Today’s blog was written with the help and expertise of James Kozelek, Shareholder/Partner, Weltman Weinberg and Reis*, one of The National List’s largest law firm members. Our editor, Marti Lythgoe interviewed Jim by phone on 8/25/17.
Our forwarders often ask about the fee arrangement they will have with one of our attorney members. They also ask us and the attorneys about court costs—whether or not they are included in the fee and when they have to be paid. We hope today’s blog will help to answer some of those questions, although court costs, especially, vary from state to state and in some states, from county to county.
Attorney fees vary depending on the type of legal work being done. In the collection industry, a Contingency Fee is usually the baseline an attorney is working from. However, there are very few firms that are doing only one or two types of collections, so if you use the attorney for legal work other than collections, the type of fee might change. Jim explained, “The farther a claim gets away from ‘direct goods and services provided,’ the more likely it is that it’s going to fall all or part of the way outside of a contingency fee arrangement.”
A contingency fee is based on a percentage of the money that the attorney is able to recover on a debt. The National List will find out as much as we can about an attorney’s fee arrangements and the expectations of the forwarder before we make referral. Jim says, “We have a discussion based on the types of claims, age of debt, what kind, balances, how many claims, and we use all of that information to make a decision on the contingency percentage. For example, collection of damages after an eviction is much more difficult than collecting from an on-going business.”
Jim added, “We try to include as many details as we can in our agreement, based on the type of claim and what could possibly happen in the course of collecting on it. If the client has a security interest in the assets of the debtor and want us to shut down the business and liquidate those assets, that is a much different scenario from debt collection on retail goods. In a case like that, sometimes what happens is that when it comes time to file the lawsuit, then we discuss switching from a contingency fee.”
Other types of fees that an attorney might charge are a Flat Rate or an Hourly Rate. Both of these are more likely on certain types of claims. Ability, experience, specialty and reputation might determine the hourly rate an attorney is able to charge. In collections, defense of a counter-claim would be billed at an hourly rate. You might want to ask if your attorney will bill for overhead expenses, or costs for staff and support. Usually, those expenses are built into the rate charged.
“A client is buying an attorney’s time,” Jim noted. “There are no guarantees on what can be collected. We can’t predict what will happen or if it will be worth it to try to collect on some accounts. I always ask myself, ‘If this were my money, would I file a suit?’ I don’t want to waste people’s money and our firm’s time. It’s relatively easy to get a judgment, but I prefer to collect money before going to trial, and so do clients. We get all sorts of different claims. We try to stay fluid, to discuss options, and to try to let the client know what the fee agreement is before we file litigation.”
Some clients will ask if there is a Consultation Fee. In other words, the first time one meets with an attorney, will they be charged for the attorney’s time. In Jim’s case, he says that the initial meeting to discuss the case usually will be free, unless he is asked to do something like review contracts, discover if a provision is enforceable in certain states, do a scrub for date of death or bankruptcy, or (for existing clients) provide reports that the clients generate themselves by logging onto his firms proprietary software system..
If you are being charged an hourly rate for attorney services, you might be asked to pay a Retainer Fee, or an upfront Cost Retainer. Jim says, “At Weltman Weinberg and Reis (WW&R), the client has to authorize us to spend the money. Whether we ask for a retainer usually depends on our level of comfort with who’s coming to us for services. We are more likely to ask for a new or difficult client.”
You might have heard of a Fee per Services, which could be the equivalent of a flat rate. In the collection industry, this might be a specific fee for filing a claim or sending letter. At WW&R, covering such tasks is usually included in the contingency fee percentage. In another legal jurisdiction, a flat fee is usually offered only if your case is relatively simple or routine, such as a will or an uncontested divorce.
Statutory Fee: In some jurisdictions, a statute or regulation may set the amount an attorney can charge for a particular service. Examples include probate and bankruptcy cases. You should ask if a contract providing for collection costs and attorney fees is enforceable in your state. Jim notes that attorney fee provisions are typically not enforceable in consumer collections, but they are enforceable in commercial collections in the areas where he practices. Usually a Judge will decide what is fair and reasonable. What is fair incorporates not only all the time the attorney has spent to date, but also all of the time the attorney is going to spend until the claim is discharged or paid. Sometimes an attorney has to present evidence to a judge that the fees are reasonable. What is considered fair and reasonable may vary from court to court.
Court Costs and upfront costs vary from state to state and even from county to county or from court to court. The thing that was most likely to change in the updated State Law Papers we’ve received is the court costs. See http://www.nationallist.com/nl_resources/white_papers/ According to Jim, CA and FL are the most expensive states to sue in, demanding $750 upfront. ”Money for court costs is paid upfront and does not go to the attorney. Money is drawn off during litigation until it runs out. When the case is resolved, you may get a refund or you may get a bill. That is because a Court may not issue a final cost accounting until the case is closed and the initial cost deposit was not sufficient to cover the court costs incurred during the litigation Usually, the client must give approval to spend more than what was asked for upfront. If enough money was not asked for, it can take much longer to get the proper permissions and conclude the case, so we do try to ask for enough to take a claim through litigation, filing of a judgment lien and at least one execution.”
In collection litigation, when working on a contingency basis, if anything is recovered, court costs come off the top. The attorney only takes commission on the remainder. For example, if the amount recovered was $1000 and the court costs were $150, the client will get the $150, and on a 20% contingency fee, their 80% of the remainder. Jim adds, “Some clients want us to assume the court costs. That is to say they want us to pay the Court costs and not invoice them, and if there is a recovery then we will get our costs back. If there is not a recovery, we are out the costs. The answer is always no. It would be like us taking ownership in the claim. The client is responsible for advancing court costs. Individuals or small companies often don’t want to or can’t pay upfront costs. In that case, then it’s not worth it to them to file a suit.”
If you use The National List to find an attorney and file your claims through us, we will find out the cost for services, fees and court costs in your location. Call us at (800) 227-1675.
James Kozelek, Managing Partner – Columbus Office
* Weltman Weinberg and Reis has been in business for 85+ years. Based in Cleveland, they have offices in Columbus, Cincinnati, Pittsburg, Philadelphia, Detroit and Chicago. They also cover Indiana, New Jersey and Florida for commercial matters. “If somebody owes somebody money, there’s a good chance we have seen it and done it.” James Kozelek is a member of the American, Ohio State and Columbus Bar Associations. He is licensed in Ohio and admitted to practice before the U.S. District Court and the U.S. Bankruptcy Court. www.weltman.com
This article is not meant to be legal advice. Please speak with your attorney regarding his or her fees and the court costs for your particular case.