Fee Agreements for Business Lawsuits in Texas

When your business is faced with filing or defending a lawsuit, it's important to carefully consider the benefits and risks of different types fee agreements. The type of fee agreement you choose may have a substantial impact on the total amount of attorney's fees you pay. Generally speaking, there are four types of fee agreements available to businesses: hourly, contingency, hybrid, and flat fee.

1. Hourly Fee Agreement

The most traditional fee agreement is an hourly fee agreement whereby the lawyer charges a set fee for each hour worked on your case. Generally speaking, large law firms charge a much higher hourly rate than smaller law firm. For big law firms, the hourly rate has risen meteorically and big law firms hourly rates of $1,000 per hour are becoming common practice.

Faced with $1,000 per hour billing rates, many business owners ultimately compromise by trusting their case to an inexperienced associate attorney. The benefit of deferring your case to a inexperienced big firm associate attorney is a lower hourly rate. However, the lack of experience, both in the law and in practice, of a big firm associate may cost more in the long run because of the associate's inexperience.

An alternative to paying the exorbitant rates of big law firms is to hire experienced trial lawyers from smaller firms. Many smaller firms (like our firm) were founded by former big firm lawyers with many years of experience. Importantly, smaller firms also typically offer much lower hourly rates. The combination of experience and lower hourly rates often makes small law firms a better fit for small and medium sized businesses.

2. Contingency Fee Agreement

In some circumstance, business lawyers (including our firm) may be willing to agree to a contingency fee agreement. Under a contingency fee agreement, any fee for the services provided is payable only when there is a favorable result. Contingent fees are usually calculated as a percentage of the client's recovery from the lawsuit. The primary benefit of a contingency fee agreement is that you are not required to pay attorney's fees and expenses as the case progresses. In the context of business lawsuit, attorney's fees calculated based on an hourly rate can easily exceed $100,000, which can damage a small or medium sized business' operations. A contingency fee agreement allows the business to aggressively pursue its damages while minimizing the out of pocket cost. Many small law firms offer contingency fee agreements to businesses. If you are seeking damages, especially for breach of contract or fraud, you should consider asking your lawyers about a contingency fee agreement.

3. Hybrid Fee Agreement

A hybrid agreement is usually a combination of a reduced hourly fee agreement and a reduced contingency fee agreement. The terms of hybrid agreements are tailored to fit an individual lawsuit and can be be an excellent option for businesses. By reducing the contingency fee percentage, your business keeps a greater percentage of any recovery and, in exchange, the lawyer bills for time spent working on your case.

4. Flat Fee Agreement

In business lawsuits, flat fees are most commonly used for large volumes of repetitive work. If your business needs lawyers on a consistent basis for the same type of work, considering asking about a flat fee agreement.

Hopefully, this introduction to fee agreement will you select the best type of fee agreement for your needs. If you have any questions, please do not hesitate to contact us.

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