In this video, you’ll get answers to these questions:
- Why is a lawsuit so expensive? (time X rates)
- Why does a lawsuit take so long?
- What steps are involved in a lawsuit?
- Can you pay contingency fees instead of hourly fees?
- How much are hourly attorney fees?
- Why are attorney rates so expensive? (many years of unpaid schooling and training, support staff, legally required records and documentation, software services, and other office overhead)
- Can you represent yourself in a lawsuit?
- If you represent yourself, are there still fees?
- Are there alternatives to a lawsuit? (state court, small claims court, special courts, settlement negotiations)
How much does a lawsuit cost? You’ll get the answer to that question today, as well as other questions like, why is a lawsuit so expensive? Why does a lawsuit take so long? What steps are involved in a lawsuit? Can you pay contingency fees instead of hourly fees? How much are hourly attorney’s fees? Why are attorney rates so expensive? Can you represent yourself in a lawsuit? If you represent yourself, are there still legal fees? And are there alternatives to a lawsuit? I’m Aaron Hall, an attorney representing business owners and entrepreneurial companies. If you’re a business owner, I create these videos for you to help you identify issues to discuss with your business attorney, identify ways that you can avoid legal problems, and just generally help you grow a great company. Did you get my free resource yet? If you didn’t, you can go get it. It’s free, it’s called Seven Common Legal Mistakes Made By New Businesses. You can get it at aaronhall.com/free and if you don’t have it yet, you can download it, get it for free, as well as I’ll send you some other exclusive educational content like this.
How much does a lawsuit cost? Obviously, it depends on the type of lawsuit. Some lawsuits cost millions, some can cost thousands of dollars if you’re paying an attorney, and it’s a small claims court or conciliation type court. So, it depends on the length, it depends on the complexity, it depends on which court you’re in, depends on how much your attorney costs. We’ll dive into some of those topics here.
Why is a lawsuit so expensive? The reason is, you are generally paying for the attorney’s time times the number of hours that the attorney needs to spend on the case. So, for example, maybe the attorney’s rate is $700 per hour, and then you are paying for a hundred hours, so you can do the math there. Or maybe it’s 200 hours, that’s why how much time the attorney spends on the case really matters to you. Also, the attorney’s rate really matters.
Let’s talk about how long a lawsuit takes. Why does a lawsuit take so long? It’s because of the phases or steps that are in a lawsuit. The lawsuit has a number of steps that each party needs to go through in order to prepare for trial. These steps ensure that it’s a fair trial. Both parties have equal access to information, both parties have had time to prepare their case so that at trial. The issues are fairly presented, or at least the parties have an opportunity to fairly present them. And then the judge can make a final binding decision unless, of course, it’s appealed.
What are the steps in a lawsuit? First, parties start a lawsuit by drafting a summons and complaint. They then serve and file that summons and complaint. They file it in the court, they serve it or deliver it to the other party. The summons basically just says, “You are summons to appear in this case,” or “You are hereby required to respond to this case.” The complaint outlines the specific things the person did wrong, and typically the legal claims that, present the case to the court. For example, it might say, “On this date you did this, and then on this date I did this. And on this date you did this, and on this date I did this.” And that’s the facts section. And then the next part of the complaint is, “It was illegal because you violated this statute and I have a claim here because you violated this statute,” or “You broke this law.” That’s the legal claims section of a complaint. So, step one is the exchange of the complaint, and then the response from the other party saying, “I admit I did this but I denied that I did this and I’m without sufficient information to admit or deny some of these other items here.” And the person who’s responding to a lawsuit generally goes through, and just admits, denies, or says they’re without sufficient information to admit or deny.
Once that pleading’s done, you generally have the attorneys meet and talk about how they’re gonna exchange evidence, documents and relevant information, how they’re gonna interview witnesses, and when that will be. Then, they actually do all of that stuff. They request information, and provide it. They request admissions, and the other side admits or denies things. They have depositions where witnesses and parties are interviewed typically. Then once that’s done, have some motions. You might have it prior to that point, you might have it at that point. But motions are generally where the court is being asked something; motion just means ask. So, you’re making a request or an ask of the court. For example, if the other side didn’t give you all the documents that they were supposed to, you might ask the court to compel them to produce those documents. Or if you need more time for some reason, or maybe there’s not enough evidence to support a claim, one party might do a motion for summary judgment to say, “Look, judge, there’s not enough evidence on something,” or “As a matter of law, this particular claim should just be dismissed.” You might have some other issues going on there, some other motions or requests to the court. And then finally, the parties are getting ready for trial. They submit information to each other, they receive information, they talk to the judge, and everything gets teed up. Well, each one of these phases that we’ve talked about that is the pleadings, the discovery and exchange of information, the motions, and then preparing for trial. Those phases each take a number of months typically. Now give or take, some a little longer than others, some shorter than others. But, that’s why a case often takes a year, and sometimes a lot more if there’s a lot of motion practice, or other disputes that have to be resolved before the case can actually go to trial. So, I used to wonder why does it take so long. It’s because of the court system’s commitment to fairness and justice, and the orderly process in which parties go through and prepare for trial. Keep in mind, too, that lawyers are often handling many different cases at the same time, so it’s not like they can just work 100% on a client’s case from start to finish. They’re juggling many different deadlines and court hearings, and obligations.
Can you pay contingency fees instead of hourly fees? There are some types of cases where the lawyers will say, “I won’t get paid unless you win, in which case I’ll get a percentage of whatever you won.” That’s called a contingency fee. The cases where lawyers will do that are very limited. In many cases, it’s not even permitted by law. For example, divorce case, the lawyer can’t say, “If we get a successful divorce, then I get paid a certain amount.” If you think about it, it makes sense from a public policy perspective. We don’t want lawyers incentivized financially to separate marriages, so lawyers have to get paid either an hourly fee or a fixed fee for a divorce. So, contingency fees are available in limited cases. Those typically are personal injury cases, like a car accident, a birth defect case, some sort of injury slip and fall, for example. Why? Because normally, it’s very clear that there’s been harm, and so there’s going to be some sort of damages paid. Also, there’s often insurance company that does the paying, so the party suing knows there are some deep pockets on the other side. Usually the issue is, how much liability did the defendant have and how much do they owe? So, a lot of those cases actually get solved without having to go to trial. And that’s why the attorneys can take these cases because they take enough of them, they know we’re likely to recover money. But business litigation, and litigation between neighbors and most other disputes, you’re gonna have to pay the attorney by the hour or a fixed fee. And that’s because the attorney doesn’t know if you’re actually going to win, and the attorney is not willing to take that risk. It’s just not worth the risk for an attorney, and the attorney can’t make a sufficient living taking on those types of cases on a contingency basis.
How much are hourly attorney fees? I’ve seen them as low as around $290 per hour. Maybe even less occasionally, and then as high as about $2,000 per hour. That $2,000 rate is typically going to be a partner at a large law firm in a big city like New York. By the way, that attorney’s gonna be very experienced and have an incredible reputation. Typically, it’s a very complex case. On the other end of the spectrum, the attorney at the bottom end of the rate is usually very inexperienced. Maybe taking a small case, perhaps in a small town where rates are just generally lower. All right, what are average rates? Well, I can speak to Minnesota. Generally in Minnesota, what I see is somewhere between $300 and $800 per hour. That’s a fairly common spectrum. Almost all of the attorneys here in 2022 are somewhere between that range, and a very common range is somewhere between $400 and $600 per hour. The attorneys with significant experience or specialty or expertise are the ones who generally go above the $600 per hour that might be larger cases as well. And the attorneys with less experience or they take smaller matters, those are the attorneys who may charge on the lower end. But it’s entirely a question of attorney discretion to set their own rates as long as the rates are not unreasonable. They’re just so outside of the norm that the government says you can’t charge that, that’s excessive.
Why are attorney rates so expensive? First off, attorneys have many years of unpaid schooling, so not only do they have no income during those schooling years, they also have substantial tuition and debt which typically they’re paying off for many years. So, in order to run a business that can cover its costs, a law firm needs to be able to pay attorneys enough to pay down their law school debt, as well as cover their living expenses. Second, a law firm is required to have ongoing training. And attorneys are required to have ongoing training and whenever staff are hired, training is required in order to do the great work that attorneys can do for clients. Training on an ongoing basis is an essential element, which is not only time that’s not paid, but it’s also time that often requires payment for those training services.
Law firms have support staff and support staff require training, and they do a lot of the behind the scenes type work. Many times they’re not billing for those. All of that work, that’s built into the attorney’s hourly rate. So, the firm has determined what does the attorney needs to charge in order to cover all the other expenses of running the business, including support staff. Also, the attorney is required to have certain records and documentation even if the clients don’t care. By law, attorneys have to open a file and track all sorts of details about the case to avoid conflicts of interest in the future, to track for compliance with ethics rules, for compliance with tax authorities, and so by law, attorneys have to do this work. It’s not billable to the client, and that means the billable work for the clients needs to account for that non-billable work. Attorneys also utilize software services, which are typically paid on a subscription basis. They need to have money to cover that, and then there are just all the other overhead costs of running a practice. Maybe it’s a lease payment to a landlord, insurance, etc., that all of those costs go into an attorney’s rate.
So, why are attorney rates so expensive? Because you’re not just paying for the attorney money that the attorney can then go pocket. From every a hundred dollars it goes to an attorney, a vast majority of it goes to other expenses required to run the practice.
Can you represent yourself in a lawsuit? Technically, you can, and many people try. But let’s face it, the court rules are complex, and you are required as a party not represented by an attorney to comply with the court rules. You can’t bypass court rules in a way that would be unfair to the other side. Court rules are extensive, they’re lengthy. Many times, there are multiple volumes of court rules. You might have the rules of civil procedure, the rules of evidence, and the rules of general practice and the local rules, and then the judge herself may have practiced pointers and preferences. So, those are other rules that you are supposed to follow. So, can you represent yourself? Yes, but problem number one: it’s hard to comply with all the rules, hard to even know what they are unless you are living in them day to day as an attorney. Problem number two is, you are not objective. You don’t have the ability to set aside the emotions and the bias that you have in order to present those in an objective manner, in a way that will resonate best with the judge. That’s why there’s a saying for attorneys, “The attorney who represents himself has a client for a fool.” What does that mean? It means that, if you are trying to represent yourself even as an attorney, you are a fool because you are too close to the situation. You will get too emotional, you’ll get distracted by the little things that irritate you instead of focusing on articulating legal arguments that are most persuasive to a judge.
Can you represent yourself? Yes. By the way, what about small claims court or sometimes called conciliation court? Most of the time, parties do represent themselves there, but if you are in state district court, federal district court, or some other venue or tribunal, normally, it makes sense to hire an attorney who is experienced in that environment, and understands its rules and can articulate the best arguments for you rather than the issues that may irritate you most and bias you.
If you represent yourself, are there still legal fees? Yes. There’s still typically court filing fees. You may have a court reporter fee for each deposition that you decide to do. You would also have transcript fees for any court hearings that you needed a transcript for, or for any depositions that you needed a transcript for. You might say, “Why would I need a transcript?” You need a transcript, so you can cite to what somebody said when you put your arguments in writing, or when you admit evidence into the case. Courts need evidence in a written form. And so, even when witnesses say something, what they say needs to get transcribed into writing, and it’s the written documentation that then becomes evidence in the court. So, even if you don’t have attorney’s fees, you typically will have significant other fees. How much? Well, filing fees might be $300 or $500. A court reporter fee typically is around $500 for a half a day. Transcript fees, depending on how long is being transcribed, typically what I see is a couple thousand dollars for a couple hours of a transcription.
Are there alternatives to a lawsuit? The main alternative to a lawsuit is negotiating some sort of settlement. Now, sometimes a lawsuit might move forward, and it may be in alternative dispute resolution like arbitration, which essentially is a private judge making a decision in your case. But if you can’t negotiate a settlement, then usually the only other option is to proceed with the lawsuit. Now, there might be a little middle ground there.
Sometimes, what parties do is they will hire a mediator who helps the parties try to negotiate a resolution that they both can agree to and live with. That would be called a mediated settlement agreement, but the parties have to agree to a mediator or the court needs to require that a mediator be used. You don’t have a right to a mediation, unless the other party has agreed to it or the court has ordered it. As you can see, litigation is expensive. It’s often very distracting for the individuals and companies that are in it. It’s often very frustrating, it can become very emotional that’s why I hate litigation. It is simply people paying money to fight each other, and to the extent it can be avoided. It’s great when you do. So, when I talk to my clients about the cost of a lawsuit, I often talk with them not just about the financial cost of lawyer fees and filing fees, court reporter fees, and transcript fees. I also talk with them about the distraction—the lawsuit will be for their attention. I talk with them about the tension it’s gonna create, and that they’ll wanna talk with it about the lawsuit to spouses and to friends and to other loved ones, the bitterness and resentment and anger that it can create, the negative energy that it can create.
Often, successful business owners are better off paying a settlement than fighting for a year or two. Now, I’ll tell you what, a lot of times clients tell me, “I would rather pay you the attorney to win this case than let that money end up with the other side.” And I try to talk my client out of that approach, “I totally get it. I understand you’re angry, you’ve been violated. It feels so unjust to pay money to a party who is wrong. You’d rather pay an attorney to fight for you.” But when weighed against the money, time, distraction, and just negativity associated with litigation, often it’s better to just pay some money and settle and be done with it.
That’s a difficult decision to have, but it’s a decision that I regularly analyze with my clients. Now, I will warn you, not every attorney does this. Let’s face it, attorneys are making money the more you fight. And unfortunately, there are a lot of unscrupulous attorneys who is self-interest and financial interest in making money drives them to push for more litigation. They fan the flame of your emotions, they take advantage of the fact that you’re in a vulnerable spot, and they will continue to take more and more of your money because the more you fight in litigation, the more money they get paid. So, you’ve been warned there are different types of attorneys out there.
I do these educational videos to help empower you so you have knowledge about the legal system, legal fees, and how to proceed with fights. If you haven’t yet downloaded the free resource that I have, Seven Common Legal Mistakes Made by New Business Owners, please go ahead and get that. It’s at aaronhall.com/free. There’s no obligation, I’m not gonna pester you a spam. What I will do though is from time to time, provide you with other valuable educational content and resources that I believe will help you.
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