Some law firms may pad their fees by recovering questionable costs
Over the course of the last few years, I have had occasion to review several closing or settlement statements from other law firms, and some of the costs recovered appear unreasonable or excessive. A closing statement is a final accounting that a law firm must provide a client before disbursing funds from a trust account. The typical personal injury closing statement will include the following:
- Total Settlement or Verdict amount;
- The attorney’s fee for services;
- The itemized costs advanced to the client and to be recovered by the attorney’s firm;
- All medical bills and liens to be paid from the settlement; and,
- The “net settlement” amount to the client.
A personal injury attorney is held to ethical rules that must be followed. When it comes to recovering costs from a client in a personal injury case, the rule is 4-1.5, which states that costs must be reasonable and that “clearly excessive” costs are illegal. I will cite below some examples of costs that may very well be unreasonable.
- Internet fees. For a firm to try to pass the costs of internet usage is unreasonable and excessive (and yes, ridiculous).
- Outsourcing Research. If you are charged for legal research, or for preparation of a demand package, then this should raise several questions. The reason you are paying your attorney a fee is for him or her to provide such services, and trying to also add them as a cost should raise questions.
- File Set-Up and/or Materials: This can be a reasonable cost, but also a fairly small one. Yes, there can be an actual cost to the firm for an accordion folder and files, but it is quite low. I have seen firm’s add a charge of $100 or more for this supposed cost. Furthermore, with more and more firm’s now paperless, these charges should be even smaller.
- File Storage and/or File Maintenance: Yes, after your case has settled your attorney must store your file materials in accordance with Florida law. In theory, I suppose an argument could be made that the firm can recovery a very small amount to cover this cost. However, I have seen law firms add several hundred dollars for this “cost.”
- Equipment and Computers: This is just ridiculous. But yes, I’ve seen it on closing statements.
- Westlaw or other Legal Research Software: Any law firm that handles litigation is going to have Westlaw or some other type of high end legal research database. In my opinion, Westlaw is the gold standard, and it is expensive. It is also part of the cost of doing business, and should not be added as a cost to a client’s ledger. The only exception might be if the attorney must obtain a document from another jurisdiction that is out of plan, but even then I’ve found that 99% of the time I can simply use the citation of the case I need and download it for free from a number of sources, such as Google Scholar.
It is important to understand that for persons injured in a Florida auto accident, there are many
advantages to the standard contingency fee agreement with a personal injury law firm. Primarily, it enables the injured victim to hire an experienced attorney without having to pay any upfront fees or costs. Furthermore, a client never pays her attorney a fee unless there is a financial recovery on the claim.
Understand that if a lawsuit is required, costs will run well into the thousands of dollars. And even when a case does not involve litigation, there are times that costs can be quite high. For example, after obtaining approval from the client I recently paid $500 to a doctor from another state for a 15 minute phone conference, and another $300 for a final report. The doctor’s fee was high, but he had the right to charge it, and it was money well spent. Other instances where costs can be high is when a client has a lot of medical records that must be obtained by the attorney.
At the time of settlement, the client has the right to question every cost the attorney is seeking to recover. If there are unusually high costs, such as $700 for medical records, then ask to see the invoices paid by the firm. Again, there may be very good and legitimate reasons for a firm to advance a lot of money on a client’s behalf, and a firm has every right to recover those costs. A reputable firm that deals fairly with clients will have no problem producing invoices when funds are disbursed.