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.
-
5 Easy Weatherproofing Projects That Help Prevent Damage and Save on InsuranceProtect your home from storms and water damage with these simple weatherproofing upgrades — some may help reduce your home insurance premium.
-
If Trump Fires Jerome Powell, What Happens To Savings and Mortgage Rates?President Donald Trump expressed his desire to remove Fed Chair Jerome Powell. If the president is successful, how would it impact your savings accounts?
-
Four Takeaways From Filing Your Taxes to Boost Your Financial FutureNow that another tax season is in the rearview mirror for most of us, what lessons can you take from what you learned about your finances to plan for the future?
-
What Claims Adjusters Are Thinking vs What They're SayingAfter a natural disaster, few of us are at our best, but here's what to keep in mind when you're interacting with your insurance company's claims adjuster.
-
Looking to Make a Job Change? How to Stand Out Like a ProTo make a strong first impression in interviews or when networking, skip your job title and work history and use an opening gambit that highlights your talents.
-
First 100 Days: Trump's Impact on Your FinancesHere are some opportunities to consider regarding investing, interest rates and tax cuts as the financial landscape shifts under the new administration.
-
What Would Happen if You Put Your Tax Refund in an IRA?Not only could you get a tax break, but the compounding effect over 35 years could turn the average refund into nearly $14,000.
-
Children Can't Afford to Fly the Nest? Here's How to HelpThe high cost of living means more adult children are staying at home. Here are four ways to help financially so they can eventually spread their wings.
-
A QLAC Does So Much More Than Simply Defer TaxesHere are the multiple ways you can use a QLAC, from managing retirement risks to creating income for specific retirement needs and wants.
-
Self-Directed Brokerage Accounts: Retirement's Hidden Gem?SDBAs are often overlooked, but they can offer more flexibility and growth potential inside your 401(k) when actively managed by a professional.
