Making Your Clients’ Cases Pay for Themselves

So here’s a hypothetical for you. Sympathetic client with an interesting and compelling case seeks to retain you. The client can pay something, but most likely not enough to see the case through. What do you do?

(a) Send the client packing;

(b) Take the case and treat it as pro bono or

(c) Find a way to make the case pay for itself.

Any of these options will work – but before you choose “a” or “b,” why not exploring option “c” first? After all, there are a large number of federal statutes — some frequently obscure — that may offer the opportunity to collect attorneys fees for various matters.

The Equal Access to Justice Act, which provides for fees when a litigant prevails in an action brought by the United States and Section 1988, which provides for fees for prevailing parties in civil rights actions are two of the best known federal fee-shifting statutes. But there are many others listed in this 2008 Congressional Research Services Report. And even that list isn’t fully complete; a few months back, I recovered attorneys fees under the Uniform Property and Relocation Assistance Act (though this particular statute is quirky and reimburses only for fees actually incurred by the clients as opposed to fees generated by the lawyers). Of course, in addition to federal fee-shifting statutes, many states have similar laws as well. And some state regulatory agencies, such as the California Public Utilities Commission or Wisconsin Public Service Commission allow intervenors to apply for compensation for the costs of participating in commission proceedings.

In this post, however, I’ll focus mostly on the federal statutes. Let’s say that you discover that your client has a claim that may qualify for attorneys’ fees under a fee-shifting statute. How do you account for that possibility in your retainer agreement, or go about recovering fees? Below are some tips.

1. Fee Agreement: In contrast to court-appointed fees, which often pay for work as you go, fee-shifting statutes provide compensation after a matter concludes, and only when a litigant has prevailed. Because of the risks inherent in recovering fees, some lawyers still require clients to pay as they go and agree to make efforts to recover fees to reimburse the client. In other situations, however, a lawyer may use the availability of fee-recovery to take a case without any fee at all, or at a reduced fee – with the expectation of collecting the remaining fee from the opposing party at the end of the case. If you choose to adopt this approach, your fee agreement should clearly state your intent to apply for the fee and further, specify that you are entitled to payment from the fee recovered. In the absence of this provision, the client would be entitled to keep any fees recovered because fee-shifting statutes typically confer the right to the fee on the client, not the attorney.

In addition, your fee agreement should contemplate that the case may eventually settle. If this happens, you won’t have the ability to file for fees. Thus, your fee agreement should state that if a case settles, the client will pay either a percentage of the award or some quantum meruit amount.

2. Application for Fees: For most fee-shifting statutes, there’s usually just a short window to apply for fees- between 2 weeks and 14 days. If you miss the deadline, you’ll miss the opportunity to recover. Your fee petition must accomplish two goals: making the case for the entitlement to fees, and setting forth how much is owed.

To demonstrate entitlement to fees, you’ll need to show that you meet the statutory criteria for recovery. For the Equal Access to Justice Act, some clients must meet certain size/financial requirements and you must prove that you prevailed on the merits. For the quirky Uniform Relocation statute where I recovered fees, I needed to show that my efforts lead to the gas company’s abandonment of their eminent domain case.

Once you’ve demonstrated that you qualify for fees, it’s time to talk dollars. Bear in mind that fee-recovery is one situation where the billable hour still thrives; this is one area where you probably don’t want to bring Jay Shepherd on board. Most judges are decidedly retro when it comes to fees (must come from applying all of that precedent day-in and day-out) – so you’re not likely to collect a cent unless you submit time sheets documenting your hours. Hourly rates may be governed by the Laffey Matrix – though there’s apparently some controversy over whether those rates may be adjusted as described in excellent detail atCalifornia Attorneys Fees Blog. In addition, you can bolster your fee application with reference to trade press articles on prevailing rates in your geographic area or – if enough money is at stake – with expert testimony.

It’s always nice to win a case against the government or a multi-million dollar corporation exercising government-conferred power like eminent domain. It’s nicer still when they have to cut you a check as well.

Do you have any tips to share on recovering fees under fee-shifting statutes? Please share your experiences – as well as your victories – in the comment section.

1 Comment

  1. Krista Bulmer on April 24, 2011 at 4:59 pm

    In Ontario (Canada), the Rules of Civil Procedure set out that the unsuccessful party to the litigation is responsible to pay a portion of the successful party’s legal fees. The theory behind awarding costs to the successful party is two-fold: to compensate the victor for costs and also to reduce the number of frivolous and vexatious claims by creating a financial disincentive to commencing legal proceedings.

    The amount of costs available to the successful party is ordinarily on a “partial indemnity” basis, or about 60% of the legal fees. However, where there has been particularly abusive behaviour by a party to the litigation, the Court will award “substantial indemnity” costs in the 80%-90% range. This system has been helpful for lawyers to estimate the actual cost to their client and the potential risk to the lawyer or firm. That said, the costs awarded are rarely if ever, sufficient to cover the entire amount of legal fees and there is a downside risk to relying on a cost award to pay off legal fees. You would have to be very confident that your client has a very strong case and that the opposing party is able to pay.

    There is also the issue of success in the motion stages of the litigation since costs are usually awarded at each step in the case. Your client may be successful at trial but lose several motions along the way and this can get very expensive for your client or for you if you chose to fund the case through costs awards. If your client loses the case, you may never get paid. So, while assessing the likelihood of success and the potential to recoup costs is important and may help in the planning stages of the case, I would never rely on costs awards to finance the litigation.

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