Alternative Billing Is The Future Of Law
Alternative Billing rewards results, not the number of hours the lawyers and paralegals spend on a case. Anything that increases efficiency in the legal industry is a good thing for the family law industry.
The legal industry is over 1000 years old, and it is time for a change.
My family law firm decided to take upon ourselves the large task of creating an innovative law firm. It’s not easy to do. I looked at other Canadian law firm’s websites to see if there were any other law firms that were being innovative. I only found two other law firms.
We did research into what family law clients were looking for and the common sources of conflicts between family lawyers and clients. We found that the most common source of conflict between lawyers and clients are: billing and communication.
This article addresses alternative billing structures that clients may feel more comfortable with.
I am still working on a solution to address the issues around lack of communication between lawyers and clients. I belief that there would have to be a special law firm app designed. If any app companies are reading this article, please feel free to reach out to me to discuss.
There two most common forms of alternative billing in law firms are contingency fees and flat fee billing.
Contingency agreements are great for clients that “cannot afford justice.” If a homeless person gets hit by a car, there is no chance that they can afford a $5000 retainer and a $350/hour bill. So what should they do?
Most personal injury law firms offer contingency fees which are most commonly advertised as “no win, no fee.” As such, no retainer is required if the client does not cancel the contingency agreement.
Most contingency agreements say that if the lawyer leaves the case, the client only needs to pay disbursements. If the client leaves the case, the client must pay the hourly rate retroactively.
Even for those that can afford to pay a lawyer’s retainer, they may be concerned about the risk of losing the trial after investing tens of thousands into litigation. To add to the risk, if they lose they may have to pay the other parties costs.
Under a contingency agreement the client only pays his lawyer a percentage of the award of the settlement or judgement. The percentage the lawyer receives is often between 20-33%. The managing partner often determines the percentage depending on how much they believe the settlement or judgement is worth. Also risk of no settlement or judgement is often considered.
The percentage can be higher than 33% if both the client and the courts agree. This is extremely rare.
Contingent fee agreements in family law are not permitted in Ontario. In British Columbia, the family lawyer must apply to the courts for approval to use a contingency fee in family law.
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Continency agreements relating to child custody or other child matters are void anywhere in Canada.
Contingency fees are often used in personal injury law. It is rare that is used in family law. I believe the reason it is not often used in family law is that clients hate when you take a percentage of their assets, especially their family home. This leads to potential disputes between the family law firm and the client.
The courts have the power to overturn contingency agreements and to order hourly billing to be billed instead.
Clients are very nervous about litigation that may go on for years. Some lawyers estimate that a trial in family court can easily cost you $150,000.
Even if your family law trial only goes on for three days, it may put you back $60,000.
Our Toronto law firm decided to take a big risk and offer a flat fee of $125,000 for long trials. This takes out the risk of your trial costing you $150,000+. We do this because we want to increase the amount of family law people that are represented by family lawyers, instead of doing it themselves.
Our law firm even charges a flat fee of 2.5% for disbursements, which some law firms call “communication fees.” This covers faxes, copies, long distance phone calls, and supplies. I have seen some law firms that charge 3% for disbursements. Most law firms charge for each fax or phone call made. This can encourage wastefulness at the law firm, which hurts the environment and the client’s wallet.
Alistair Vigier is the CEO of ClearWay Law, a law firm in Toronto. Alistair also won the BC Business 30 under 30 award and the 2015 Victoria Police Civic Service Award. You can reach him on his LinkedIn.