My Shingle

Why Aren’t Lawyers More Affordable?

by Carolyn Elefant on June 3, 2014 · 12 comments

in Future of Law, MyShingle Solo

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A recent article in The Atlantic asks: Is There Such a Thing as an Affordable Lawyer?. A provocative title, but how accurate is it?  And how useful are most of the suggested solutions —- which involve automating services or forcing solos and smalls to offer reduced rates and eliminating the “guild mentality” which of course, is responsible for all of the system’s ills — in addressing the scenario that opens the article:

Consider the case of Ned Henry, the plaintiff in a landlord-tenant dispute that’s commonplace in most ways—and curious in one.

In late 2012, Ned and his partner—recent tenants in an apartment in California’s East Bay—began to feel sick. Ned developed migraines and psoriasis, while his partner suffered headaches and nausea. As the winter progressed—more time inside, windows closed—the symptoms got worse. Eventually, they hit upon an explanation: toxic mold poisoning. They moved out and filed a lawsuit, both to avoid a penalty for breaking their lease, and to recover the costs that the mold and the move had imposed.

Ned and his partner didn’t have a lot of money—and the move had depleted their assets—but they weren’t exactly poor, either, so they looked into hiring a lawyer. They couldn’t, however, find anyone within their budget who would take their case. “It was definitely more than we could afford,” he told me over the phone last week. “Big range, depending on who we called, but at least $3,000-$5,000 on the low end, to start out.”

Because Henry and his partner couldn’t find an attorney in their budget, they proceeded pro se in small claims court. After more than a year, their case went before a judge and they won, though their landlord has since appealed.  In addition, during the course of the case, Henry discovered that his landlord had previously failed to disclose mold problems to a dozen or more tenants – most of whom gave up their fight to hold the landlord accountable. Henry attributes much of his success in small claims court to informal assistance that he received from his lawyer contacts, which he believes gave him a significant advantage.

Predictably, the article goes on to describe the high cost of lawyers – ranging from a low of $125 to $250 an hour and criticize the “guild mentality” that imposes a monopoly on legal services that keeps rates high.  But other professionals such as dentists or doctors charge comparable or higher fees — yet no one complains about the guild mentality and forced scarcity that keeps those prices high. That’s partly because of the availability of medical insurance which covers these costs. And even under the Affordable Care Act, health insurance isn’t cheap; many individuals probably pay around $3000 dollars a year which – surprise – is the same amount that Henry and his partner claimed they couldn’t afford to pay a lawyer. 

My guess is that Henry and his partner probably could have come up with $3000-$5000 to pay a lawyer. However, they chose not to because the amount that they would recover would probably cancel out the cost of fees. That’s true of many of the tiny legal matters now being automated. Most clients weight the cost and benefits of these smaller cases and decide not to pursue them.  That doesn’t necessarily mean that the cost of lawyers is too high but rather that the cost isn’t always justified by the value.

The article then trots out the usual suspects -Gillian Hadfield, cheerleader for licensed technicians and non-lawyer providers, Richard Granat on using technology to streamline and automate processes so that lawyers can compete with document providers and Rocket Lawyer’s  Charlie Moore who envisions his site as a place where clients can procure legal services at deeply discounted rates. And like most lawyers, I don’t oppose any of these options – but I also don’t think any of them would have helped Ned Henry.

Take for example, limited license technicians. I’m not sure that they would have provided Henry with better information than the small claims court clerks and likely, would not have uncovered or known what to do with the evidence of the landlords’ past violations.  In addition, although a licensed technician will presumably cost a fraction of what a lawyer charges and therefore is cheaper, the flip side is that a licensed technician adds to the cost of small claims courts which were set up so that consumers could handle these matters themselves.  To the extent that new services like ShakeLaw or non-lawyer technicians are being created to serve clients in matters where it was never cost-effective to use lawyers before, I don’t think that most lawyers would be troubled. However, isn’t the better solution to simplify the systems like small claims court that are supposed to serve clients rather than creating the legal equivalent of H&R Block, which many taxpayers use to complete their tax forms even though all H&R Block does is act as a middleman to what most consumers could do themselves.

As for the other two options, Granat’s Direct Law platform would have helped Henry and his partner to prepare forms to submit to small claims court but would not have spared them of the time consuming legwork – which incidentally, also drives the costs of legal services. As a result, it’s questionable as to whether the deeply discounted legal services offered through the Rocket Lawyer platform would have fit within Henry’s budget.  Even a rate of $100 an hour for 25 hours of work over a year long period amounts to $2500, which might not be worthwhile for a recovery of three or four thousand dollars.

What bothers me most about sensationalist stories like that in The Atlantic is that they blame lawyers for high fees without examining the underlying causes. My guess is that Henry and his partner probably had to show up in person 5-6 times over the course of a year to try to schedule the case or mediate a resolution. They probably had to messenger documents to the court because it doesn’t have e-filing and photo-copy all of the earlier cases against the landlord because they couldn’t be searched through the docket and printed out. Just as it takes time for laypeople to handle these tasks themselves, it takes lawyers time and added costs to handle them as well. In my own case, I would estimate that I save at least $100 in costs, and 15-30 minutes of time when I can e-file a document rather than printing it out, arranging for photocopying and pick up by messenger or Federal Express. In a case involving 10-15 filings, those costs can add up.

In addition, the article fails to suggest one of the more obvious solutions to the high cost of legal services: legal insurance products. Just like Ken Cuccinelli’s $10/month legal defense plan for gun owners that entitles them to the full cost of representation in a self-defense case, Henry and his partner could have been helped by a tenant defense plan – where apartment tenants pay a modest set amount – $10 or $20 a month – for defense against eviction or assistance with disputes against landlords. Of course, these plans work only with economies of scale – for example, a lawyer would need to sell 150 plans at a cost of $20/month to generate $36,000 but those proceeds would suffice to handle a dozen cases at at the $3000 rate. Still, it’s questionable as to whether tenants would pay for this added protection.

No doubt, the cost of legal services is too high for most consumers – and indeed, for many solo and small firm lawyers – to afford. But many factors account for these high costs besides legal fees and if we don’t focus the conversation on those factors as well, we may be left with a bunch of low cost providers and still not much in the way of savings or added value.

  • Jeff Gamso

    In the years I was in private practice, much of that time as a solo and mostly in courts without e-filing, I never had a courier or messenger service do any filing for me. I filed things by FedEx occasionally when they absolutely, positively had to be there overnight (as the ads said), but that was more often a function of my not finishing things earlier than any technical need for speed. And much of that time I never had any staff at all. When I rented space from other lawyers, it worked even better as we shared some costs

    That stuff’s not why we charge so much. (And of course geography makes a real difference in what we charge.) Look into the cost of maintaining a library (or significant databases). Look into the cost of CLE. And then, most important, look at the crushing debt load that so many lawyers carry. And then figure that people who’ve done the years of schooling and training and who hold lives and fortune in their hands often figure that they’re entitled to do more than just scrape by.

    Of course, there’s also price gouging.

  • Kristi Bodin

    I think the framing of the question may be the problem. When I meet with clients with smaller cases, the discussion turns to cost-effectivness. If it’s less costly to handle the case themselves, I am happy to advise clients to do that. If they want my help, we reach an agreement about how much money they are willing to invest in order to try to obtain their goals. We monitor progress, and I give them a number of options as things progress so that they are in partnership with me in deciding which way to go next. I try to be brutally honest about potential outcomes, and my clients seem to appreciate that. The point is to give them value for their money, and take the mystery of law out from behind the curtain. It works for me.

  • http://www.tipsforlawyers.com/ Chris Hargreaves

    It’s quite an issue and I wish I had a solution. I work in commercial litigation, where fees are notoriously high. The reality is that every step of the process increases the cost. Rent, wages, CLE, library costs, administrative staff. However in addition Court processes (constant hearings in some jurisdictions), clients themselves (who don’t tell you the whole story or give you the documents you ask for, or call you every couple of hours and send you 50 emails a day).

    Unfortunately the dollar value of a case is not always indicative of its complexity or cost.

    I do feel for those who cannot access legal advice, and lack the skills or smarts to act for themselves. There are occasionally ways they can access advice, but not often.

  • myshingle

    Jeff – of course you are right – federal express and photocopies are really just nuisance value in comparison to the cost of a lawyer. My point, however, was that if we could remove these small nuisances from simpler matters, an attorney operating under-capacity might be willing to take these cases on. For example, I’m assuming that lawyers quoted Ned Henry a high fee partly due to their expertise but partly because they anticipated that the case could take several physical appearances which also drives cost. What if Henry’s case could have been handled by a lawyer filing a complaint, doing the subsequent hearings and submissions by phone or email and only making one physical appearance? At that level, a lawyer might be willing to do it for $1500. But with all of the nuisance costs, the $1500 isn’t going to be worth it even for a newer lawyer.

  • https://www.equibbly.com/ eQuibbly – Lance Soskin

    I’m curious why you didn’t mention arbitration as an alternative to small claims court? Online arbitration, like that offered by equibbly.com, where former trial judges conduct the arbitrations, are very affordable and convenient. Everything takes place online, including the ‘hearing’ and uploading evidence. A competent, experienced, knowledgeable judge decides the case. There’s also no need for legal representation since an experienced judge controls the process and ensures that the process and decision is unbiased and fair.

    Another benefit is it’s also final without a right to appeal.
    It appears that Ned Henry is now going to have to pay for an appeal which will drain him of even more money than he has already spent.

  • myshingle

    I didn’t mention it because it hadn’t occurred to me. In person arbitration a can be costly but there’s probably considerable savings online. Thanks for chiming in. I’ll check out your website

  • Paul Spitz

    You also have to include hazard pay, in case your court appearances feature one of the many judges on a power trip. Your judge might even invite you into the hallway for a good thrashing.

  • Mo

    When it comes to consumers obtaining affordable legal services from a lawyer and not a paralegal or ‘licensed’ document preparer, the ‘poison pill’ solution for lawyers is to offer lower hourly rates. But that pill’s not going to go down easy not when traditionally, lawyers have priced themselves out like most well-educated professionals. Unfortunately, as has been pointed out, humongous undergrad and law school loan debts also obviate against it. New lawyers going small firm and solo who might have otherwise been more inclined to work for lower non-traditional hourly rates, can’t afford to price themselves out that way — not if they plan on paying back Uncle Sam in ten years. But ironically, there are paralegals/document preparers in the marketplace who already charge near-lawyer-like rates at around $100/hr, which still places legal services outside the reach of many.

    Granted, a paralegal or doc preparer’s $80 to $100 per hour is still lower than what established and accustomed lawyers are willing to sustain — large debts or not. However, I submit that but for the mostly non-dischargeable debts they’d have to service, those lower hourly rates for a trained licensed lawyer would still make a lot more sense for a newbie lawyer than enduring underemployment; unemployment; low-paid document review exploitation work; or for the ‘lucky’ eking out a small firm starting salary existence for $35k to $45K per year (effectively about $17 to $22.50 per hour).

    I, too, don’t think it is CLE or the other “nuisance” costs that drive up the daily overhead demand lawyers face, especially among the new lawyers. Besides food, clothing and shelter, it’s the six-figure debt they’re saddled with that places them between the proverbial rock and hard place. Until that problem is ‘fixed,’ I don’t hold out much hope for more affordable lawyer services from the new generations some day displacing the Boomer lawyers still hanging around in saecula saeculorum without a retirement plan.

    And good luck to the guy selling prepaid legal defense insurance to what I surmise are going to be mostly low income and middle income consumers, especially renters. Talk about a truly discretionary purchase and betting on the come to sell for what most always be nebulous, dubious and ephemeral risks. As Consumer Reports points out, generally speaking, due to typical insurance policy exceptions, limitations and loopholes, prepaid legal services insurance isn’t such a hot deal for consumers. And the reason these plans aren’t more widespread, especially among people (who aren’t being partially subsidized by employers) is that as you point out, smart consumers weigh the costs against the benefits. When it comes to prepaid legal services insurance, should people pay $10 to $20 per month for ‘peace of mind’ protection against something they may never need or that might be cheaper as a one-up proposition? See
    http://articles.courant.com/2014-01-25/business/hc-ls-consumer-reports-prepaid-legal-20140125_1_legal-plans-services-consumer-reports-money-adviser

    As a final aside, prudent lawyers will always ethically discuss with prospective clients the cost-benefit of going forward. Forgetting the merits for a moment, as a threshold matter, does the amount in controversy exceed the financial burden of hiring a lawyer?
    - Mo

  • Enni Bay

    I really like your take on the issue. I now have a clear idea on what this matter is all about. Thank you so much.
    Rules of court

  • tetonattorney

    A couple thoughts: First, the East Bay is a pretty high costs of living area. My guess is that a lawyer that needs to take home $5K a month after taxes to cover his or her living expenses and student loans, is going to have a hard time with this case. Maybe in another area they would have had more luck. Second, what are the statutes on landlord-tenant laws and do they provide for attorney’s fees? My expectation is that California would have some sort of statute providing for attorney’s fees where the landlord’s mold is poisoning the tenant, and the landlord doesn’t fix it or let the tenant out of the lease. Third, I’m curious about the diligence of the potential clients in calling attorneys. Did they look at civil legal aid? Baylegal.org is the first result on google.

    Fourth, and now I’ve gone back and read the article, the potential client has a BA from Harvard and a Ph.D. in Physics from Berkeley. If he doesn’t think it’s worth 3 grand to avoid toxic mold that’s causing migraines…well, I’m confused as to his earning power and the value he places on his health. As an attorney, I routinely give folks working low wage jobs, or Spanish-only speaking immigrants a break–call it low-bono or that I’m a soft touch. But a Harvard grad with a PhD from Berkeley? That would be a tough sell. Did apply for civil legal aid and get rejected?

    What’s funny is I don’t disagree that civil legal services are to expensive for most consumers. I’m on board with the thrust of this article. However, I think a large part of the problem is that lawyers need help running their business. As someone who has deliberately kept his overhead very low so that I can take on righteous low-bono cases, I see the business mindset of attorneys as part of the reason costs are high. Attorneys can do a lot to minimize their costs if they want to make money at $150 an hour.

  • https://www.equibbly.com/ eQuibbly – Lance Soskin

    Thanks Carolyn

  • BillOGoods

    There are markets in everything, including legal services. Ned and his partner were no doubt seeing attorneys with at least enough experience with the court system to understand that a complaint has to prepared and filed, scheduling conference held, settlement conferences or required facilitation done, documents demanded, medical records obtained and reviewed, treating physicians deposed, the other tenants exposed to mold at least interviewed and, oh, did Ned want a jury trial? Need jury instructions prepared and submitted. Did the clients want that done? Did the landlord have insurance and counsel hired by the insurer to defend him? Those attorneys know how to paper a file.
    Then, assuming the case isn’t settled, everyone’s time is spent and expenses incurred for a jury trial. Would one or the other side appeal a verdict?
    No, the attorneys Ned interviewed were operating in a competitive environment, evaluated the case, and nobody wanted to take on a contingency—even with the prospect, unknown at the time, but no doubt considered, I assume, that others similarly harmed, allegedly, by the landlord’s negligence, could have been added to the suit. Sounds to me like the author of the piece in The Atlantic doesn’t understand or did not want to understand the free market in legal services and how it likely worked pretty well in this case.

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