If the adage about one bad apple spoiling the barrel is true, the American justice system may be in trouble. Perhaps you’ve heard of famed attorney Thomas Girardi, married to Real Housewives of Beverly Hills star Erika, who was recently accused of stealing millions of dollars from clients’ personal injury settlements?
And let us not forget Michael Avenatti, who has been accused of stealing from his clients, including stripper Stormy Daniels, and was sentenced to 30 months in prison for trying to extort millions of dollars from Nike shoes.
Friends of this column, Los Angeles based Brian Kabateck and Shant Karnikian of Kabateck LLP have earned a nationwide reputation as among the most successful plaintiff's lawyers handling cases on behalf of consumers against insurance companies, large corporations, and other wrongdoers. Concerned that the widely publicized actions of a few dishonest lawyers have risked the reputation of an entire profession, they wanted to share some guidelines for the average consumer to keep in mind when hiring an attorney. Hopefully, by understanding what you’re getting into when hiring a lawyer, and knowing some red flags to watch out for, you can stay away from any potential “bad apples” out there.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Guidelines to Keep in Mind When Hiring a Lawyer
Brian: Always be aware of the agreement you entered into. If this is a contingency fee case — where the lawyer is paid only if you win — specific percentages must be set out in the contract, which is also known as the “retainer agreement.” Some agreements have a sliding scale starting at a lower percentage if the case settles early but then going to a higher percentage if it goes to trial or gets close to trial.
The lawyer’s fee is earned when the case settles and when settlement funds are received. Unless you dispute the amount of fees, the attorney is entitled to take their fees upon payment of the settlement and must comply with the terms of the retainer.
Shant: In addition to the lawyer’s fee, expect to be charged what are called the “costs” of litigation. This includes most other expenses aside from the lawyer’s time, including court filing fees, paying a court reporter, copies of transcripts, hiring experts, travel and related expenses.
Look closely at the costs that you are being charged. Ask for a breakdown. Watch out for certain "hidden costs,” which may be impermissible, such as an administrative charge to set up the file, or the lawyer billing you as a cost to review a file. These are more traditional legal fees – and they should not be in a contingent fee retainer. Look for things like “Long Distance Telephone Charges, Sending a Fax, Secretarial Time,” which are being disguised as costs and are generally not proper!
Brian: After signing the retainer agreement, expect frequent reporting from your lawyer. All litigated cases have hearings and trial setting conferences when important decisions are made. Your lawyer must advise you of all important dates and rulings. What upsets clients most is when they are not kept informed. Ask to be copied on correspondence and all important events connected with your case. This is critical and lets your lawyer know that you consider yourself an active partner in the case. You want to be a polite squeaky wheel.
Red Flags
Shant: At the end of the case, with large settlements or verdicts, often the client’s net recover can be put into a “structure” or an annuity, which can provide lifetime payments and substantial tax benefits. But if the lawyer claims to be investing or promises to invest your money, this is a huge red flag! It is generally not allowed.
Any long delay after settlement before receiving payment is another red flag, as anywhere from two to four weeks is typical. A delay beyond that requires an immediate explanation! Delays are a warning sign. Your patience and silence is not beneficial!
If you win the case and the other side appeals, or if you lose and you decide to appeal, your retainer agreement usually will not cover an appeal. It is completely permissible for the lawyer to ask the client to sign a new agreement for an appeal, but they cannot charge you more money unless you have agreed to it.
Brian: Are you hiring someone to simply present the claim and then, if it does not settle, hand it off to somebody else? That is fine, but you want to know this up front, and if there will be a fee-sharing arrangement. Most states require the client to agree in writing if the lawyer is going to share fees.
A Few Final Thoughts
If you fire your lawyer, they may put a lien on your case but, in most situations, they cannot demand payment upon firing unless the retainer agreement calls out for it. Conversely, if the lawyer withdraws from the case or decides to stop representing you in the case, many states do not allow the lawyer to recover fees.
Remember that the case is going to take a long time to work its way through the courts, particularly in the post-COVID world. Courthouses across the country have become logjammed with cases and trials. A case that could go to trial in 18 to 24 months before the pandemic may now take three to four years or longer because of the backlog. Delays are expected, but make sure your lawyer keeps you informed about the reasons for such delays.
You may have a great case with clear liability and substantial injuries or damages, but you need to find out early from your lawyer if the defendant has the ability to pay or if there is adequate or inadequate insurance.
Make sure your lawyer communicates with you. Communication is the great panacea for all difficulties in an attorney-client relationship. No client has ever complained because they have gotten too much information. Conversely, be wary of a lawyer who is not keeping you posted on what is happening in your case or ignoring your requests for updates.
-
Rising AI Demand Stokes Undersea InvestmentsThe Kiplinger Letter As demand soars for AI, there’s a need to transport huge amounts of data across oceans. Tech giants have big plans for new submarine cables, including the longest ever.
-
Return to Your Home Country to Retire: Repatriation RetirementThey came to the U.S. to live and work, but they want to retire in the old country. Here's how to juggle the move back home.
-
The Three Biggest Fears Keeping Retirees Up at NightHere are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
-
What Can a Donor-Advised Fund Do for You? (A Lot)DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
-
Estate Planning When You Have International AssetsEstate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
-
Three Essential Estate Planning Steps to Protect Your Nest EggAfter dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
-
Is Chasing the American Dream Ruining Your Financial Life?Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
-
Retiring With a Pension? Four Things to KnowThe road to a secure retirement is slightly more intricate for people with pensions. Here are four key issues to consider to make the most out of yours.
-
How to Teach Your Kids About the Tax Facts of LifeTaxes are unavoidable, so it's important to teach children what to expect. Also, does your child need to file a tax return for 2024? Find out here.
-
Revocable Living Trusts: The Good, the Bad and the UglyPeople are conditioned to believe they should avoid probate at all costs, but when compared with living trusts, probate could be a smart choice for some folks.
