Fixed Fees for Divorce (Updated)

I have followed with interest the mounting clamor for fixed fees in divorce cases. I loved North Carolina attorney Lee Rosen’s quote in an ABA Journal e•report, “If someone at Lockheed can put a price on a jet, a lawyer can put a price on a case – the variables they deal with are so much more complicated than those we deal with… We should be expert enough in our areas of law so that we can do it.” After many years I cannot predict with much accuracy. How do you know after one interview whether the client or spouse has good records or any records tracing that nonmarital interest? You have never met the spouse and probably don't know who is representing him/her so it is virtually impossible to gauge whether the case will proceed with open and forthright discovery and a cooperative sense of collegiality or whether you will be in court often and taking many depositions. How to know whether this is the case that will have a child related issue after every exchange of the children? What we can do, however, is spread the risk. Under fixed fees some cases will be financial losers and others will be profitable.

Rosen’s website has a fee calculator so prospective clients who answer a few questions can find the range for legal fees they would pay his firm. Once the few simple questions are answered “yes” or “no,” a range of fees can be found for cases that settle without filing a lawsuit and a separate range can then be accessed for litigation fees. The actual fee, of course, is set in a meeting with the client because the web based calculator cannot cover all scenarios. The ranges were developed after Rosen lawyers analyzed five years of their cases. At first blush they appear to be a very reasonable approach.

One could quibble that the lowest fees published on the website are too high; most of us handle many cases for less than $6,000. This has the probably intended effect of discouraging calls from those who cannot afford his firm's services. For clients with a fixed fee retainer, however, $6,000 may be on spot as the hourly rate mitigates huge numbers of phone calls and emails. On the other hand, the fee calculator does not take into account complicating issues such as relocation, hidden assets, multiple businesses, legal questions of first impression, and personality disorders. Perhaps before settling on a definitive fee in the interview, the lawyer takes such matters into account.

All in all, it’s a good step in the right direction. We are in the process of analyzing our historical fees and considering whether to offer clients a fixed fee option. We could do it today and use Rosen's numbers and methodology if I could satisfy myself that those fees are fair. I would prefer to have my own basis for the numbers. Some clients would end up paying more with a fixed fee as opposed to an hourly rate and some would save money, but for those who justifiably want a sum certain, the time has come.

UPDATE: A comment from William Wilson, Indiana Family Law:
The worry about getting the fixed fee "right" stems from our brains looking at everything in terms of hours having value. If we can break that habit, then fixed fees aren't so worrisome.

An analogy (albeit a poor one) is a car: for the most part, auto makers can produce a $15,000 car in the same amount of time that they can produce a $50,000 car, yet they do not charge us based upon the number of hours that went into making the car. They charge us based upon the value of what they sell and we want to buy.

For clients, it's easier for them to say "yeah, it's worth $2,500 for me to get this divorce" than to say "I'm willing to have you put X hours into the case." The other side of the coin is the lawyer saying "the work I did was worth $2,500" or "the work I did was probably worth more than $2,500."

We all have cases where we put more time in than we thought we would, but many of those cases also end up with unpaid client bills. The end result is the same--our expectation of being paid a fair amount was not met.

But, on the flip side, there are those cases where we can quote a $2,500 fee and get it done quickly. We shouldn't feel bad about "making more" than we would have under an hourly rate--for the client, the end result is the same.

In a nutshell, hourly billing has many flaws. Some things we do as lawyers can be done very quickly, but are worth more than the time it takes to do them. It's easier for clients to understand the value of achieving a goal--like obtaining the divorce--than to understand how much time goes into doing discovery and the resulting fees based on an hourly rate.

I hope that makes sense--I haven't had my morning OJ yet.

Don't be afraid of flat fees. I've been making that move, and clients seem very comfortable with the concept. I figure I will quote the fee a little higher, and in the end, if I feel the fee was a bit high, I can always reduce it--and you can imagine how much clients will appreciate that.

Comments

[William Wilson]

The worry about getting the fixed fee "right" stems from our brains looking at everything in terms of hours having value. If we can break that habit, then fixed fees aren't so worrisome.

An analogy (albeit a poor one) is a car: for the most part, auto makers can produce a $15,000 car in the same amount of time that they can produce a $50,000 car, yet they do not charge us based upon the number of hours that went into making the car. They charge us based upon the value of what they sell and we want to buy.

For clients, it's easier for them to say "yeah, it's worth $2,500 for me to get this divorce" than to say "I'm willing to have you put X hours into the case." The other side of the coin is the lawyer saying "the work I did was worth $2,500" or "the work I did was probably worth more than $2,500."

We all have cases where we put more time in than we thought we would, but many of those cases also end up with unpaid client bills. The end result is the same--our expectation of being paid a fair amount was not met.

But, on the flip side, there are those cases where we can quote a $2,500 fee and get it done quickly. We shouldn't feel bad about "making more" than we would have under an hourly rate--for the client, the end result is the same.

In a nutshell, hourly billing has many flaws. Some things we do as lawyers can be done very quickly, but are worth more than the time it takes to do them. It's easier for clients to understand the value of achieving a goal--like obtaining the divorce--than to understand how much time goes into doing discovery and the resulting fees based on an hourly rate.

I hope that makes sense--I haven't had my morning OJ yet.

Don't be afraid of flat fees. I've been making that move, and clients seem very comfortable with the concept. I figure I will quote the fee a little higher, and in the end, if I feel the fee was a bit high, I can always reduce it--and you can imagine how much clients will appreciate that.