Attorney Fee Structures

By Bobby Borg

Samuel Butler once said, "In the law, the only thing certain is the expense." People know attorneys aren't cheap, and that's why they avoid calling them in the first place. As a result, they often fly blindly with no contract or they accept terms to agreements they barely understand—and inevitably they run into legal problems.

Attorneys typically charge their clients in one of three ways: by the hour, a flat fee, or a percentage of the deal they negotiate. On your initial meeting with an attorney, you want to be very clear as to which method it's going to be.

Hourly Fees

The hourly fees an attorney charges can range anywhere from $100 for a young attorney to $400 or more for a high-powered attorney. But before you freak out completely, you should know that hourly billing is not as common as some of the other fee structures discussed here. Nonetheless, an attorney who charges by the hour will typically send you a monthly bill. Find out whether you can use a credit card to make payments as well as whether you'll be charged interest for late payments. You may also want to ask if your attorney can set a cap on his or her costs in the event a case drags out for an extended period of time. It's also important to ask exactly how you'll be billed. For instance, you may be billed at increments of an hour. This means that you may be charged for a quarter of an hour for a phone call that only takes three minutes to make. Finally, ask what expenses you'll be charged for, such as faxes, photocopies, postage, messenger services, or even administrative work. Your bill should not only always be easy to understand, it should leave you with no doubts as to what you're paying for.

Flat Fees

Most attorneys are willing to provide a flat estimate of what their services will cost; in actuality, this is their hourly rate multiplied by the number of hours they expect it will take to complete a job. To draft a short agreement, for instance, your fee may be $500 plus out-of-pocket expenses such as faxes and phone calls. Negotiating a recording agreement can cost anywhere from $2,000 to $20,000 (and more). Of course if you have a friend who's an attorney, you may be able to talk him into to charging you much less.

Percentage of the Deal

Most attorneys are also willing to work for a percentage of the deals they negotiate. For example, an attorney may agree to work for 5 percent (which, by the way, is the industry standard) for negotiating a recording deal. Out-of-pocket expenses are again separate. When first meeting with an attorney, if your costs are expected to be more than $1,000, regardless of how you're being billed, you have the right to ask for a "fee agreement" in writing. A good attorney will suggest that you price shop to make sure his or her fees are reasonable.

Note that the fee most attorneys charge for what is known as a "label shopping agreement" is five percent of the income derived from the record deal. THIS MAY APPLY FOR THE FULL LENGTH OF THE DEAL. For instance, for every album your band records, your attorney may earn a five percent fee for initially shopping your band long after his job is done. For this reason, a "cap" may be negotiated as to how much the attorney's percentage will yield (e.g., $30,000 over the life of the recording deal).

Retainers

Some attorneys may ask for a retainer upfront against your legal bills. For example, if you pay a retainer of $500, and your attorney charges you $1,000 in legal services, the $500 retainer will be deducted from your bill. At that time, you may be asked to pay the $500 balance and another retainer to be held in trust for further services to be rendered. In the event that your attorney never earns the amount of the initial retainer, and you decide to discontinue your business relationship, the remaining retainer should be paid back; if you pay a retainer of $500 and your attorney's charges for the month are only $300, the extra $200 should typically be returned.

Bobby Borg is the author of "The Musician's Handbook: A Practical Guide To Understanding The Music Business," which is available now at www.bobbyborg.com or in a store near you. Contact www.bobbyborg.com.