Logo for the Law Firm of Richard J. Rutledge, Jr. PLLC. Winston Tower
301 N. Main St., Suite 2402
Winston-Salem, NC 27101
Call: (336) 283-0284
info@RickRutledgeLaw.com

Billing Policies and Procedures

How Lawyers Bill

“How lawyers bill” is a subject currently undergoing a lot of change throughout the legal profession. This does not necessarily reflect any major change in the way attorneys work or the work they do, but rather reflects a change in the perception of the legal profession by outsiders, and a shift in the perceived value of a lawyer’s services.  Ultimately, though, we must all remember that an attorney is a service provider.  An attorney makes a living by providing information, advice, guidance, administrative support, and by acting on behalf of (as an agent for) a client.  When you hire an attorney, you are paying for a combination of time, knowledge, experience, wisdom, and access to specialized resources.

To the end of making this topic a bit less muddy, let’s start with some definitions:

Fees. Fees are the costs incurred by the client for the effort an attorney expends on behalf of a client.  Fees encompass services like drafting documents, appearances at court, meetings, etc.  Fees are calculated in a number of ways.

Hourly Fees. Hourly fees are the “traditional” method for billing an attorney’s services.  Hourly fees will generally vary with the expertise of the staff member doing the work (senior attorney, associate, paralegal, etc.), with the firm’s overhead (bigger firms tend to have higher fees), and other factors such as geographic location (city firms tend to have higher fees than suburban or small-town firms).

Please be aware that different attorneys charge different rates, based on many factors, and one attorney may charge different hourly rates for different kinds of work.  These variations result from differences in the amount of research that must be done, the resources available to the attorney for that kind of work, the need to engage outside resources, the ability to engage internal support staff to assist, and the extent to which the attorney’s schedule must be rearranged to accommodate the timing and complexity of your matter, among other factors.

Flat Fees. Flat fees are increasingly common.  Some have long felt that hourly fees had the potential to motivate an unscrupulous attorney to “pad” his time, occasionally charging the client more than the amount a matter reasonably required.  Flat fees eliminate this risk, shifting the burden and risk of estimation to the attorney; the client knows going in what a matter is going to cost.  Some matters – complex litigation, for instance – are difficult or impossible to estimate accurately in advance, and the scope of the matter may expand or contract as evidence is exposed.  In these cases, where an attorney has quoted a flat fee, it may be necessary to renegotiate the fee occasionally as the matter progresses, to adapt to the changing scope, settlement options, etc.

Wherever the nature of the services makes it feasible and practical, I will offer a flat rate for my work, such as preparation of a power of attorney, a straightforward will, or a real estate closing.

Contingency. In certain cases, the client and attorney agree that the outcome of a matter is highly uncertain at the outset; some matters could result in expensive litigation that yields no reward or a trial or settlement that produces great rewards.  In short, it’s risky.

In these cases, the attorney and client often agree to share the risk and the rewards between them, because the client acknowledges the potential rewards, but doesn’t have the resources to go it alone, and the attorney has the resources, and is willing to take the risk.  In a contingency case, the client will generally agree to bear some or all of the costs and expenses (see below) of pursuing the case, and the attorney agrees to bear the risk related to all of the fees (see above).  In exchange for this, the client and attorney agree that they will split the award or settlement amount according to a pre-determined percentage.  If the attorney has also agreed to “carry” the expenses and costs of the litigation, those costs generally come “off the top” of the award before the split is applied.  This approach is often used in personal injury or accident cases or certain types of employment matters where the litigation cycle is long (often, years).  

Value Billing. There is no absolute agreement on what “value billing” means.  The consensus seems to be headed toward regarding the lawyer’s contribution to the client’s life or business as having two components: process, and outcome.

One approach to value billing is a combination of flat fee and contingency billing.  Here, the attorney agrees to undertake the process – typically litigation or negotiation – for a flat fee.  The parties then agree on a range of possible outcomes, from losing the case to a huge award or settlement.  They then agree on how various awards will be shared between them.  This approach, it is believed, solves several problems:

The client establishes a value for the process of litigation: “How much is it worth to you to sue, even if you lose?”

The attorney avoids the all-or-nothing risk of a contingency (where the process is acknowledged to be expensive), but still provides the client with a “worst-case” cost for the litigation process.

The attorney has a share of the award as an incentive to maximize the effectiveness of the process for a better outcome, and at the same time, to keep cost and efficiency in control, to maximize the profitability for the firm (law firms are, after all, businesses) and compensation for the client’s losses or damages.

Similarly, in some contingency cases, especially where the outcome may yield rewards that are not easily subjected to a “split,” I may agree to a reduced hourly rate, which will be credited toward the contingent division of any monetary awards. This arrangement may be applied to situations, for example, where part of the award is getting your job back.

Retainer. The term “retainer” actually has two meanings.  The first use refers to a fee paid to an attorney to keep him “on-call” for the client, dealing with small matters as they arise, and for the burden of shifting priorities if it becomes necessary to move that client’s matters to top of the stack, inconveniencing others.  This use of retainers is increasingly rare.

Now, “retainer” more often refers to the practice of asking a client to pay a deposit on fees in advance, and bills are charged against this amount.  The retainer balance – which is held in a trust account – is then replenished by the client when bills are received.  This occurs for several reasons: It provides the attorney some assurance that cash flow will be forthcoming; it raises the motivation for the client to be more actively participatory and responsive in the matter; and it helps to ensure that a client will not cease paying simply because she is not happy with the direction a matter has taken, among many others.  

Expenses / Costs. Costs are costs incurred by the client as a result of payments the attorney has had to make on the client’s behalf.  These may include court filing fees, express or postage fees, hiring experts or court reporters, or other clear-cut costs.  Expenses may also include charges for travel, mileage, or other indirect and out-of-the-ordinary expenses

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Fee Agreements

Regardless of the method used to arrive at the fee, you should ensure that you understand and agree with the scope of the engagement (what we’ll be doing for you), the method chosen for establishing the fee, and the calculations that will be used to arrive at the final amount due.  The firm will not engage in your matter until an agreement has been reached and signed by you and the attorney.

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Billing: Invoices & Statements

Periodic Billing. It is my practice to bill semi-monthly: mid-month and end-of-month.  Case load and calendar may occasionally cause this to slip.  I will send you an invoice or statement by first class mail unless you have stated a preference for receiving statements via electronic mail.  Charges are due upon receipt of notice.

Please review your bill promptly upon receipt; the billing will be deemed approved and the fees earned five (5) business days after the statement or invoice is mailed.

If you have a retainer balance with the firm, the retainer will be reduced by the amount of the bill at that time.  Prompt replenishment of the retainer is expected and appreciated, including payment of any charges over the available retainer balance.

If you have requested billing by credit card, you credit card will be charged at that time.  Credit card payments will not be accepted unless and until the client has agreed (in writing) to the terms related to credit card billing (see below).

If you have questions or concerns about the bill, or if you dispute the amount, please contact the office by phone or electronic mail to discuss your concerns.  Disputed amounts will not be transferred out of trust while reasonable discussion is ongoing.

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Trust Accounts

Most law firms are required to have a trust account for holding client funds that have not yet been billed and earned.  Most states have very strict accounting rules regarding these accounts.

Interest on Lawyers’ Trust Accounts (IOLTA)

This law firm participates in the North Carolina state bar’s Interest on lawyers’ trust accounts (IOLTA) program.

Under this plan, funds deposited on behalf of a client that are nominal in amount or are expected to be held for a short period of time will be deposited in an interest-bearing trust account and the interest generated will be remitted to the North Carolina State Bar to fund programs for the public’s benefit.  

The costs of maintaining an interest-bearing account on an individual client’s funds when the funds are nominal in amount or held for a short period of time exceed the amount of interest that may be earned on such funds.  Therefore, such client funds are placed in one trust account from which distribution is made at the client’s direction and, until recent changes in banking laws, the trust account could not earn interest.  Under current law, a trust account is permitted to earn interest under certain circumstances.  It is only when all client funds are deposited into a single account with the interest going to a public purpose that such an account can be established.  Under no conditions, including any request that the funds not be placed in such an account, can the client benefit individually from the interest earned.  The attorney will not receive any of the interest generated under the plan.  All interest earned is transmitted from the bank to the North Carolina State Bar monthly.

Approval for Payment

You will be given the opportunity to review and approve charges before the funds are transferred from the client trust account to the firm operating account.  If the client does not raise a question about an item on a bill within five business days from the mailing of the Invoice or Statement, the bill will be presumed correct, and the transfer made.  Please review your billing promptly upon receipt.

Idle Balances

If a trust account balance remains after a matter is resolved and closed, and if the attorney has reason to believe you may have occasion to engage the attorney's services in the near future, the balance of your retainer will remain in trust until such time as you reëngage the firm, you request a refund of the balance, or it becomes reasonably clear that no near-term charges are imminent.  (If the attorney engaged in your matter in a narrowly-limited capacity, the remaining balance will likely be refunded with your final statement.)

Any interest earned on the balance held in trust will, of course, be subject to the standard rules regarding interest on lawyers' trust accounts (IOLTA), as described above.  While the firm may, in its sole discretion, send you occasional reminders of the availability of this prepayment for services, your final statement will reflect any trust balance outstanding, and this will serve as your primary notice of the outstanding balance.

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Credit Cards

We realize that, for related or unrelated reasons, cash flow does not always match up with a need for funds.  For this reason – and to ensure our own cash flow, so that we may continue to serve you – we strive to make payment as convenient and flexible as possible.  Where circumstances justify it, this includes accepting payment by credit or debit card.  Because of strict state laws and professional ethics rules governing the handling of client funds by attorneys, however, we must work to ensure that certain procedures are closely followed.

When you pay by credit card, you agree as follows:

You understand and agree that credit or debit card billing is a service extended by the firm for your convenience and at its own expense.

Bills authorized for payment by credit card will be submitted for payment on the fifth day following invoicing (or upon approval, whichever is earlier), for such amount as is necessary to pay all fees incurred in excess of the retainer in trust, plus the amount necessary to restore the retainer in trust to the level agreed upon in the fee agreement.  It is absolutely essential that you review bills promptly upon receipt, and promptly raise any questions or concerns you have about the bill.

Payment for services already rendered will be deposited directly to the firm’s operating account.

Payment of retainers will be deposited to the client trust account.  Withdrawals from client trust accounts are strictly controlled by law and state bar rules.  Therefore, you agree that if you make a payment by credit card, you will NOT cancel, charge back, or revoke the card, nor dispute the charge with the credit card company, or otherwise demand a reversal of the charges by the credit card company, unless such an agreement is prohibited by law.  Instead, you agree to notify the attorney if you wish to revoke the retainer and terminate services, and the attorney will promptly refund any unused and/or undisputed trust account balances.  Any disputed billing that cannot be resolved between you and the firm within ten (10) business days will be submitted for resolution according to the rules of the state bar.

If, after a payment by credit card, you do dispute the charges and cancel, revoke, or charge back a previously entered charge on your credit card such that a fee, penalty, overdraft, or other unanticipated charge is posted to the client trust account, and it is later determined that the charge was properly authorized, you agree to pay all out of pocket fees and costs (including legal fees) incurred by the firm as a result of the improper cancellation, revocation, charge back or dispute.

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We accept payment via MasterCard, VISA, Discover, and American Express debit and credit cards.
*Tenant matters engaged less than 10 days before the curt date are payable by cash only;
w e regret any inconvenience.

Nothing on this web site is intended to provide, nor should be intepreted as providing, legal advice. Every legal question turns on the facts of the individual situation, and any examples, illustrations, or cases presented here are presented as illustrations only.

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