Paladin Didn’t Charge Split Fees.

Everyone thinks that his way is the best. In his “How to Hire a Gun Slinger…” blog post (a staple of criminal law blawgs: the post suggesting to potential clients criteria they should look for in hiring a lawyer, and explaining how the blogger fits those criteria; I may have written that post a time or two myself), Mississippi criminal-defense lawyer Remy Orozco (Hostis Civitas) writes:

In my office I operate on a standard flat fee for evaluation and preparation. I then have a separate flat fee if the case ends up going to trial. Most lawyers charge you one flat fee which covers the entire case but end up settling 80% of cases with a plea and do not refund you any of the money paid to cover the trial. Having an option not only saves you time and money but ensures that if your case does settle that you are not overpaying for the lawyers time or advice.

There are jurisdictions in which criminal-defense lawyers must charge split fees (New York comes to mind). In my neck of the woods, the rules allow more freedom of contract. Many criminal-defense lawyers charge a nominal fee per court appearance. Some charge a flat fee for plea, dismissal, or trial, win, lose, or draw. Very few charge an hourly rate. Most charge much like Remy does: $X for handling the case until it’s set for trial; $Y if the case is set for trial.

Every one of these lawyers can justify the billing method she has chosen by explaining how it is best for the client. Those who charge a hundred bucks per court appearance might explain that they are making legal services available to the working poor. Those who charge an hourly rate might say that they are ensuring that clients only pay for the services they need. To those who adopt a different practice, the justifications might sound like rationalizations of naked self-interest.

There is always, in any attorney-client relationship, the possibility a conflict of interest between the lawyer and the client. The client has an interest in getting his case resolved as well as possible while spending as little money as possible; the lawyer has an interest in minimizing the time he spends on the case while maximizing his fee.

An argument against the hourly rate is that the lawyer is motivated to “churn”—to spend unnecessary time on the client’s case; an argument against the per-appearance fee is that the lawyer is not motivated to spend necessary out-of-court time on the client’s case.

An argument against the split-fee arrangement is that the lawyer is motivated to lead the client toward trial; an argument against the flat-fee arrangement is that the lawyer is motivated to lead the client toward a plea.

Regardless of the fee arrangment, the lawyer also has an interest in treating the client fairly, and in getting the client’s case resolved as well as possible. Ideally, these shared interests will dominate both the lawyer’s and the client’s decisions, so that neither will take advantage of the other, but neither will cut corners at the expense of the best possible resolution.

Here’s an argument for a split-fee arrangement:

  1. Most cases don’t end in trial. (In Harris County, even most cases that are set for trial don’t end in trial.)
  2. Negotiation continues up until the last minute. In many cases, the lawyer doesn’t know for sure that a case will be tried until jury selection begins. It’s extremely impractical to try to collect money from a client after jury selection begins.
  3. Even when a case is not tried, the client gets the best possible resolution (dismissal, favorable plea) when his lawyer is prepared for trial.
  4. The client should not pay for work that the lawyer doesn’t do, but
  5. The lawyer must be fairly paid for the work that he does. A lawyer who isn’t charging for his time preparing for trial has to make up for it by not preparing, or by taking on more clients than he can effectively represent. (Remy talks about a fee for evaluation and preparation. If Remy Orozco tells you he’s going to prepare for trial, he’s going to prepare for trial, and he’s not going to take on more clients than he can effectively represent, so I’ll bet he’s charging appropriately for that work. Which brings us to …)
  6. Once the lawyer is prepared for trial, in most cases trial is a small amount of additional work.

All of this supports charging the bulk of the fee for preparation, and charging a comparatively small additional fee once the case is set for trial. But if it’s okay to charge a flat fee for all of the preparation—whether two hours or 200—before a case is dismissed, pled, or set for trial, why is it not okay to make the flat fee a little bigger and include the possibility of a trial? Should we all be charging by the hour?

Forgive my cynicism about the money management habits of the accused, but a split-fee arrangement inevitably leads to situations in which the accused feels compelled to plead guilty because he doesn’t have the money when he needs to pay it or plead, or the lawyer is tempted to write a letter like this.

Consider, instead, an arrangement under which the client pays a fair fee up front, and the lawyer agrees that that fee will cover whatever work needs to be done, up to and including a jury trial. If the case is dismissed or the client elects to plead guilty, the fee does not decrease; if the case is tried, the fee does not increase.

Those whose cases are not set for trial pay more than they would under a split-fee arrangement, but those whose cases are set for trial pay less.

By including in every fee the possibility of a trial, the criminal-defense lawyer can spread the risk. Not everyone winds up needing a trial, but the lawyer can charge less to those who are less likely to need trials, in essence selling trial insurance.

There are equally important policy reasons for charging a flat fee rather than a split fee: many people would be better off going to trial—or at least to the brink—than pleading guilty early, and the world would be a better place if more people accused of crimes would make the government do its job.

By agreeing to pay an additional fee in the event of a trial, though, the client hands the State a lever to force a plea; if setting the case for trial triggers the additional fee, the lever will press the client to plead guilty early. I prefer to deprive the State of this leverage from the beginning, so that the client’s crucial go/no-go decision can be made based entirely on the client’s judgment (with my counsel) of his best legal interest. To take away the lever, I don’t charge extra for a trial.

Remy writes, “When your life and freedom are on the line you should not be looking for a lawyer who is going to charge you by the bullet.” He’s right. Don’t look to save time or money. Don’t look for a lawyer who is going to come back to the well for more money later on. Find a lawyer whom you trust to charge you a fair fee now, then put the money out of mind and get the job done.

Gunfighters Don't Charge By the Bullett Poster
(Update: Scott reminds me that I’ve written about trial insurance before, as has he.)
Reblog this post [with Zemanta]
, ,

0 responses to “Paladin Didn’t Charge Split Fees.”

  1. Mark:

    I really enjoy reading your blog,, it’s so insightful. I have a question though. Let’s say a client comes in on a first DWI and you charge $5,000.00 fee. If the case pleads after the second setting, do you then refund the excess, or does that put your hourly fee at say $2,500.00? Just wondering.

    • Paul, down here a first DWI never pleads after the second setting; it’s more likely to be dismissed outright.

      In that situation, I try to do what’s fair, bearing in mind that what I’m selling is not my time but my knowledge, training, and expertise. In that situation the client has received as much value as a criminal defense lawyer could give him (the only better resolution would require a trial, an acquittal, and an immediate expunction).

      Which would the client prefer, the lawyer who gets the best possible result after fifteen minutes of work, or the lawyer who gets the same result for the same price after three months of toil?

      It’s a trap to think in terms of hourly fees—that’s biglaw thinking. If I were billing hourly, I’d waste a lot of time keeping track of my time, and much of what I do to win a criminal case—just letting the problems bounce around in my brain while I do other stuff (walk dogs, fix cars) until the solutions present themselves—would be untrackable, unverifiable, and unbillable anyway. Billable hours? Near zero. Value? Priceless.

      • I once got an itemized bill from an attorney — he was doing my incorporation, and there were some issues that he had to think through — with a couple hours I got charged for on it for “contemplation.” Well, he wasn’t writing, or researching, or consulting or anything like that during that time, and I did want him to sit and think about the stuff and try to figure out what made sense. Seemed fair to me.

        (I think if we hadn’t been friends, and he’d felt he had to document it further, he would have, but I don’t mind him not charging me for the additional documentation time.)

        Not suggesting that you should change your billing practices, but were a guy to be thinking through a client’s stuff while he was also walking a dog and/or fixing a car, I think he’d be providing a service to the client, and if the arrangement is billable hours, rather than fixed fees, this non-lawyer doesn’t see anything wrong with it.

        As to the fixed fee thing . . . seems to me that if, after a reasonable initial interview with the client, and setting a fee ($5K, in this hypo) that you’re both comfortable with, and both agree to, should you start work on the case and within five minutes find the NLS that you think will — and does — make the whole thing go away with a one minute phone call, and that makes your actual pay per hour go to some preposterous number, your client has gotten not only a fair deal, but the one he or she paid for: the best possible result that you could get with your efforts.

        Am I wrong, as per usual?

  2. Mark,
    I always charge a flat, non-refundable fee which includes a trial. I don’t ever want a client to say “I would have gone to trial, but that damn lawyer wanted more money and I didn’t have it -it’s all his fault that I’m a convicted felon.” Also, trials are the fun part of the job. Most clients will plea, but they should always have the option of going to trial without any additional cost.

    I co-counseled a case recently. Client wanted to go to trial. In the retainer agreement (we used co-counsel’s because he brought in the client), it stated there was an additional fee for trial. The client paid it. We prepared. The day of trial a new prosecutor was on the case. She offered pre-trial intervention for a felony gun charge. Never had that offered before. The client wanted money back because he said we didn’t go to trial. Your post correctly states that much of the work is the prep, not the actual trial itself.

    I won’t put myself in that position again.

    As for the pros and cons of charging an additional fee, there are many criminal lawyers that NEVER go to trial. As long as the client is aware that he is only getting a lawyer for a plea, that’s o.k. if that is what’s bargained for.

    You get what you pay for.

    • You often get less than you pay for; you rarely get more.

      The lawyer who never goes to trial has got no business defending criminal cases. The prosecutors know who never goes to trial, so he’s got no bargaining leverage of his own.

      The client who only wants a lawyer “for a plea” should be told that the lawyer can’t tell what defenses might arise in his case, that it might turn out, on proper investigation and preparation, to be a beatable case, and that people who go to court prepared to try their cases almost always get better resolutions than people who go in just wanting to plead.

      I’ve given that speech to dozens of people who’ve come to me looking for a quick plea: hire someone else for a quick plea; hire me if you want someone to try to find a way to win your case. When they change their minds about an easy plea and hire me to fight, we win the case outright about half the time. Which just illustrates that the client who believes when the case begins that he should plead guilty often has no clue.

  3. That’s a great economic analysis of the situation. Nicely done. I think a single flat fee gives the lawyer an incentive to do as little work as possible and encourage a plea, but if the lawyer can commit to doing a lot of just-in-case prep work for every trial and actually enjoys trials, that effect is mitigated.

      • Yup. And from a possible consumer’s POV — assuming it’s not a guy who is in the trade (professional criminal, crim lawyer on either side, cop) — it’s real hard for him to have much of an idea who does or doesn’t.

        I have the perfect solution, of course, which is

        grgle bleep A)bort R)etry I)gnore

  4. I think there’s something else to factor in here.

    On an hourly basis, very, very few criminal defendants can ever afford a trial with a good lawyer. Multiply a reasonable hourly fee for an experienced lawyer ($250-$700 an hour in other fields!) by the 200-500 hours of prep, trial, motions, numerous appearances, etc., and that’s pretty obvious.

    So the attorney who charges a flat fee that wouldn’t come close to paying for a trial is charging for the risk that the case will go to trial. If, e.g., a trial case would run $70K in hourly fees, and the lawyer charges $14K, part of that fee goes to the risk the lawyer is taking on that he’ll lose money at trial. If he takes seven or eight cases for every one that goes to trial, it is pretty clear that the finances average out to an appropriate hourly fee. Think of it as insurance against having to pay an hourly fee.

    This is really analogous to the reasoning for allowing contingency fees. Criminal lawyers aren’t allowed to charge those. However, just as civil lawyers are allowed to reap an otherwise exceptional fee to compensate for the risk they are taking on that they’ll lose money, criminal defense lawyers who charge flat fees do the same.

    I’ve seen almost no discussion about the defense lawyer’s right to be compensated for the risk he takes on that a case will go to trial, and that he’ll lose money on it as a result. Yet that needs to be recognized, and — whether through a contingency fee mechanism or a flat fee — it is clear that a lawyer has a right to be compensated for assuming a risk.

    Is it, then, against the interests of the flat-fee lawyer to do trials? Of course not: it is his reputation as a trial lawyer that justifies high flat-fees; even if he loses money on those individual cases, he is investing in his long-term profitability. The lawyer who has a rep as a “plea lawyer” won’t be able to justify good fees for his pleas.

    • Would you say that the lawyer is “in essence selling trial insurance”?

      Another cost to the lawyer, independent of the amount of time the case takes, is the opportunity cost of representing one client when that representation might cause a conflict that will prevent the lawyer from representing another client. Especially in federal drug cases, this can be huge.

    • So, clients 1-8, who plead, are paying part of the fee for client 9, who goes to trial?

      Slightly unethical if you build that into your model.

      That’s like the asbestos lawyers who would throw one malignancy in with a bunch of asbestotics in order to settle. The one malignancy improperly inflates the value of the asbestootic cases, and the asbestotic cases improperly deflate the value of the malignancy.

      • I don’t grok your analogy. It’s risk sharing. I see it like homeowners 1-19, who never have flood damage, paying part of the repairs for homeowner 20, who does. Or newspaper readers 1-4, who don’t read the sports pages, paying part of the sportswriters’ salaries for reader 5, who does.

        If the client knew that his case was absolutely not going to go to trial (or to be set for trial) he’d be ill-advised to pay a fee that included a possible trial; if the lawyer knew that the client’s case was absolutely not going to trial (or to be set for trial) he’d be unethical to charge a fee that included the possibility of trial. But when the lawyer takes the case neither he nor the client has any way of knowing whether the case will go to trial. (The lawyer might have an educated guess, and should discount the rate for this chance.)

        Considering that only the rich and the profoundly indigent would be able to afford a trial if criminal defense lawyers charged hourly, I don’t see a feasible alternative that preserves the right to a jury trial. Take away the right to a jury trial, and the people have no negotiating power, and no freedom.

        Unethical? If I were the one in trouble, it’s how I would pay my lawyer. So at least it satisfies the golden rule.

        • A dead tree publication analogy? Insurance is a different risk analysis. My premiums don’t pay for the repairs on the home of another, except in flood insurance or high risk auto policies, and those are specific types of policies that are intended to be risk pooling and sharing. Standard insurance isn’t like that. My health insurance premiums don’t pay for your swine flu vaccine, they pay for mine.

          The analogy is that in civil cases similar arrangements have been declared unethical. A valuable case is diluted with cheap ones, to increase the amount of money the smaller cases get. That dilutes the client’s recovery who is truly injured. Does that maximize the recovery for the little guy? Absolutely. But at the expense of another’s case. This isn’t collective bargaining, we’re supposed to represent each client separately. In the civil system, it was abused by snakes who were doing it to increase their own fees, not to benefit the clients.

          The risk isn’t borne by the attorney in your fee schedule scenario, but by the clients. The attorney will do a certain amount of work during the year and make a certain amount of money, but knows that some are paying more than others for the amount of work done.

          It’s just another instance where pooling cases in a mathematical calculation for risk/reward purposes places the attorney’s interest above the client’s.

          It’s unethical in Clay Conrad’s case (the thread string makes it appear like I was talking about your post, but I was talking about his) only in an ivory tower sense. As a practical reality I think it makes perfect sense to have flat fees or phased fees and it can be done ethically. But you get closer to the line when you charge one client less because you charged another more, because the flip side of that is that you need to charge one more because you charged the last guy less.

          The fact is that fees and value to the client have so many moving parts that it’s impossible to say that one single rule applies to every situation.

          • Of course a risk is borne by the criminal defense lawyer. The lawyer risks going to trial on a fee that may amount to less than his office overhead, on an hourly basis.

            It is wrong to say “the attorney will do a certain amount of work during the year and make a certain amount of money.” It just isn’t true. I never know how much $ I’ll make in a month, or a year, and it varies wildly from month to month, and from year to year.

            The decisions that determine how much work is done on a case do not belong to the attorney. The prosecutor decides what sort of offers to make. The client decides whether to take them, whether to go to trial or not. The judge decides how many settings to require before a trial, and when the trial will be. The facts largely determine how long a trial will be, if there is one. None of those things are known when the attorney signs on for the case.

            Contingency fees compensate PI lawyers for assuming a risk. Criminal defense lawyers also deserve to be compensated for the risks we take on.

          • Standard insurance isn’t like that. My health insurance premiums don’t pay for your swine flu vaccine, they pay for mine.

            Why don’t you give that some more thought?

            If you are never sick, never go to the doctor, never have any medical expenses, does the insurance company refund your premiums?

            If you never have an accident, do you get your liability insurance premiums back?

            If your house never burns down, does the insurance company give you your money back?

            No, of course not. The insurance company doesn’t live to serve only you. All insurance is risk pooling and sharing.

            Not naming names, but some lawyers provide “fantasy island” representation, where the clients pay whatever they can afford and get excellent representation. So people with lots of money pay more than poor people, for the same representation. The rich subsidize the poor. Is that unethical?

            The American law business has been built around the idea that lawyers are selling something; Abraham Lincoln said that a lawyer’s time and advice are his stock in trade. The metaphor is inapt. We are not shopkeepers.

  5. Trial insurance? No. I’d just say the lawyer is assuming a huge risk, for which he deserves to be compensated.

    If the lawyer can’t be trusted not to work the case for the best result, regardless of the time involved, of course, this isn’t a good deal. If the lawyer can be so trusted, then this is a fair deal for the client.

    • I’d say that being compensated for assuming a huge risk is insurance.

      I think Mark was pointing out that his fixed-fee approach obscures the fact that he’s selling two services: Legal representation, and insurance against the full cost of a trial. Understanding that all fee schemes must address both costs and risks will probably help explain why certain fee schemes are chosen for certain cases or by certain types of lawyers.

  6. There is no right way to do this. I mostly charge a split fee. I charge for pre-trial prep, and then a “daily” fee. If the case goes to trial. I understand the argument that someone may not go to trial because they can’t come up with more money, but you can also say they wont pay the increased fee initially because it’s too much.

    On a case where there is little need for preparation, like a misdemeanor or clear cut small felony, I’ll charge one fee including a trial.

    What I can never understand is the philosophy from people like Paul, your first commenter. If you pay me a fee, and in one phone call I convince the prosecutor to dismiss the case (rare), or in one court appearance, I can take the prosecutor aside and convince him/her to dump it, am I now worth much less money?


    • It sounds like you’re saying you should be paid the same for a trial or a dismissal-by-phone because the result for the client is the same. But if it’s the result that matters, then shouldn’t you offer a refund if the client goes to jail for a long time? Even if you do a complex trial? Or when that happens, do you think you should be paid for all the effort you put in?

  7. As a potential client, I, like others, am paying for results. Paying a flat fee and getting the results I want in one phone call or meeting is well worth the cost. The anxiety and uncertainty are gone and one can get on with their life. Worth every penny in my view.

    If the lawyer makes $2,500 an hour, good on him.

  8. Mark Bennett is a great lawyer. Having said that I think you have gone too far to suggest someone is charging by the bullet when they charge a separate trial fee. There are lawyers that I know I am more prepared and more qualified in comparison that charge a large one fee buys all. Some of those lawyers are actually more inclined to plea cases than if a split fee is charged. I personally charge a pre-trial / pre-motions fee and a separate trial fee. I tell my clients that I believe it is only fair to them if there case falls into the category that many cases do of tough to beat at trial, I do not think you should be paying the same as you would had the case gone to trial. However, there is an argument made above suggesting an all in one fee may be results oriented. However, we make and cannot make any guarantees in our business. A true results oriented fee would be a contingency fee which is not appropriate in criminal cases. The other good argument for an all in one fee is that (in some cases) it may be necessary to do almost as much work as you would to prepare for trial to get a case dismissed, or a lesser charge or something much better than the prosecutor thought they were getting. The most important point to be made is there are many folks in the criminal justice system that do not qualify for court appointed counsel but going into more debt to pay an all in one fee when they know they are not going to trial becomes unnecessary. Your suggestion you try to do the right thing if a case pleas early actually puts you in an awkward position of figuring out what to refund. Most importantly those of us who charge split fees should be telling our clients if you cannot afford my trial fee you should not hire me because I do not want you to take a plea because of lack of funds. Suggesting that split fees encourages this ignores that fact that there are many good and honorable lawyers who will make this crucial inquiry so a client understands the fee structure and the timing of when a trial fee might be due. Having said all of that there are many lawyers that charge an all in one fee that because of there past results you are really gambling on a results oriented fee and that you as a client will get a favorable result as many of those before have experienced. Most importantly, the all in one fee is not appropriate for ALL citizen accused cases.

  9. Mark,

    Thanks for highlighting my post. And as always your analysis is dead on. I am working on getting my practice to where you are now. A main reason I charge a split fee is that many of my clients are those that I once represented at the PD’s office and they are not looking for a trial but know that I am not afraid to. Most of them can’t afford an attorney and come to me because of the way they are treated at the PD’s office..

    This last year in private practice has brought me very few cases where my client’s actually wanted to go to trial and out of the two last month, both jumped on last minute deal the DA came up with against my advice. What people do not understand is that they are not just paying me for my time and knowledge, they are compensating me for the sleepless and anxious nights I spend laying up at night working on theories of their case. They are paying me for the peace of mind, knowing that they can sleep because I am the one staying up until three in the morning worrying for them.

    I one day hope to get my practice to the point where everyone that comes to me is willing to go to trial. Like Gerry told me at the ranch, “Anyone can plea a case for free.” But only time, integrity and fairness will allow me to build the type of reputation here where everyone will know that if they are calling me its because they know that I am their Huckleberry…

  10. Another problem with split fees: the judge who won’t let you withdraw when the client can’t, or won’t, pay the tral fee. That is not an unusual occurrence: a lawyer on the case,familiar and prepared, or a lawyer paid from the county coffers, entirely up to the judge.

Leave a Reply

Your email address will not be published.