Law Society Of Alberta Client Communication Toolkit: Legal .

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Law Society of AlbertaClient Communication Toolkit:Legal FeesOctober 2019

DisclaimerThis handbook outlines techniques and strategies to improve your practice but therecommended practices will not fit every situation.The material presented does not establish a standard of care for lawyers, nor does itprovide a complete analysis of the relevant topics. This information is not legal advice andshould not be construed as such.Nothing in this document supersedes the Legal Profession Act, Rules of the Law Societyof Alberta, Code of Conduct or the Law Society’s ability to step in to protect the publicinterest should the need arise.This handbook is adapted with permission from the Price and Transparency Toolkit, Law Society of England and Wales. The support and assistance of the Law Society ofEngland and Wales is gratefully acknowledged.

Law Society of AlbertaClient Communication Toolkit: Legal FeesIntroductionThe legal market is as wide as it is deep.Clients have a myriad of different needs andpreferences, so there is no single right way tooffer or provide legal services. And with rapidtechnological changes, what it means to‘practice law’ is changing before our eyes.By highlighting common pitfalls, best practicesand recent developments, our goal is to helpyou meet your clients’ expectations andachieve a more successful, satisfying practicefor yourself.Not every aspect of client relations is dealt within the Client Communication Toolkit. In allcases, you should conduct your own researchand consider your specific circumstances whenplanning for future contingencies.Pricing Basics Not all clients are right for your firm. You are not the right lawyer for all clients. Get to know your clients and their needs beforeyou try to solve their problems, not after. Value is the place where pricing, efficiency andquality meet.How Much?The most common question lawyers receivefrom clients – both current and prospective –is “How much is this going to cost me?”What is FeeTransparency?At its simplest, fee transparency meansproviding clients with the right information atthe right time to let them make informeddecisions about the legal services they require.Transparency is not just about providing moreinformation, as too much can cause confusion.The key is to provide the right information thatallows those seeking legal services to assessthe value of that service.Price is not the only determining factor inchoosing legal counsel. Most clients areinterested in value and understand thatsomething can be more expensive and of goodvalue, and conversely, cheap and of poorvalue.Reputation is often the most important factor inchoosing a legal services provider – but price,convenience and speed are alsoconsiderations.Ensuring that clients understand the scope andthe cost of the work being done is smartbusiness practice. It is also a hallmark of actingprofessionally.www.lawsociety.ab.caPage 3

Law Society of AlbertaClient Communication Toolkit: Legal FeesAdvertisingWhat distinguishes you from otherlawyers?Promoting yourself onlineMany clients assume that all legal serviceproviders are the same and are startled tolearn they are not.When trusted recommendations are notavailable, clients increasingly go online to finda lawyer.Find It On the WebThe 2019 Clio Legal Trends Report1indicates that 17% of respondents visitedlawyers' websites and another 17% usedonline search when looking for a lawyer.The annual U.S Consumer Legal NeedsSurvey2 conducted by FindLaw reports that41% of respondents said they began theirsearch with legal directories and 71% usedtheir phones to find a lawyer or legalservice.Since your firm’s website will often be the firstpoint of contact with prospective clients, itsimportance can’t be overestimated. Your firmshould enlist a professional for help designingyour website.Similarly, a well-crafted profile on LinkedIn isalmost mandatory in today’s legal market. Alawyer that doesn’t have one may not evenmake the first cut when clients are seeking tohire new legal counsel.Closer to home, the Law Society of Albertaoperates the Lawyer Directory3 to help connectpeople with lawyers across the province. Thisservice is used by thousands of people including members of the public, other lawyers,banks, mortgage lenders and real estateagents - to search for lawyers and law firms.Websites and LinkedIn profiles, like all otherpromotion, must comply with advertising rulesin the to-expectin-2017-79/www.lawsociety.ab.caThey are surprised that only some areregulated and may not be aware of howprofessional regulation protects them: how theCode of Conduct only applies to lawyers, thatall lawyers are required to maintainprofessional liability insurance, and thatdifferent legal service providers have differentlevels of insurance.If potential clients are not aware of thedifferences between legal service providers,they may be inclined to make their selectionbased on who is simply the cheapest.Whether you are advertising your services andfee structure online or in person: Your firm’s advertising must not bemisleading, confusing or deceptive. You should be wary of providingunreasonable or over-confidentassurances, especially when youremployment or retainer may depend onadvising in a particular way. It is alwaysbetter to under-promise and over-deliver. Advertisements relating to your firm’scharges must be reasonably precise foreach fee quoted, and must say whetherother amounts, such as disbursements andtaxes, will be charged in addition to theadvertised fee.4 Lawyers are not permitted to advertise thatthey will make loans to clients, regardlessof whether those loans are characterized asloans or cash advances.5 You should avoid estimating charges at anunrealistically low referral/4Code of Conduct, Advertising of Fees, Rule 4.25Code of Conduct, Making Legal Services Available, Rule4.1-3Page 4

Law Society of AlbertaClient Communication Toolkit: Legal FeesResourcesBest Law FirmWebsites62019 Clio Legal Trends Report7 Raise expectations unjustifiably. Imply that a lawyer is aggressive. Disparage other persons, groups,organizations or institutions. Use testimonials or endorsements thatcontain emotional appeals.11U.S Consumer Legal Needs Survey8Lawyer Directory9LinkedIn: Maintaining Authenticity In YourOnline Profile10Advertising may not: As each client will have differingcircumstances, it may not be possible toadvertise fees that match every possiblescenario. Some firms advertise their fee for astandard package, while explaining that thecost may be adapted due to the situation facedby the client.Suggest qualitative superiority to otherlawyers.Firms then invite potential clients to contactthem to receive the most accurate fee ctin-2017-79/11Code of Conduct, Marketing of Professional Services, er-referral/www.lawsociety.ab.caPage 5

Law Society of AlbertaClient Communication Toolkit: Legal FeesPricing Optionsadvance how much time the file will take orhow complex the case might be.What is a reasonable fee?Flat fees for repetitive or standardizedwork:Explain to your clients that your fees reflect awide range of considerations, not just the timeyou spend on their case. Factors apart fromtime may include:12 Your experience and ability.The difficulty of the matter.Whether special skill or service isrequired.The results obtained.Special circumstances, such as thepostponement of payment, uncertaintyof reward, or urgency.Whether accepting their retainerprevents you from accepting otherwork.Any fee estimate you provided.The client’s prior consent to the fee.How you price yourself is a strategic decisionthat will have a profound impact on the natureof your practice and the clients you attract.There are a wide range of approaches to feesin the legal sector including:Hourly:Benefit to clients: costs are proportional to theeffort required.This is the most common type of fee sincemost matters involve an unknown amount ofwork due to several factors, many of which arebeyond your control.Hourly rates vary depending on the lawyer’sexperience and the nature of the case. Theclient knows up front what they are beingcharged and can compare rates betweenlawyers. Total costs, however, cannot alwaysbe determined because no one knows in12Code of Conduct, Reasonable Fees and Disbursements,Rule 3.6-113See also Alberta Rules of Court, Part 10: Lawyers’ Charges,Recoverable Costs of Litigation, and Sanctions; Subdivisionwww.lawsociety.ab.caBenefit to clients: predictability.You offer a menu of services with descriptionsand corresponding prices.This may be an option when you know whatthe retainer will entail with reasonable certainty,such as real estate transactions, foreclosurework, debt collection or incorporating acompany.Flat fees are the simplest fee structure but areonly practical when the amount of time andeffort required is fairly consistent from one fileto the next.Corporate clients are increasingly looking to flatfee arrangements as a means of controllingtheir legal spend.Contingency fees:Benefit to clients: they don’t shoulder all therisk.If someone hires you to obtain money for them,such as in injury or accident claims, you can bepaid a percentage of whatever you help themrecover - the contingency fee - which usuallydepends on settling the case or winning at trial.In addition to the contingency fee, the client isexpected to pay disbursements.Contingency fees are popular because theyexpose clients to less financial risk if their claimultimately fails or falls short of initialexpectations.When drafting contingency fee agreements, itis essential that you review Rule 10.713 of theAlberta Rules of Court which sets out specificrequirements for all such agreements:3, Contingency Fee AgreementsPage 6

Law Society of AlbertaClient Communication Toolkit: Legal Fees Must be in writing.Percentage fees/value-added fees: Must be signed by the lawyer, the clientand a witness.Benefit to clients: predictability, proportionality. No fee, calculated as a percentage orotherwise, can be charged onrecovered disbursements. If you are to be paid any portion of acost award, the percentage you receivecannot exceed the percentageapplicable to the settlement orjudgment.For example, if your contingencyagreement fixes your fees at 30% of thedamages awarded in a lawsuit, youcannot claim 40% of the associatedcost award.The agreement must also explain: The event that will trigger yourentitlement to fees. How those fees will be calculated and ifthey include disbursements and othercharges. 14That the client owns any cost awardand is waiving the right to any portionpayable to you under the agreement.Fees can be proportional to the value of aspecific asset or transaction, such as whenbuying or selling a business or property,collecting a debt, probating a will or executingan estate.Value billing refers to the value of the legalservices to the client, to be determined throughdiscussion with the client. Working together,you and your client collaborate to assess theclient’s needs and develop a strategy toproduce the most effective representation.Volume-based discount:Benefit to clients: predictability, efficiency fromincreased exposure to their work.Clients who purchase legal services in bulkmay receive a volume discount. Rates maydecrease once certain volume thresholds aremet.Institutional clients often have the bargainingpower to secure discounts in return forproviding a steady supply of work.The fee typically requires periodic adjustment.That the client can ask a review officerto determine the reasonableness of theaccount and of the contingency feeagreement itself. Unless the Courtorders otherwise, the contents of theagreement remain confidential.Monthly/annual retainer:That the client can terminate thecontingency fee agreement within fivedays without incurring any liability foryour fees.General retainers must be confirmed with awritten agreement signed by the clientacknowledging that:Benefit to clients: predictability.A general retainer provides unlimited access toa lawyer. It is payable whether you are calledupon or not. The money is non-refundable andbelongs to you immediately uponreceipt.Resources You are not obliged to account for it orrender services with respect to it.Contingency Fee Issues - TheCalculation of Fees14 Services may never be rendered inrespect of the ment/contingency-fee-issues/Page 7

Law Society of AlbertaYou may only deposit a general retainerdirectly into your general account if theserequirements are met. Retainer funds mustotherwise be held in a trust account.15 Forlawyers operating without a trust accountpursuant to an exemption16, this can be asignificant issue that must not be overlooked.Hybrid/mixed rates:Benefit to clients: different approaches mayhelp clients recover costs from their customers;clients may use different counsel within the firmfor the most appropriate tasks.Different rates or pricing structures may applyto different types of work. For example,percentage rates for real estate, hourly fees forlitigation, fixed fees for corporate work.What is a ‘disbursement’?Lawyers understand that disbursements areout-of-pocket expenses incurred to advance aclient’s file. However, many clients are notfamiliar with the term. It is better to explain itahead of time than to upset your clients withunexpected charges appearing on their bills.Statements of account must clearly andseparately detail fees and disbursements.17You can only charge as disbursements thoseitems that you actually pay or are required topay to a third party on a client’s behalf.18The following do not qualify as disbursements: Annual subscription costs andtransaction fees for using onlinesolutions to manage businessprocesses.In-house administration charges suchas postage and photocopying.15Law Society of Alberta Rules, Rule 119.41(1)16Law Society of Alberta Rules, Rule 119.1617Alberta Rules of Court, Lawyers’ Charges s.10.2(3); Code ofConduct, Statement of Account, Rule 3.6-318Law Society of Alberta Rules, Rule 119(1)(f); Code ofConduct, Statement of Account, Rule 3.6-3.www.lawsociety.ab.caClient Communication Toolkit: Legal Fees Other overhead costs. Professional indemnity insurance.If you want to charge for such things as fileopening charges, word processing or othercosts that are not disbursements, you caninclude these as “Other Charges” on youraccounts, provided the client agrees.Converting a fee agreementJust as it is never too late to begin exercising,you can convert a vague or unwritten feeagreement into one that provides better clarityand more reasonable compensation.To do this, bill the client for any work you havedone to date based on the fee arrangementyou agreed to when you took on the case. Givethem reasonable warning that, going forward,you wish to charge for your services at adifferent rate or by some other method. If theydisagree, either one of you may decide toterminate the relationship.If you cannot come to terms and you choose toend the relationship altogether, the usual rulesabout not prejudicing your client’s interestsapply, as in all withdrawals.19Fee ReviewsThe reasonableness of any retainer agreementand of a lawyer’s charges can be assessed bythe Review/Assessment Office through theCourts for up to six months (unless extendedby the court) from the time the retaineragreement terminates, or from when you sendthe account to your client.20It is good practice, particularly when acting forindividuals, to consider telling your clients inyour retainer agreement or an accompanyingletter at that the Rules of Court give them the19Code of Conduct, Withdrawal from Representation, Rule3.7-120Alberta Rules of Court], Part 10: Lawyers’ Charges,Recoverable Costs of Litigation, and Sanctions; Subdivision4 Right of Review; Rules 10.9, 10.10, 13.5Page 8

Law Society of AlbertaClient Communication Toolkit: Legal Feesright to review your charges. The precisewording of Rules 10.9 and 10.10 could beincluded and the client advised that anextension of time is not easily obtained.21one machine for both trust and generalfunds. Please note:Payment OptionsPayment by credit/debit cardThe ability to purchase goods and serviceselectronically has become almost universal.You can take advantage of this by offeringclients the option of paying with a credit ordebit card. This may give them access to legalservices they may otherwise be unable toafford and avoids unpaid fees and cash flowproblems for you.While the fee for electronic payments mayseem high at first, remember that acceptingalternate payment methods will get you paidfaster, reduce the number of files you send tocollection and result in fewer bad debts.1. One terminal connected to your trustaccount. You deposit all payments into trustand transfer any fee payments to yourgeneral account.2. Two terminals with separate merchantnumbers, one connected to your trustaccount for trust receipts and one to yourgeneral account for general receipts.3. One terminal that allows two separatemerchant numbers – one for trust and onefor general. This option has only becomeavailable recently and allows you to useThis can only be done through apoint of sale terminal provider andnot directly through a bank. You must have your general andtrust account at the same bank, sothey can take any associated feesout of the general account only.Bartering Legal ServicesYou may decide to provide legal services inreturn for goods or services provided by yourclient. For example, an I.T. consultant may becash-poor but is willing to set up the computernetwork at your office if you handle theconsultant’s divorce. An auto mechanic may bewilling to work on your car in return for handlinga house purchase.ResourcesYou must deposit all credit and debit receiptsinto your trust account within two banking days,so you cannot hold a blank, signedauthorization as security for your fees anddisbursements.22As for the terminals you will need, you havethree options: Bartering Legal Services23Fee Payment by Third Party24 (L.S.O.)Bartering arrangements pose uniquechallenges, not the least of which is assessinga value to whatever is being exchanged.Documenting the transaction accurately iscritical.You cannot accept trust funds or any other prepayment of legal services in a barterarrangement.If you accept payment through a barterarrangement, it is strongly recommended thatyou confirm the terms in a written agreementthat includes: The client’s informed consent.Details of the legal services you willprovide.21West v Logie Family Law, 2018 ABCA 255 at para. ervices/22Law Society of Alberta Rules, Rule rdParty/www.lawsociety.ab.caPage 9

Law Society of Alberta Client Communication Toolkit: Legal FeesThe value of the service.Details of how and when you will bepaid.Confirmation that a statement ofaccount will be provided to the client.Payments by Third PartiesOccasionally, your client’s parent, spouse,friend or business partner may offer to pay thelegal bill.There is nothing objectionable about this, butyou need to be sure you don’t reveal anyconfidential information – the fact that you areacting for someone, the nature of the retainer,how much is owed – without prior authorizationfrom your client.Try to have an agreement

Law Society of Alberta Client Communication Toolkit: Legal Fees www.lawsociety.ab.ca Page 3 Introduction The legal market is as wide as it is deep. Clients have a myriad of different needs and preferences, so there is no single right way to offer or provide legal services. And with rapid technological changes, what it means to

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