A Primer on Alternative Fee Arrangements
By Preston Lim | January 15, 2016
Alternative fee arrangements are becoming more popular in the marketplace, as clients are seeking to find options outside the traditional hourly rate. Here is a basic overview of the various alternative fee arrangements available:
Contingency Fee. The “no award, no fee” scenario where the client pays the attorney a certain agreed-upon percentage of the awards. Although contingency fees occur mostly in the representation of plaintiffs, it is also used in the context of representing defendants. In that context, a law firm may receive a certain agreed upon fee if the damages are equal or lower than a certain amount. The lower the damages, the greater the fee.
Flat Fee. Regardless of the number of hours billed, flat fee is an arrangement made between the client and the law firm whereby only a specific amount is charged for the representation. Although the flat fee provides some certainty to the client regarding the cost of legal work, it may at times be higher than paying an hourly rate if the case is resolved quickly. When broken down into hours worked, the client may end up paying more than the traditional hourly rate.
Capped Fees. There is a maximum limit on the number of hours a firm is able to bill. That said, a cap fee may also involve a minimum fee that is provided in conjunction with the max limit. Law firms may be disinclined to agree upon a cap fee if the case appears to be unpredictable. In such a circumstance, the client and the law firm can agree to a soft cap, whereby the max cap would be based on specific assumptions agreed upon by the parties.Which Fee is Right for You?
That answer will vary based on the case, the financial circumstances of the client, and the level of risk a law firm may be willing to take.
For more information, please contact Preston H. Lim