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Flat fees

Sam,

I am intrigued by the flat-fee concept every time I hear/see you discuss it.  My practice is limited to family law and guardianship/conservatorship.  

In the guardianship/conservatorship area, it's simple enough to set a flat fee.  In family law cases, it's much more complicated and I get overwhelmed and confused every time I try to think about how that might work.

The time required to resolve a family law case is affected by a number of factors, including but not limited to:

the client's capacity to understand the process and follow up
the identity and style of opposing counsel
the responsiveness of opposing counsel and party to requests for information

I've heard you speak in the past about averaging the fees on previous cases to come up with flat rates.  It seems like doing so would skew the results - for example, one or two $50-80,000 divorces would drive up those averages quite a bit.

I'm interested in feedback on how flat fees might work in the family law area.

Thank you.
--
Sincerely,

Patricia M. Buss
BUSS LAW OFFICE, P.A.
1500 McAndrews Road West #217
Burnsville, MN  55337
Phone:  (952) 892-8406
FAX:  (952) 892-1722

Comments

  • Patricia,

    I use flat fees as a method for lower level (and lower cost) projects as a gateway for new clients, especially who are budget-conscious where it allows them to understand fees up front. This clearly only covers a certain portion of my business and I also have quite a bit of "custom" work that requires more specific and unique estimates and fees. For these larger projects and clients it would not be appropriate to try to offer a pre-packaged solution when they are needing something at a completely different level. For those
    clients I have more general guidelines, but still try to provide an estimate on the project (not an hourly rate), based on past experience combined with some of the items you've mentioned below (client understanding, etc.).

    I'll offer my usual disclaimer that I'm not an attorney, so clearly my business is a bit different, but after trying both options I still believe
    flat fees are the way to go.

     

    Karin
  • samgloversamglover Minneapolis, MN Admin
    I wouldn't say I average the time, but that is one place to start. If you are dealing with more variable cases, that probably is not as good a place to start.For you, my question is how much of the information you need to quote a fee can you obtain before you quote a fee? If you know the identity of opposing counsel and spend some time getting to know the client and their situation, can you make a more-accurate estimate?
    Or can you write a "change order" provision into your agreement, so that your client agrees to come back to the table if their spouse hires a "bulldog" and you end up doing more work? Or could you simply specify your expectations in the agreement (three court hearings, and about two weeks to negotiate an agreement), and state an additional fee for each additional hearing, week of negotiation, etc.? You can think creatively around the problem, I think.

    And if you wanted to start drafting a retainer agreement, I am sure we could help you spot weak points in it.

    You may find that using flat fees also re-focuses the way you litigate. I really do focus more on the outcome when I charge flat fees, and I have found better ways to get to the same result, since it is my time at stake, now, not my clients'.
  • Sam,

    In quoting a fixed fee for a project (in my case, a commercial lease
    negotiation), do you ever "hedge your bets"? For example, is it ever
    appropriate to say something like, "this will cost you $xxxx, but if it
    gets out of hand, I reserve the right to revisit the amount"?

    It doesn't happen often, but I've run into transactions where the
    attorney on the other side of the deal is so ridiculous, and so
    unreasonable, that the time needed to complete the transaction runs
    wild. If I am dealing with an attorney with whom I have no experience, I
    have no way of anticipating the problem.

    So, assuming there are occasions when it is appropriate to hedge, do you
    have any suggestions as to language to include in an engagement letter
    that accomplishes that?

    Thanks,

    Lawrence G. Rose, Esq.
    Rose & Kissin LLP
  • Lawrence:

    I wouldn't recommend going about it quite that way. Think of it from the
    client's perspective. They think they're paying a fixed fee to get something
    done, but when you say 'if it gets out of hand, I reserve the right to
    revisit the fee,' it already sounds like a bait and switch - and if it
    doesn't sound that way from the outset, it certainly might when you go back
    to the client for an additional fee.

    You can, however, tell the client specifically what your fee covers and what
    is excluded or what might become the subject of a supplemental services
    agreement, but you've got to be able to tell the client up front what the
    triggers would be. The more you can quantify it, the better. For example,
    perhaps you want to set your fee assuming that the lease will be fully
    negotiated and executed within 30 days, but if (as a result of opposing
    counsel or their client's obstreperous behavior) the lease cannot be fully
    negotiated and executed within 30 days, there will be a supplemental
    services agreement.

    You could also set the scope in terms of the numbers of drafts/revisions to
    the agreement and/or the number of meetings required with opposing counsel,
    etc. - a certain number would be included in your original fee, based on
    your experience with 'typical' lease negotiations, with any additional ones
    being the subject of a supplemental services agreement.

    Alternatively, you could price your services taking into account the fact
    that some negotiations are more difficult than others and set the fee to
    cover yourself if it gets 'out of hand' - sometimes you'll win and sometimes
    you may 'lose' in terms of the time you've invested, but overall, you should
    come out ahead, particularly with the elimination of time spent tracking
    your time and fighting with the client over the bill.

    If you're basing your fee entirely on the time you spend working on the
    engagement, you're still in an hourly billing mindset and both you and the
    client will be back to counting hours, in which case you might as well just
    bill by the hour.

    Allison

    Allison C. Shields, Esq.
  • samgloversamglover Minneapolis, MN Admin
    All of Allison's comments are right on. But if there are significant
    contingencies, it does sometimes make sense to mention them.

    For example, I just took a case that was brought in conciliation court, and
    the creditor lowered their claim to fit under the conciliation court limit.
    We are going to be removing the case to district court, where the creditor
    has the right to amend their claim to seek the full amount.

    I charged the client my usual 40% of the claim, but added a sentence to say
    that he will have to make up the difference if the creditor does amend to
    seek more.

    That is the kind of contingency is makes sense to account for.

    As for the difficulty of anticipating difficult negotiations, you may be
    surprised how your ability to deal with a difficult opposing counsel
    improves when you aren't benefiting from that extra time. It refocuses your
    strategies. Still, sometimes, there is nothing you can do. I think it makes
    sense to add a "change order" provision just like subcontractors do for a
    "material change in circumstances, such as obstinate opposing counsel." Or
    something like that.
  • Just to clarify - I think you ALWAYS have to mention the potential
    contingencies. I recommend that when my clients are setting up alternative
    fee structures and fixed fees that tell the client right up front what the
    contingencies are that can lead to a supplemental services agreement and
    additional fees - including the client's failure to cooperate with the
    attorney. But I think that the more you can quantify that, the easier it
    will be for the client to swallow.

    Allison

    Allison C. Shields, Esq.
  • Allison,

    Thank you very much for your suggestions. I appreciate both yours and
    Sam's. After 28 years of billing by the hour, you are correct that it's
    not easy to get my head around other kinds of fee arrangements. I can't
    help but think about the hours!

    Does anyone have an engagement letter template that I could look at that
    deals with some of these "assumptions"?

    Thanks.

    Larry

    Lawrence G. Rose, Esq.
    Rose & Kissin LLP
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