Attorney’s Fees: Past, Present, and Future

“A lawyer’s fees shall be reasonable”.

This, according to the American Bar Association’s Model Rules of Professional Conduct is the baseline standard for how attorneys should charge for their services. Of course, whenever a “reasonableness” standard comes up, the law usually appears to assume that the meaning of “reasonable” is self-evident. Of course, it rarely is.

The manner in which lawyers charge for their services has changed greatly over time. Looking back into the history of the law, it can fairly be said that the modern legal profession has its origins with the “Orators” of Ancient Greece, who would speak on behalf of a defendant in court. These individuals, however, were trained in rhetoric, not law. At the time, there was a rule requiring individuals to plead their own cases, or essentially represent themselves in court. However, they were allowed to have a friend or acquaintance assist them in this. Professional orators simply operated under the legal fiction that they were friends of the defendant, who happened to compensate them for their time.

Later on, in Ancient Rome, it was illegal for lawyers to charge for their services. While this rule was in existence, there was essentially no functioning legal profession in Rome. Similar to their Greek counterparts, these advocates were trained in rhetoric, and had little legal training. However, there were individuals who were highly educated in the law, known as “jurisconsults”. These were members of the wealthy elite who dabbled in the law as a hobby, and offered legal opinions to advocates, judges, and laypersons. This was the status quo until Emperor Claudius made it permissible for legal professionals to charge for their services. Very shortly thereafter, the legal profession in Rome was well established.

The rest, as they say, is history.

Currently, there is a well-established legal profession in every developed country on Earth. Almost every legal system in the world owes, at least in part, its existence to the innovations of Ancient Rome, which essentially mainstreamed the revolutionary (at the time) idea that lawyers can charge for their services.

Today, attorney’s fees tend to be divided into a few different structures.

In many matters, especially when representing defendants, law firms tend to bill by the hour. Large law firms, which tend to represent major corporate clients, usually charge several hundred dollars per hour, and usually have several attorneys working on a client’s matter.

Another popular structure for attorney’s fees is the contingency agreement. This is used by attorneys for plaintiffs in civil suits, usually when there is a decent chance of a large damages award. The attorney does not charge anything for his or her services upfront, and only collect a fee if and when a judgment rendered and paid. The fee comes in the form of taking a percentage of the final award, typically 30-40%, depending on the type of case, and the perceived chance of success (obviously, if success seems unlikely, the attorney might demand a higher percentage in exchange for taking on the risk).

The legal industry was particularly hard-hit by the financial crisis that occurred in the fall of 2008, and the subsequent recession. With fewer business deals being done, there was much less demand for lawyers to oversee them. Furthermore, many businesses began trimming their budgets, especially the amount they spend on legal services, and the problem for lawyers was exacerbated. With this came the realization among some large clients that they now have significant leverage over the law firms they retain. This has led to many lawyers and law firms experimenting with innovative fee structures.

For example, a small number of firms are trying to do away with the billable hour altogether, and instead charging flat fees for certain types of legal services. This can make it far easier to set a budget for legal services, since, under this system, costs are far more predictable for clients. While the billable hour is traditionally viewed as a cash cow for lawyers, even some attorneys have advocated abolishing it.

However, some people continue to argue that the billable hour is here to stay, and is simply a reality of the legal profession.

In the end, however, clients, no matter how small, need to remember that hiring a lawyer, just like hiring a contractor or buying a used car, is a bilateral transaction: the client has at least some leverage, no matter what. Clients should not be afraid to aggressively negotiate fees with their prospective attorneys, nor should they fear shopping around to find the best legal services at the best price.