Insider Tips on How to Put a Cap on Spiraling Legal Fees

Insider Tips on How to Put a Cap on Spiraling Legal Fees

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Last year a flippant email exchange between lawyers discussing a client’s mounting legal fees surfaced in court papers submitted as part of a fee dispute between the client and the law firm. The lawyers worked for one of the world’s largest law firms and the offending email stated: “That bill shall know no limits.”

The law firm in question has since denied that overbilling took place and described the emails as, “an unfortunate attempt at humour by three former lawyers of the firm.” However, apart from resulting in a public relations nightmare for the firm, this is one of several cases that have once again thrown the international spotlight on legal fees charged by commercial lawyers.

The burning question of cost

It is not surprising then that for any business requiring legal services, whether large or small, the burning question usually is whether a fair deal from a law firm is even possible.

Yvonne Wakefield, founder of Caveat Legal, says small and medium business owners are not alone in worrying about the cost of legal advice.

“Big corporates have similar concerns,” says Wakefield. “The difference is that they are doing something about it.”

Last month the Association of Corporate Counsel (ACC), a global in-house bar association for legal departments, reminded their members as well as law firms that legal professions across the globe should be working towards the following three targets:

 

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  1. Reducing the client’s total legal costs by a significant amount;
  2. Providing near-complete predictability in cost and process; and
  3. Significantly improving outcomes.

Navigating a minefield

Wakefield says in an attempt to avoid spiraling legal fees many small and medium business owners choose to struggle through legal minefields without the guidance of a legal expert.  But Wakefield explains that  avoiding legal advice at the right time can lead to costly unintended consequences later.

“Foregoing legal advice often results in businesses being incorrectly structured or basic business agreements not being in place. We also find that entrepreneurs frequently incur unnecessary opportunity costs by trying to progress important business deals as far as possible on their own in order to minimise the costs of briefing a law firm.”

So how do you ensure that your business does not become the victim of the bill that knows no limits? Wakefield has the following advice for entrepreneurs (or in fact anyone in need of legal advice):

Do your homework before seeking legal advice

There are many different legal service providers out there and your specific requirements should dictate whom you brief. Only limited categories of legal work such as litigation and conveyancing are the exclusive domain of attorneys practicing at a law firm.

If, for example, you need help with drafting contracts, advice on buying or selling a business, or help with commercial dispute resolution big law firms are not your only options. Independent legal practitioners and legal consultants will be able to help you at a fraction of what a big law firm charges. You are also likely to find that many of these lawyers come with big law firm credentials.

Understand the system

The reality is that lawyers at most large firms work towards monthly fee targets. These are used to judge their performance and determine eligibility for promotions and bonuses. While this does not necessarily lead to “bills that know no limits” at the large firms, this does mean that big firm lawyers are likely to be more interested in taking on cases that are complex enough to deliver the hours. 

A stitch in time 

If you are likely to need help from a lawyer, contact the right person for the job as early as possible. Getting lawyers involved too late often results in them having their hands tied, with far fewer angles to pursue to get you the best results.

Also, as your legal challenge grows in complexity, the more expensive it will be to resolve.

Request a quote or a fee cap 

Just as you would request a quote first before signing up for major surgery or dental work, you should also request a cost estimate from your lawyer.

Understand that time is a lawyer’s currency. Since most lawyers use time-based billing, ask what the hourly rates are for the lawyers that you would like to engage and request an estimate of how much time will be required. This will give you a good indication of what to expect from your legal bill.

Once you and your lawyer have an understanding of the ambit of the brief, you can also impose a fee cap, meaning that you communicate to the lawyer that you will only spend a certain fixed total amount on the work in question.

Be realistic

Do not underestimate the amount of time required by your legal team to properly deal with your case and deliver a solution of high standards.

While you want to be charged a fair price for the work to be done, you also don’t want to put unrealistic pressure on your lawyer to deliver a professional outcome without spending the necessary time.  Similarly, you would never ask a surgeon to do his or her job as quickly as possible.

Be well prepared

Prepare an instruction to the lawyer by carefully collecting all relevant documents and listing the relevant facts. A written instruction is always a good starting point and helps the lawyer to prepare before consulting with you.

Lengthy time delays for collecting documents and information on your side may mean that when the lawyer picks up the matter again after a time lapse, he or she may have to spend time reading back into the matter. Understand that you will be charged for this.

Also avoid to-ing and fro-ing. Each time a lawyer is asked to incorporate further changes to documents already drafted, the cost rises. Therefore, if you need a document to be reviewed by several people, gather all the comments and only then ask the lawyer to incorporate them.

Communication is key

Ask your lawyers to keep you updated regarding the progress of your case and to highlight any complexities arising that may require more time. If yours is a complex matter that is becoming time consuming, ask for mid-month fee summaries so that you can track the costs.

Communicate to your legal team that you are happy for work to be delegated to junior legal professionals where appropriate. This way junior lawyers who charge lower hourly rates do the legwork under the supervision of more experienced (and expensive) seniors.

This is only a good option, however, for straightforward aspects of your matter. You do not want to insist on having junior lawyers working on a complex issue, which then results in the work taking much longer than it would have in the hands of a senior lawyer.

Insist on technology to reduce costs

If your legal case involves the processing of volumes of documents, ask whether your lawyers use technology allowing for the most cost effective processing and management of documents. There are excellent solutions that have been developed for this purpose and all lawyers should be doing what they can to avoid using hourly-billing professionals to manually work through volumes of documents unnecessarily.

Consider mediation over litigation

Mediation is often quicker and more cost effective than litigation when it comes to resolving commercial disputes, workplace disputes and those involving family trusts.

Parties to a dispute generally opt for mediation for three reasons: they want to maintain their business association with each other, they want resolution as quickly as possible, and they want to prevent exorbitant legal fees.

Yvonne Wakefield
Yvonne has a BA (law) and LLB from Stellenbosch University, a Diploma in International Studies from Antwerp University, and an LLM from UCT. She has qualified as both an attorney and an advocate in South Africa, and as a solicitor of England & Wales. Yvonne now heads up Caveat Legal, a legal consultancy aimed at making quality commercial legal services more accessible to the business market.