Here’s What to Do When Clients Want Legal Fee Estimates in Unpredictable Cases

Here’s What to Do When Clients Want Legal Fee Estimates in Unpredictable Cases

By Frederick Hertz. He is an attorney and mediator based in Oakland, has managed his practice for more than 25 years.

Imagine if every time you bring your car in for a repair or make an appointment with your doctor, you are told that the likely cost is “indeterminable.” Granted, you aren’t expecting a guaranteed estimate, but hearing that the fees are impossible to predict would not inspire confidence in the service provider. You can’t be the first person to come in with a “check engine” light or a broken arm!

The same goes for consumers of legal services. They understand that the future is unpredictable, but they rightly assume that you will have some sense, however inchoate, of what you are going to do for them. It’s important that you meet their expectations.

Legal services tend to fall into three general categories when it comes to estimating fees: the “almost certainly” predictable, the moderately predictable, and the wildly uncertain.

“Almost Certainly” Predictable

The first category includes tasks such as drafting wills and trusts, processing an uncontested eviction, or filing an application for an immigration visa. Of course there will be exceptional circumstances, but most attorneys who have handled such matters can predict the fees with a fair amount of certainty. Indeed, that is why such services are often provided on a fixed-fee arrangement. For these matters, attorneys should either offer clients a flat fee or give them an estimate of how much time will be involved, with a brief summary of what factors could take it out of the ordinary.

Moderately Predictable

Some work is fairly predictable but could readily result in a lesser or greater amount of work. This could happen handling uncontested divorces with complex custody arrangements, drafting partnership agreements, or managing trusts with multiple assets. The key to explaining these sorts of matters is, once again, to describe what is involved in the standard situation, and then describe the variables that could lead to higher fees.

It isn’t that complicated. You can discuss what a typical eviction requires, and then point out that if a court hearing is required it could add five to ten more hours. For a trust administration, you can describe how a complex real estate sale could add several hours to the work. What is needed is an explanation that links the most likely variations to a general range of how much more time will be involved.

Wildly Unpredictable

Even in wildly unpredictable areas such as litigation, my hunch is that experienced lawyers can provide far more clarity than they realize. I typically describe to clients the four phases of litigation—pleadings, discovery, settlement negotiations, and trial—and for each phase I lay out the possible range of tasks, with a range of total hours. Then I explain to them the nature of litigation: that it’s like taking a long train trip (think Siberian Railroad) that charges by the week, and we just don’t know when you are going to disembark.

Within this framework, I set forth a range of time for each phase, and show the client how the scale of discovery and the timing of a settlement could affect the fees. My overall statement that fees are “wildly unpredictable” still holds true; what’s different is that I’m explaining the likely tasks and the range of hours in a manner that makes the uncertainty feel more logical, less arbitrary.

Here’s my suggestion: go back and look at your time records of similar matters and compile a realistic assessment of each task. Taking a deposition isn’t just a matter of showing up that day—it involves preparation and often a few hours in the gyrations of scheduling and objections. Settlement conferences include drafting the conference statement, sitting around waiting for the judge, and (hopefully) drafting an agreement. Set a range that is credible—generally, the high side shouldn’t be more than double the lowest amount. And don’t be shy about disclosing how long things really take. Remember, in most instances you don’t have control over the process, especially if it includes other counsel or judges.

Your next task is to estimate the fees. But unless it’s a contingency case, you can’t estimate the fees unless you know how much work is going to be involved.

How to Calculate a More Realistic Estimate of Likely Fees and Costs

The one decision that has the biggest impact on your income is, of course, the setting of your hourly rate. There is no magic “right” answer here: as discussed earlier, it’s a balancing of a great variety of factors. Having set your rate, you might think that translating the estimated hours of time into the total likely fees is simply a matter of multiplication, and in some sense it is. But there’s also more to it.

Balance Hourly Rate vs. Work to Be Done

First, there is the balancing of your hourly rate with the different sorts of tasks to be done. Some tasks take a set amount of time, no matter how efficient or skillful you are. Settlement negotiations, for example, rarely go more quickly just because you’ve been doing this for decades. An experienced attorney, however, should be able to draft an agreement in much less time than a newbie.

Explain Delegation of Work

Depending on how your office is set up, there is also the question of what work is delegated to paralegals or to clerical staff—those who will have a lower hourly rate or perhaps not be charging at all for their time. This is something that you will need to explain to your clients, especially if they are sensitive to being pushed off to working with a “lower-echelon” employee. Confusion over who is going to do what task, and what the resulting impact on fees will be, is one of the biggest fee-related complaints against lawyers.

Discuss Timing of When the Fees are Incurred

Clients need to know when in the process the fees are going to be highest, so they can budget accordingly. This scheduling of fees will, in turn, be affected by how you are handling the retainer issue. It also affects how the big decisions get made by the client. If a series of depositions are going to be the biggest pre-trial expense of the case, you will want to push hardest for settlement before those fees are incurred. The same goes with trials: explain to your clients when the bulk of the preparation work needs to be done, so they realize the cost of not settling prior to that deadline.

Attach Value to the Substantive Options

Finally, it is always best to “monetize” the substantive options that are available to a client. I once had a client tell me he wanted to oppose his partner’s demand for access to their shared residence to obtain an appraisal. There was no legal basis for my client’s position, and so I told him that if he wanted to take that position, he needed to send me $10,000 in advance of my notifying the other attorney. The reason? That was how much his fees would likely increase if I took an unjustified position in the litigation. Not surprisingly, he backed down from his rigid posturing very quickly.

Predict and Explain the Likely Costs in Simple Terms

You also need to be able to predict the likely costs, and explain them in simple to understand terms. Remember, this is likely your client’s first experience with the legal system, and he or she may have trouble deciphering the legal fees from the additional costs.

I frequently handle fairly complex dissolution matters, and I sometimes need to consult with tax experts or child support experts. In some cases the experts will give me their time for free, but often I need to compensate them and that is a cost my client generally pays. I recently handled a divorce where the value of a very complex property was the key issue. It took me almost two hours of discussion with prospective appraisers to determine that the appraisal fee was going to be nearly $10,000—a price which my client couldn’t afford. But in order for her to make the decision, I needed to explain what I had done to obtain the estimate of the fee, and why we couldn’t find anyone to do the task for less.

Your goal is simple: to lay the groundwork so your client has a clear understanding of the likely fees and costs, so that no one is surprised when the invoice is delivered. Your client may be disappointed that the work took so long or the results were not quite what they hoped, but at least they will know why things cost as much as they did—and so will you.