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3 (Common) Types of Attorneys' Fee Agreements

When I'm on-boarding clients during consultation or follow-up calls, I spend a lot of time talking about the strengths and weaknesses of their legal cases, strategies, expectations, etc. What I don't spend a lot of time doing is explaining to them how lawyers get paid. As a plaintiff's attorney, historically, I haven't given it much thought. And it seems like most potential clients don't give it much thought either. It seems like most clients just take it as a given that I will work without payment until the conclusion of their matter, sort of like nobody thinks about paying their realtor until they are signing purchasing papers for a house. And just like with a plaintiff's lawyer, the realtor just sort of gets paid without putting too much thought into how it happened..

To be fair, this is rarely an issue because for the most part, I prefer the contingent relationship as well. I almost always make more money than I ever could working hourly. That said, it is essentially speculating (or gambling) on what you can produce. It's a fair characterization that plaintiff's attorneys are mostly out hunting on their own, eating what they kill, banking that the next valley over will sustain then until they find the next after that. Mostly, in my career, the fat of the land has kept my stomach full.

I'm an employment lawyer in Seattle, and I always offer a free consultation for things like wrongful termination, retaliation and discrimination cases. But depending on the potential client, I don't always do a contingent agreement. Below are 3 common fee arrangements lawyers use, and a quick explanation of what type of client might be interested in each.

1. The Contingent-Fee Agreement

This is the realtor arrangement, and it's the thing that most proto plaintiff's are looking for even if they don't realize it. My business model, to a large extent, is based on this type of arrangement, and it's usually mutually beneficial to the attorney as well as the client. It's simple, my fee (under most circumstances) is 1/3 of the gross recovery on the case. There are some caveats in my fee agreement, but for most situations, this is what it is. I get paid after all the paperwork is signed, and checks arrive in the mail,. During the case, I log my hours, but you don't pay me an hourly rate. Most plaintiff's don't have the amount of money that it would take to fund a legal case. Lawyers are expensive, and most people live either live paycheck to paycheck, or they just prefer not to spend their life savings litigating a lawsuit that there is no guarantee will pay off. The lawyers is in a better position to speculate on what they can produce from a legal case. Most of the time, everybody gets paid, and everybody is happy.

2. The Hourly-Fee Agreement

This one should require no explanation at all. I work, you pay. Simple. What's less intuitive is, who wants this arrangement? That's actually pretty simple too, and if you fall into this category, you probably already know who you are. Highly-compensated individuals often want hourly representation. Here in Seattle, the city if full of these individuals. Highly-compensated individuals often understand the value of their cases, and can pay hourly. Even though I tend to make less money on these cases, I always take them. Having a pipeline of some hourly work frees me up to pursue the contingent cases since the hourly clients are keeping the lights on here at Stockwell Law Firm. These people are playing the long game, and they can afford to finance their case. More importantly, they can afford to lose without the case swallowing their entire savings account.

3. The Retainer-Fee Agreement

Assuming the attorney doesn't overextend themself, retainers are great. The client, in this case, usually a business entity of some sort, pays the attorney a predetermined amount of money, at regular intervals (usually monthly) to be available to work for them for a predetermined amount of time. A lot of the time, the lawyer gets a fee without having to do anything at all. The client gets the surety that if a legal issue pops up, they already have a lawyer to take care of it. Out of the three arrangements covered here, this one is pretty-perfect symbiosis.

There's more to it, and other types of fee arrangements that I use for specific types of situations such as flat-fee and hybrid-fee agreements, but the three above are by far the most common types of agreements, and they are the most important for a non-lawyer to understand when they go out into the marketplace to hire an attorney. Here's a link to a YouTube video on the subject. It's talking about fee agreements in California, but it's mostly still on point.


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