Flat Fees Versus Hourly Rates In A Criminal Case
by Jamison Koehler on May 25, 2010
There is no good way to charge for legal services, I am persuaded. Clients come in need. They are afraid and angry. They want a hero, a savior, a warrior. You offer them what you can. Most often it is enough. But sometimes it is not. A client grows disenchanted, angry, they want what you cannot give. It is a risky thing to agree to represent a person in crisis. You cannot tell where people will turn in the dark of night. What to charge for this work is a topic about which I am not at peace. Norm Pattis, “Flat Fees, Black Holes, and The Value Of Chaos“
There are a number of ways to charge for legal representation. The most common option in criminal cases is probably the flat fee. The client pays an agreed upon amount, usually upfront. The client bears the risk of overpayment if the case is disposed of quickly through, for example, dismissal, a guilty plea or some other type of non-trial disposition. The attorney bears the risk of underpayment if the case turns out to be complicated and time-consuming. The primary advantage is that the client knows upfront what the cost of the legal representation will be.
Payment on an hourly basis, which Norm Pattis says he now prefers, is the primary alternative. The lawyer will usually ask for a large upfront payment which he or she will hold “in trust” for the client. The lawyer will then draw down the funds according to the number of hours he or she spends working on the case. If the case turns out to be more complicated than anticipated, the lawyer may need to ask the client to replenish the funds.
The benefit of payment on an hourly rate is that it eliminates the risk of either underpayment or overpayment. The lawyer is paid for every hour he or she devotes to the case. The client isn’t charged for hours that the lawyer didn’t spend working on the case.
Generally, flat fees are more widely used in defending against such “street crimes” as DWI, assault, drug distribution and possession, and firearm violations. Hourly rates may be used more in “white collar” cases (e.g., fraud, embezzlement, bribery, insider trading).
There are also variations and hybrid approaches. A colleague, for example, says that he charges a flat fee for pre-trial representation and then an hourly rate if the case goes to trial. Other attorneys use a tiered approach. It costs a certain amount, for example, to work out a non-trial disposition, such as diversion, a deferred sentencing agreement or a guilty plea. It costs an additional set-amount if the client decides to take the case to trial.
Based on my experience, clients are often attracted to the hourly rates option, at least initially. This may be because, as Pattis points out, they may not be aware of the many “hidden hours” spent by a lawyer in defending a criminal case. Most people who are charged with a criminal offense do not have experience in the criminal justice system. Based on what they have seen on T.V. or in the movies, they probably envision the legal representation as involving a courtroom appearance or two. How many hours can a lawyer spend in court on a particular case? Probably not many, particularly if the case doesn’t go to trial.
What they may not fully appreciate are the many hours of preparation a criminal defense attorney will devote to the case outside the courtroom. The work involves negotiations with the prosecutor on a possible dismissal or non-trial disposition. It involves legal research, preparation of any pre-trial motions, interviews with witnesses. It also involves, as Pattis points out, many night hours spent fretting about and going over the details of a case. Writes Pattis: “I rarely sleep well during evidence at trial. My wife tells me I argue throughout the night. But the sleep work pays because it often seems in court as if I [am] merely reciting lines already prepared and written by some secret hand. Is there a rate for unconscious processing?”
Pattis, an experienced and widely respected criminal attorney, has come to the conclusion that we should consider prohibiting flat fees for legal services in favor of hourly rates. Charging flat fees, he says, leads to “an almost inevitable conflict between lawyer and client.” Clients often have unreasonable expectations about the amount of time and effort they expect a lawyer to devote to their case. They may insist, for example, that the lawyer pursue “fool’s errands” that the experienced lawyer knows will not bear fruit. Charging the clients on an hourly basis forces the client “to consider the benefit of each additional increment of cost.”
For me, without Pattis’ vast experience, the jury is still out. Yes, the hourly rate does offer many advantages. It assures that the lawyer is compensated for every hour he or she spends working on the case. And it prevents the client from paying for hours the lawyer has not devoted to the case.
At the same time, based on what I know now, I still prefer the flat fee, at least for the type of cases I currently handle. The flat fee allows the client and me to deal with the money issues upfront and then to put them behind us, without the continuing distraction. The client pays me the fee. I put the funds into a bank account held in trust for the client. And then I start to work on the case. There is no need to track my hours or to justify the time I spend on the case. I never need to worry that I may be wasting the client’s money by pursuing deadends. And there are no uncomfortable discussions about replenishing the trust account when funds get low.
I have also experimented with the tiered approach — charging one amount for pre-trial work and then an additional amount if the case goes to trial. The problem there is the risk that financial considerations could enter into what should be a purely legal decision. The question should not be whether or not the client can AFFORD to take a case to trial. Instead, the thing you need to decide is whether, from a legal standpoint, you SHOULD take the case to trial.
If a flat fee case settles early and I feel the amount paid to me is disproportionate to the amount of work I devoted to the case, I can always refund a portion of the fee to the client. (I should note in fairness that I have yet to refund any fees.) If, on the other hand, I realize after trial that I ended up spending a lot more time than expected on the case, that I was in effect underpaid for my work, well, at least I can rationalize to myself that I have benefitted from the additional trial experience. That in itself has tremendous value.
Norm Pattis concludes, and I agree, that there are no clear answers with respect to charging for legal services. Even after many years, Pattis says, he himself is still not comfortable with how to charge and what to charge. The relationship shouldn’t be about money at all, he says. And yet there it is.