client is surprised by the amount of the fee. The attorney spends years collecting the fee.
- The client doesn't appreciate the value of the legal advice and expertise. The attorney doesn't appreciate the value of their legal advice and expertise.
- The client may run out of money and have to enter into a settlement they don't want because they can't afford to keep negotiating. The attorney may not have the money to explore all avenues of settlement.