The legal fee should fit the case and it should fit the client. While most people associate hourly fees with defense work in civil trials, flat fees with criminal and family law, and contingency fees with personal injury plaintiff work, any of these types of fees can make sense, depending on the client goals, their internal budgeting, and their financial resources.
As more fully explained below, the hourly rate is just what it sounds like. The Gerber Law Firm gets paid for each hour (or part of the hour) that we work on the case. If the case gets busy, the fee is higher for the client. If the case is settled early, or the matter concluded quickly, then the client pays only for the legal services they use. However, if the matter takes more time than expected, the bill rises with it. This can lead to budgeting uncertainty. It also means that the law firm is paid whether we get a recovery or the client pays a settlement or verdict.
Alternative fees, however, shift some of the risk – and reward – to the lawyer. In a pure contingency fee, the attorney takes all of the risk of success on the firm. In a hybrid-contingency fee (smaller hourly fee, smaller contingency fee), the client and law firm share risk almost equally. A success fee does the same thing on the defense side of litigation. Flat fees (for the total matter, or a monthly flat fee) give clients budgeting certainty and the peace of mind knowing that their legal work will be covered in months when there is a lot of work, and months when there may be little.
The firm works with its clients at the beginning of the legal matter to outline the matter’s objective, the methods to reach the objective and the fee structure that best suits the matter, client, and the law firm.
Explanation of Different Types of Alternative Fee Structures
- Pure Contingency Fee: A pure contingency fee arrangement is the best-known alternative fee. They are most common in Plaintiffs’ personal injury cases. They are also used in business or commercial litigation cases where there is a demonstrable monetary injury and very little to no possibility of counterclaims.
In pure contingency fees, The Gerber Law Firm receives a fixed or scaled percentage of any recoveries in a lawsuit brought on behalf of the client as a plaintiff. These are typically 33% if the case is settled prior to suit, 40% if a lawsuit is filed, and 45% if the case goes to appeal after trial. The client typically pays – at the time they are incurred – the expenses of the litigation in a business plaintiff’s case (court reporter fees, expert costs), while in Plaintiff’s personal injury cases plaintiff the firm typically fronts expenses of litigation. However, we are also willing to discuss sharing part or all of the expense risk with business clients in appropriate cases.
- Hybrid Contingency Fee: In a hybrid contingency fee structure, the law firm takes an hourly fee that is less than a typical hourly fee, and takes a proportionate reduction in the contingency fee. For instance, the law firm will charge half of its hourly fee, and will receive at 20% contingency in the outcome. Hybrid contingencies are most often used in business litigation cases, but can also be used on behalf of a personal injury plaintiff who has the funds to pay a smaller hourly fee to retain more of the settlement or verdict result. Hybrid contingency fees are most often used in plaintiff’s cases. However, defense cases can also be structured with hybrid contingency fees (referred to as a “reverse-contingency”) with success fees contingent on agreed upon results (a percentage of the money saved on settlement or verdict from an agreed-upon amount – usually the initial demand from the plaintiff in the case).
- Flat Fee: Flat fee or “fixed fee” arrangements are typically arrangements whereby The Gerber Law Firm agrees to handle a matter or group of matters for a sum certain for the total matter, or for a certain amount of money per month. Monthly flat-fees are best used for clients with many smaller matters and typically involve business transactional matters (such as incorporation, negotiation with suppliers or vendors, etc.) and reserve a certain amount of the firm’s time (e.g., they cover up to a certain amount of hours of work, with the additional matters charged at a reduced percentage of the firm’s standard hourly fee). Fixed fee arrangements can be tailored to the nature of any given matter. Clients who seek budgeting certainty often find fixed fee arrangements useful.
- Holdback/Success Fee: A holdback/success fee arrangement is similar to a hybrid contingency fee in that The Gerber Law Firm is paid a portion of its fees up front, but has a portion withheld contingent upon success in the matter. If the matter is concluded successfully (with “success” defined specifically at the outset of the matter), the law firm receives either the whole holdback or a percentage of it. This structure is often used in defense cases or when the result sought in the matter is not monetary (injunctive relief, stopping certain business actions of the opponent).
- Group rates for multiple cases: The Gerber Law Firm is willing to negotiate special fee arrangements that provide a fixed contingency across a group of cases, or to handle a group of defense cases at a discount in exchange for a contingency on plaintiffs’ cases that a client may have.
Ask Us about Alternative Fee Structures
Our goal as a law firm is to serve our clients with the best possible outcome. This involves not only getting the desired result in the matter, but in getting the matter done and paid for in the way that best serves the client and maximizes the law firm’s relationship with the client. In most cases The Gerber Law Firm will suggest a fee structure that we believe serves the client and case the best. Clients shouldn’t hesitate to discuss any of the types of fee arrangements to determine what works best for the client in the particular case. In many circumstances The Gerber Law Firm and the client will agree to a customized fee arrangement that combines some of the types of arrangements listed above (e.g. hourly billing during the pre-lawsuit portion of a litigation matter, followed by a hybrid-contingency after a lawsuit is filed).
The fee discussion goes hand in hand with a discussion of the client’s objectives and the law firm’s analysis of proper strategy for the legal matter.