“Who pays the cost of a lawsuit – attorney or client?”

Question: We just finished a lawsuit. Our agreement with our lawyer was that the lawyer would get 40% of the final settlement.

When we went to sign the final papers, they had taken out 40% – plus an extra amount of almost $10,000 – for what they said was fees that were incurred at a later date.

Can they do that?

Howe, Indiana

Answer: Dear Vicki:

As an attorney, I hate to see payment disputes between attorneys and clients. That said, I’ve had a few myself. Let me try to shed some light on this for you:

1. I hope you had a written agreement with your attorney; that would be helpful. It is always a good idea to have agreements – and that includes agreements with attorneys – placed into writing. If an agreement is in writing, it is far less prone to later disagreements or disputes. Many states actually require that attorney-client agreements be put into writing.

2. Whether your agreement was written or by a simple “handshake,” the terms of your agreement with your attorney must be honored by the attorney and by you. No matter if your agreement with your attorney was in writing or not, you both have to honor it. Of course, if it was by a simple “handshake,” it may be difficult to determine exactly what was agreed to. If there is nothing in your agreement about “fees incurred at a later date,” then your attorney had no right to take monies out of the settlement for that. In such disputes the burden of establishing that your attorney did the right thing will be on your attorney, not on you. Quite frankly, I can’t imagine any “fees incurred at a later date” if the agreement was a percentage-type attorney fee.

3. Quite often “who pays the costs” is not agreed on, or not agreed on with clarity. My guess is that “fees that were incurred at a later date” really means “court-related costs of the lawsuit.” Who pays those costs is a matter of your agreement with your attorney. You could have agreed to (a) the attorney bearing those costs, (b) those costs being shared 60-40, the same way you shared the settlement monies, or (c) you paying those costs. In my experience, this is often not clearly understood by clients, and not sufficiently explained by attorneys. With very few exceptions in very few states, that is a matter for the attorney and the client to discuss and agree on. Again, if the agreement says you pay them, but is not clear in saying that, or if your attorney did not explain that to you, then your attorney should bear that cost.

4. My first suggestion: Write to your attorney, suggest that either the $10,000 be returned to you, or suggest that your Bar Association Grievance Committee decide. Most cities, counties and towns have bar associations that offer resolution systems, often called “Grievance Committees” to help resolve these problems. I suggest you go through this process. It is usually quite simple, without cost, and – in my opinion – almost always sides with the client. Faced with such a choice, most attorneys would likely just return the monies to you. The primary advantage of this route is that the Bar Association committee could “refer” your attorney to the legal ethics people – and that is potentially a very serious matter for your attorney.

5. My second suggestion: Go to your local Small Claims Court. If you are concerned that “attorneys stick together, and protect each other,” then I suggest you take the matter to your local Small Claims Court. These days $10,000 is handled in these courts, and you do not have to use an attorney for this, just (a) give your side of the story, and (b) use your common sense. If you do so, I think that (a) your attorney might just return the monies without going to court, or (b) the small claims court will likely be on your side.

Attorneys are not perfect people. They are no less, and no more, honest than the general population. If you are not comfortable with the way you have been treated, or even if you are not sure of what happened, by all means insist on a resolution, and a fair one at that. You owe that to yourself. And, more importantly, your attorney owes it to you.   

Hope this helps. If yes, please consider telling your friends and colleagues about our blogsite.

Al Sklover

P.S.: If you would like to obtain a list of five or more experienced, “employee-side” employment attorneys in your city, just [click here]. Delivered by Email – Instantly!

© 2011 Alan L. Sklover, All Rights Reserved.