For many people, a lawsuit is a complicated enough situation in its own right. In addition to the surprise that comes along with getting served, there is most likely some terminology and certainly legal processes that are unfamiliar to you. Unless you’re well-informed about the law and how lawsuits work, there’s bound to be some uncertainty about what’s going on, such as: what do you need to do with the summons, what kind of consequences can there be if you lose the lawsuit and how do you decide how to hire an attorney for your case.
If you’re reading this article, you’re probably past that initial stage of getting sued and hiring the attorney who is right for you, but just because your case is starting to progress doesn’t mean that everything magically starts to make sense.
For example, one of the major sources of confusion for our clients is how paying a law firm works. The purpose of this blog is to provide some clarity on retainers, how they work and why they’re important to your case. We’ll start by going over two of the easiest pay structures to explain: contingency and flat-rate fees.
Working on a contingency basis is typically found in personal injury law on the plaintiff’s side; contingency is where the client doesn’t pay the firm until the attorney collects money for the client. Then, the client pays their attorney their fees out of the portion of money collected. If you’ve ever heard the phrase “we don’t get paid until you do” that’s contingency.
Another simple concept, but one worth explaining, is flat-rate fees. This is where you pay your attorney a one-time fee at the beginning of the case. This type of pay structure is usually found in debt settlement lawsuits, traffic tickets, and basic criminal defense. The reason certain cases can be paid with flat-rate fees is because there is a highly predictable or set level of legal work that would need to be performed. But what happens when the amount of work needed in a case is unpredictable? Civil litigation lawsuits and family law cases, such as divorces with children and/or assets, can be highly contested, making it impossible to calculate a flat rate fee. In these sorts of cases, clients are charged a retainer; let’s go over exactly how a retainer works and why it’s important.
Think of a retainer like a ballpark figure that estimates how much work would be needed to get started on a case. The attorney will charge the client a set number of hours (at their hourly rate, which would vary from law firm to law firm) to begin the initial phases of the case. As legal work is performed, the attorney is paid by the funds that are already in the retainer. You can think of this concept as prepaying for your legal work (just like the flat-rate fee we talked about earlier) but because the timeline of a highly litigated case is unknown, the retainer could eventually drop to a threshold where a replenishment is necessary. Don’t worry if that last sentence confused you, we’ll break it down with an analogy that’s easier to understand.
Imagine you and a friend are going on a road trip. You volunteer to drive and since your friend appreciates the favor, he agrees to pay for the gas. To make this example work, let’s imagine the trip started at the gas station and your car was already near E. Your friend fills up the tank and you begin to drive. A few hours into the drive, you decide to take a detour. After exploring for a while, you get back on track and continue toward your destination. Noticing that your car’s gas light has come on, you pull into the gas station to fill up; since you’re still on the same road trip, your friend fills up the tank and you continue to drive.
If you’re following where this is going, you’ll realize that a litigated case can be a long road trip with many detours. Let’s think of you, the driver, as the attorney; you know how to operate the car for your friend, but no matter how good of a driver you are, you can’t move the car without gas. The retainer in a lawsuit is very similar to gas-in-the-car in that you will always fill it up before using it. If you signed a contract with a retainer, it’s because there was only an idea of how much legal work would be provided; and the same way you fill up a gas tank knowing that there may be detours, a lawsuit can take many different turns since there are multiple adversarial parties involved. In a child support case, or a divorce with assets, there might be mediations and tons of litigation over trivial things (in our analogy, this would be like driving around a city in traffic, trying to figure out what to eat, but taking an hour to come to a decision). Much like we’d have to fill up the gas tank, we’d also have to replenish the retainer. This way, when we’re ready to drive again, there’s gas in the tank to move the car.
The problem with not replenishing retainers is that in a lawsuit you never know when the case will take a detour. Imagine you want to catch a sunset on your road trip, but you only have an hour to get to the location and you’re 30 minutes away, with hardly any gas. To catch the sunset (or legal deadline), you’d stop for gas and continue driving; it would never make sense to wait at the gas station for an extended period-of-time because you’ll miss the sunset.
Just like cars and drivers, courts and cases all move at different speeds. Some trips are short, and you know exactly how much gas you’ll use (flat-rate fee) but other trips are seemingly endless and can have 2 drivers who can’t agree on where to go at every turn (these are litigated cases with retainers). In certain instances, law firms like ours can work out a payment plan to replenish the retainer (this would be like your friend promising to pay you back for gas at some point on the trip) but if that day comes around and your friend doesn’t pay you, eventually you’ll feel like it’s best to not continue the trip since they’re not holding up their end of the agreement.
We hope this article helps bring clarity to the different ways clients can pay law firms and how retainer replenishments work. Any attorney who gives you an exact quote on a case that is going to be highly litigated isn’t being transparent about what the lawsuit might cost. If you have any questions about a case, your bill, or account status, please feel free to call our office at 305-514-0500.
