How Much Will My Divorce Cost? - Part 4 of 4

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:

Fixed Fees

Pros

1.  The client knows what the representation will cost.  The attorney knows how much revenue the client will generate.
2.  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.
3.  A fixed fee may be cheaper in the long run than an hourly rate.  The attorney has the incentive to be more efficient.
4. 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.
5. 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.
6. 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.
7. The fee the client pays aligns with their need. The client may be willing to pay a premium for certainty.

Cons

1. 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.
2. 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.    
3. 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.
4. The client may cause compassion fatigue in the attorney by calling all the time.  Why won't the client stop calling?
5. This method may also inhibit creativity in order to get the case done before the next stage or installment of payment.  

Value Billing

Pros

1. 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.
2. There are no surprises in the fee. Everyone knows what is expected of whom.
3. The client feels they are getting value for their money. The attorney knows the value the client places on their expertise.
4. 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.
5. 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.
6. The client knows whether they can afford the attorney.  The attorney knows they're getting paid.
7. 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.
8. It's the goal, not the fee that determines the cost.  It's the goal, not the fee that determines the cost.
9. The client doesn't have to worry about how much time the case takes. The case takes the time it takes.

Cons

1.   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.
2. 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.
3. 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.  
4. 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.
5. 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.
6. Sometimes the lawyer may charge a wealthy client more than a client of more limited means for the same work.