The cost of legal advice
By Kenneth Gorman
Lombardo and Gilles
Litigation is a time consuming and costly process. It is no
secret that attorneys are expensive and that the attorneys’ fees
for a litigated matter may go into the six figure range. If a
person is being sued or is considering suing someone, two key
questions that a person should ask are: 1) how much will attorneys’
fees be; and 2) will I be able to recoup them if I win?
The cost of legal advice
By Kenneth Gorman
Lombardo and Gilles
Litigation is a time consuming and costly process. It is no secret that attorneys are expensive and that the attorneys’ fees for a litigated matter may go into the six figure range. If a person is being sued or is considering suing someone, two key questions that a person should ask are: 1) how much will attorneys’ fees be; and 2) will I be able to recoup them if I win?
There are four common types of attorney fees: hourly, flat rate, contingency and statutory. Hourly fees are the number of hours that an attorney spends on a matter multiplied by the attorney’s hourly rate (2.5 hrs. x $300 per hour = $750). The rates are not set by law; they are set by the attorney and are negotiable. They vary based on the experience of the attorney, by the type of practice and location (higher overhead means higher fees), and by the type of matter that is being litigated.
Flat rate fees mean that the attorney charges a set amount no matter how much time the case takes. These fees are common in minor criminal matters, simple business organization formations, uncontested divorces and basic probate matters.
Contingency fees are primarily used in personal injury cases. The attorney is paid a percentage of the recovery and receives nothing if there is no recovery. The percentage of the fees varies depending on how far the case progresses: i.e., 25 percent if the case is settled before a complaint is filed; 33 percent if the case is resolved after that but before trial; 40 percent after trial; and 50 percent if the case goes to appeal. These percentages can also be negotiated with the attorney. A client must still pay the attorney for the costs incurred in the matter. “Costs” are different from attorneys’ fees in that costs include items such as court reporter fees, filing fees and expert witness fees. These costs remain the person’s responsibility even if there is zero recovery.
In some cases, such as probate and workers’ compensation, statutes specify the amount of fees that attorneys can recover. These are deducted from the probate estate or the “award” in workers’ compensation actions. In addition, some statutes permit an award of attorney’s fees, such as in a discrimination or sexual harassment matter or where the civil defendant has been convicted of a felony for the same act they are being sued over.
Most disputes involving attorney’s fees are in civil litigation – lawsuits between persons or businesses. The “American” rule, which is followed in California, is that the parties to a civil case must pay their own attorney’s fees and costs, unless there is a statute or contract providing otherwise. If there is a contract involved, then it may have an attorneys’ fee clause which provides that the losing party will pay the prevailing party’s attorney fees. It is usually the court that determines who is the prevailing party.
One type of common civil case that does not involve a contract is a dispute between neighbors over a fence or property line. Because there is no contract between the property owners, each of them must pay their own attorneys, experts and court costs, no matter who the court rules for. These cases are often drastically more expensive than the value of the property in dispute. For example, a claim that a 100 foot fence is one foot over the property line could easily cost each side $50,000 to take to court, while the value of the property could be worth less than the combined $100,000 in attorney’s fees spent fighting over it.
In contrast, if the same piece of property had been sold by contract from one person to another, and it turned out that the property line was off by one foot, then it could cost the same amount to litigate the case. But if the contract (like a standard residential home purchase contract) provides for the “prevailing party” to recover attorneys’ fees in the event of litigation, then the winning (or prevailing) party would receive a judgment including their attorneys’ fees. Similarly, if a contract for purchase and sale of goods states that the prevailing party in any litigation is entitled to an award of attorneys’ fees, then the stakes for each side might be far more than the value of the goods.
It is not uncommon for the attorneys’ fees clause to be the “tail wagging the dog” in litigation. If the parties start out with a $25,000 disagreement and each side spends $25,000 in attorney’s fees, one side will break even while the other side is going to lose $50,000. It is critical for anyone involved in, or potentially getting involved in, a lawsuit to determine whether there is a contract or statute that could entitle them, or their opponents, to an award of attorneys’ fees. Litigants and their attorneys need to fully evaluate the costs and benefits not only of the amount each side is going to spend on attorneys’ fees, but also the odds of success or failure and the ramifications of winning or losing when there is an attorneys’ fees provision in a contract.
Everyone needs to decide whether it is economically worthwhile to pursue or fight a lawsuit regardless of the strength of the case or the principles involved. Litigants must often choose between the principles they live by and the principal in their bank account.
This column is the work product of Lombardo & Gilles, LLP, which has offices in Hollister and Salinas. Ken Gorman is an attorney with Lombardo & Gilles, LLP. You may contact the author at (888) 757-2444 or
ke*@lo****.com
. Mail your questions to Ken Gorman, It’s the Law, c/o The Pinnacle, 380 San Benito St., Hollister, CA 95023.
