Symposium on Money Management
The Value of the Legal Profession and Its Cost
Edward A. Trabin, B.S., J.D., C.P.A.*
Many articles have been written by and for veterinarians dealing with techniques of surgery, new developments in veterinary medicine, research, hospital management, client relations, etc. We suspect that few, if any, have dealt with the relationship between the veterinarian and his attorney. The thrust of this article is to suggest that the veterinarian may be well advised to have legal counsel-if not on a regular basis via a monthly retainer, at least on a regular periodic basis. We have all heard about preventive medicine (human and animal) and the advisability of an annual physical check-up; especially when one reaches middle age (whenever that may be). But how many of us have heard of preventive legal advice and an annual legal check-up? It has long been the theory of many attorneys, including the author, that the best form of law that can be practiced and the best service one can render a client is in the nature of preventive law- advising a client before the problem arises. Obviously, a client must have an awareness that a particular situation necessitates seeking legal advice before and not after the fact. This, unfortunately, is not often the case. It is important that the client develop the awareness, for example, that the cost of an hour's consultation with his attorney before signing that deposit receipt (which he only assumes is the negotiating entry to the subsequent execution of a contract) is far less expensive than the cost of the subsequent awareness that if the other party to that receipt signs it, a binding contract may have been entered into, with all of its attendant ramifications, implications, and obligations. How then may one approach the concept of "preventive legal medicine"? As is true with veterinarians, in general, attorneys are ethically not permitted to advertise, hence one meets an attorney through recommendation of his banker, colleagues, accountant, etc. If good rapport can be established, the first step has been taken. How then might the relationship develop? *Attorney at Law, Torrance, California Veterinary Clinics of North America- Vol. 6, No. I, February 1976
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Unless the practitioner has a particular problem at the moment the best place to start is with the question of whether the practitioner has a Will. One does not have to be wealthy to need a Will. In the case of a married practitioner of modest means it would be no great catastrophe if he would succumb without a Will if his assets were held in joint tenancy with his spouse. In such case his estate automatically passes to his spouse without probate although subject to death taxes. However, problems may arise if both were victims of a common disaster. A guardian for their children is one issue that quickly comes to mind. It is not the intent of this article to discuss estate planning but simply to observe that as good a starting point as any in the development of an attorney-client relationship with the veterinarian is the consideration of a Will. Having conferred with his attorney regarding the drawing of a Will (whether simple or complex), the veterinarian may then have the attorney review his other legal affairs such as the status of his practice, leases, partnership agreements, buy and sell agreements , income and estate planning, legal advice with respect to current investments (leads to recognition for legal advice in the making of future investments), etc. Obviously, it does not necessarily follow that any of the foregoing matters may be applicable or pose a current question. However, if the veterinarian keeps them in mind he will consult with counsel before and not after he enters into a partnership, etc. Retainers
What about retainers? Many clients will broach the subject of placing the attorney on a retainer without fully understanding the nature of a retainer or whether the need exists for a retainer relationship. In general, the author tends to discourage a retainer agreement until there has been an ongoing relationship with the client that indicates a retainer agreement would be appropriate. In general the purpose of a retainer is to provide a regular monthly fee to the attorney whereby the client inay feel more comfortable about seeking the advice of his counsel without being concerned about "a bill every time he talks with his lawyer." Obviously, no one receives something for nothing and the client is paying for those times he calls his attorney, or drops in to see him, or has him send a letter in his behalf. The client may even be paying his attorney for not using him since the concept of a retainer is for the client to be able to call on his attorney, in a sense, at any time without being billed each time. Because the client is paying this monthly fee for the privilege of being able to have his attorney on call, it can be an expensive luxury if the client does not call his attorney quite frequently. An ongoing relationship is necessary in order to determine whether a retainer arrangement makes economic sense to both parties.
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Legal Fees What are the economics of the matter? Obviously, fees will vary with the locale and the nature of the service performed by the attorney. The legal fee for a simple Will probably varies from as little as $35.00 to perhaps $150.00, depending upon the locale and whether the attorney charges on a flat-fee or time basis. When one gets involved in estate planning which must, of necessity, include consideration of the size of one's estate, the computation of estate taxes, possible creation of testamentary trusts, living trusts, gifts, etc., an attorney normally charges on an hourly basis. Again, fees will vary according to locale, size of the firm retained, etc. While the author has not done studies on the various hourly rates, he believes that most attorneys involved in estate planning charge from $60.00 per hour of office time to perhaps as much as $150.00 per hour, the latter being charged by highly specialized firms in only the large metropolitan areas. Any thorough estate program, including conferences and drafting of documents, is likely to cost from $350.00 upward. The cost may be cheap in the long run. All of us have heard the old saying that the attorney who represents himself has a fool for a client. This is not only true but the author can attest to it by personal experience. Some years ago we probated an estate in which the decedent had declined to seek legal advice with respect to his Will. He purchased a form at a stationery store for about 25 cents and filled in the blanks, in his own hand, and put it away. When it came time to probate the Will it was discovered that he had made a number of erasures with respect to the amount he intended to leave one legatee. The amount, according to handwriting experts, might have been $2,500, or $3,000, or maybe as much as $12,500. After a lengthy will contest, the matter was settled with the legatee receiving more than the other heirs thought he should receive but less than the legatee wanted. The attorney and executor also received substantial extra fees for their work in connection with the contest. The author was subsequently informed that the decedent had asked his banker to recommend an attorney but when he was informed that the fee would probably be about $25 to $35, he demurred in favor of a 25 cent stationery form, and a cost of thousands of dollars to his heirs. As stated previously, fees vary from one locale to another. In general, it has been the author's experience that the costs, including government fees, in connection with incorporating one's practice are between $850 and $1,000. The cost of drafting a partnership agreement will vary according to the complexity of the agreement and whether the attorney works on a flat-fee or hourly basis. Many attorneys have developed a number of standard forms over the years, adapting them to the particular client. In these latter cases the fees may be somewhat less than those where the agreement is written specifically for the client.
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Obviously, in the former instance, there will be some loss of individuality and the lower cost may not be warranted if the product does not truly fit the needs of the clierlt. Some attorneys provide a "package deal" for incorporation, setting up a pension and/or profit sharing plan and drawing employment agreements for about $2 ,500, including governmental fees . The fee, all things considered, is a very reasonable one. The only difficulty is that the "package" is just that and where the client has special considerations the "package" doesn't quite do the job. The client may not be satisfied with the end product and therefore he must be prepared either to accept the molded product or pay for the individualized service. It is as true in law as in anything else, the client gets what he pays for. In the area of litigation, the costs to the client may be substantial. Most of the direct cost of litigation to the client can be avoided by adequate insurance coverage. Liability for damages caused in an automobile accident, injury to persons or property occurring on or about the practitioner's home or hospital, malpractice, etc., can be guarded against by adequate insurance. Defense of such litigation is provided the practitioner by his carrier, which will also pay any judgment within the limits of the policy. It is those areas of litigation in which the practitioner does not have insurance that litigation costs can be most expensive. In general, in Los Angeles County, minimum legal fees are $350 per day in Municipal Court and $450.00 per day in Superior Court, plus the attorney's usual hourly charge for pretrial consultation, research, and preparation. In addition to the legal fees, there are the filing fees, deposition costs, jury fees, and, in some cases, court reporter's fees. The one silver lining in the dark clouds of litigation is that if the practitioner is the prevailing party he will at least be entitled to a judgment awarding him his court costs (not attorney fees). Hopefully, he will be able to collect the judgment for such costs. It is a basic principle of American jurisprudence that unless there is a contractual provision or a special statutory provision, attorney's fees are not recoverable by the prevailing party. We might add that (at least in Los Angeles County) when attorney's fees are recoverable they rarely cover the actual legal fees incurred by the client. Thus the concept of preventive legal advice becomes even less expensive in the long run to the client. There is nothing mysterious about legal fees and the client should not be bashful about inquiring at the outset just what the fee may be. Law, however, does not quite lend itself to allowing for a fixed fee as is generally true in the other professions. In general a doctor, dentist, or veterinarian knows with a greater certainty just what is entailed in a surgical procedure and can render a fixed charge. Likewise, he knows just how much an injection will cost the patient. Because an attorney is dealing with a far less exact science and is often dealing with the vari-
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able of human emotions, it is much more difficult to give an exact figure for his fee. Unless he is to give a pre-packaged product which may be designed to cover all cases and not really cover any, his quotations of fees, in general, must be estimates or approximations. The attorneyclient relationship is one which must be based upon trust and confidence. The relationship of mutual trust and confidence becomes especially important when the client must rely upon the attorney to charge a reasonable and honest fee for the services rendered. Most attorneys keep time records from which they determine their billings and they should be prepared to support their charges accordingly when the client asks for the same. Divorce
We have mentioned the "business" aspects of legal advice: incorporation, partnership, leases, etc. What about divorce? Divorce may occur between the practitioner and his wife and between the practitioner and his partner. If the partners have acted prudently they consulted with an attorney when they became partners and made adequate provisions for the dissolution of their practice regarding division of clients, assets, etc.; who should remain at the hospital and who leaves, etc. This is not to suggest that all dissolutions of partnerships can be accomplished without litigation but a well thought out and well drawn agreement executed at the inception of the partnership or at least during the partnership and before problems arise, can go a long way in reducing the area of conflict. In divorce between the practitioner and his wife, the attorney and accountant play an important role. While it may not be possible to avoid the emotional trauma it may be possible to structure the dissolution wherein the parties achieve some reasonableness in the division of property and provisions for support, the result of which is to create a favorable tax impact. For example, the husband may resist all efforts at division of property simply because he is not about to pay any spousal support (alimony), although he will certainly be glad to pay the same amount as child support. While he may derive some tax benefit by taking a dependency deduction based upon child support, if the same dollar amount is called "spousal support" it becomes fully deductible and may well result in an actual increase in the net spendable income of the husband. Thus the advice of the attorney with the assistance of the accountant extends beyond the mere mechanics of obtaining the divorce to the structuring of the division of property and payment of spousal and child support to achieve significant tax savings to the (ex) husband. This is not to say that both parties will always be pleased with the result; emotions often prevent this. But it is the job of the attorney to act in an objective fashion and to avoid allowing the emotions of his client to interfere with the negotiations he enters into with the wife's attorney.
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Specialty Areas
Just as veterinarians may have a specialized practice, so do some attorneys! While there are postgraduate courses and Master and Doctor of Law Degrees available, most attorneys develop their expertise simply by experience in a particular field. There has long been pressure in the profession to certificate attorneys in particular fields and in the last several years California has recognized several areas in which a "certification" has been allowed: taxation, criminal law, patent law, and workmen's compensation are those areas especially suitable for certification. This does not mean that an attorney who is not certificated is not able or competent to practice in those areas. However, it is certa1nly appropriate for the veterinarian who is faced with an income tax audit, for example, to look to either an attorney who is certified as a tax specialist or who at least engages in some income tax practice to represent him rather than consult with any attorney whose sole familiarity with taxes is knowing he must file an annual income tax return. Obviously, the fees charged by the practitioner who is certificated or who has a better than average knowledge of the area of law are likely to be higher than the general practitioner. Summary
We have attempted to give the reader an overview of the function of the lawyer and his value to the working practitioner and hope that in some small measure the foregoing has helped in this regard. 18522 Hawthorne Boulevard Suite 200 Torrance, California 90504
The Value of the Legal Profession and Its Cost
Edward A. Trabin, B.S., J.D., C.P.A.*
Many articles have been written by and for veterinarians dealing with techniques of surgery, new developments in veterinary medicine, research, hospital management, client relations, etc. We suspect that few, if any, have dealt with the relationship between the veterinarian and his attorney. The thrust of this article is to suggest that the veterinarian may be well advised to have legal counsel-if not on a regular basis via a monthly retainer, at least on a regular periodic basis. We have all heard about preventive medicine (human and animal) and the advisability of an annual physical check-up; especially when one reaches middle age (whenever that may be). But how many of us have heard of preventive legal advice and an annual legal check-up? It has long been the theory of many attorneys, including the author, that the best form of law that can be practiced and the best service one can render a client is in the nature of preventive law- advising a client before the problem arises. Obviously, a client must have an awareness that a particular situation necessitates seeking legal advice before and not after the fact. This, unfortunately, is not often the case. It is important that the client develop the awareness, for example, that the cost of an hour's consultation with his attorney before signing that deposit receipt (which he only assumes is the negotiating entry to the subsequent execution of a contract) is far less expensive than the cost of the subsequent awareness that if the other party to that receipt signs it, a binding contract may have been entered into, with all of its attendant ramifications, implications, and obligations. How then may one approach the concept of "preventive legal medicine"? As is true with veterinarians, in general, attorneys are ethically not permitted to advertise, hence one meets an attorney through recommendation of his banker, colleagues, accountant, etc. If good rapport can be established, the first step has been taken. How then might the relationship develop? *Attorney at Law, Torrance, California Veterinary Clinics of North America- Vol. 6, No. I, February 1976
143
144
Eow ARD A.
TRABIN
Unless the practitioner has a particular problem at the moment the best place to start is with the question of whether the practitioner has a Will. One does not have to be wealthy to need a Will. In the case of a married practitioner of modest means it would be no great catastrophe if he would succumb without a Will if his assets were held in joint tenancy with his spouse. In such case his estate automatically passes to his spouse without probate although subject to death taxes. However, problems may arise if both were victims of a common disaster. A guardian for their children is one issue that quickly comes to mind. It is not the intent of this article to discuss estate planning but simply to observe that as good a starting point as any in the development of an attorney-client relationship with the veterinarian is the consideration of a Will. Having conferred with his attorney regarding the drawing of a Will (whether simple or complex), the veterinarian may then have the attorney review his other legal affairs such as the status of his practice, leases, partnership agreements, buy and sell agreements , income and estate planning, legal advice with respect to current investments (leads to recognition for legal advice in the making of future investments), etc. Obviously, it does not necessarily follow that any of the foregoing matters may be applicable or pose a current question. However, if the veterinarian keeps them in mind he will consult with counsel before and not after he enters into a partnership, etc. Retainers
What about retainers? Many clients will broach the subject of placing the attorney on a retainer without fully understanding the nature of a retainer or whether the need exists for a retainer relationship. In general, the author tends to discourage a retainer agreement until there has been an ongoing relationship with the client that indicates a retainer agreement would be appropriate. In general the purpose of a retainer is to provide a regular monthly fee to the attorney whereby the client inay feel more comfortable about seeking the advice of his counsel without being concerned about "a bill every time he talks with his lawyer." Obviously, no one receives something for nothing and the client is paying for those times he calls his attorney, or drops in to see him, or has him send a letter in his behalf. The client may even be paying his attorney for not using him since the concept of a retainer is for the client to be able to call on his attorney, in a sense, at any time without being billed each time. Because the client is paying this monthly fee for the privilege of being able to have his attorney on call, it can be an expensive luxury if the client does not call his attorney quite frequently. An ongoing relationship is necessary in order to determine whether a retainer arrangement makes economic sense to both parties.
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Legal Fees What are the economics of the matter? Obviously, fees will vary with the locale and the nature of the service performed by the attorney. The legal fee for a simple Will probably varies from as little as $35.00 to perhaps $150.00, depending upon the locale and whether the attorney charges on a flat-fee or time basis. When one gets involved in estate planning which must, of necessity, include consideration of the size of one's estate, the computation of estate taxes, possible creation of testamentary trusts, living trusts, gifts, etc., an attorney normally charges on an hourly basis. Again, fees will vary according to locale, size of the firm retained, etc. While the author has not done studies on the various hourly rates, he believes that most attorneys involved in estate planning charge from $60.00 per hour of office time to perhaps as much as $150.00 per hour, the latter being charged by highly specialized firms in only the large metropolitan areas. Any thorough estate program, including conferences and drafting of documents, is likely to cost from $350.00 upward. The cost may be cheap in the long run. All of us have heard the old saying that the attorney who represents himself has a fool for a client. This is not only true but the author can attest to it by personal experience. Some years ago we probated an estate in which the decedent had declined to seek legal advice with respect to his Will. He purchased a form at a stationery store for about 25 cents and filled in the blanks, in his own hand, and put it away. When it came time to probate the Will it was discovered that he had made a number of erasures with respect to the amount he intended to leave one legatee. The amount, according to handwriting experts, might have been $2,500, or $3,000, or maybe as much as $12,500. After a lengthy will contest, the matter was settled with the legatee receiving more than the other heirs thought he should receive but less than the legatee wanted. The attorney and executor also received substantial extra fees for their work in connection with the contest. The author was subsequently informed that the decedent had asked his banker to recommend an attorney but when he was informed that the fee would probably be about $25 to $35, he demurred in favor of a 25 cent stationery form, and a cost of thousands of dollars to his heirs. As stated previously, fees vary from one locale to another. In general, it has been the author's experience that the costs, including government fees, in connection with incorporating one's practice are between $850 and $1,000. The cost of drafting a partnership agreement will vary according to the complexity of the agreement and whether the attorney works on a flat-fee or hourly basis. Many attorneys have developed a number of standard forms over the years, adapting them to the particular client. In these latter cases the fees may be somewhat less than those where the agreement is written specifically for the client.
146
EDWARD
A.
TRABIN
Obviously, in the former instance, there will be some loss of individuality and the lower cost may not be warranted if the product does not truly fit the needs of the clierlt. Some attorneys provide a "package deal" for incorporation, setting up a pension and/or profit sharing plan and drawing employment agreements for about $2 ,500, including governmental fees . The fee, all things considered, is a very reasonable one. The only difficulty is that the "package" is just that and where the client has special considerations the "package" doesn't quite do the job. The client may not be satisfied with the end product and therefore he must be prepared either to accept the molded product or pay for the individualized service. It is as true in law as in anything else, the client gets what he pays for. In the area of litigation, the costs to the client may be substantial. Most of the direct cost of litigation to the client can be avoided by adequate insurance coverage. Liability for damages caused in an automobile accident, injury to persons or property occurring on or about the practitioner's home or hospital, malpractice, etc., can be guarded against by adequate insurance. Defense of such litigation is provided the practitioner by his carrier, which will also pay any judgment within the limits of the policy. It is those areas of litigation in which the practitioner does not have insurance that litigation costs can be most expensive. In general, in Los Angeles County, minimum legal fees are $350 per day in Municipal Court and $450.00 per day in Superior Court, plus the attorney's usual hourly charge for pretrial consultation, research, and preparation. In addition to the legal fees, there are the filing fees, deposition costs, jury fees, and, in some cases, court reporter's fees. The one silver lining in the dark clouds of litigation is that if the practitioner is the prevailing party he will at least be entitled to a judgment awarding him his court costs (not attorney fees). Hopefully, he will be able to collect the judgment for such costs. It is a basic principle of American jurisprudence that unless there is a contractual provision or a special statutory provision, attorney's fees are not recoverable by the prevailing party. We might add that (at least in Los Angeles County) when attorney's fees are recoverable they rarely cover the actual legal fees incurred by the client. Thus the concept of preventive legal advice becomes even less expensive in the long run to the client. There is nothing mysterious about legal fees and the client should not be bashful about inquiring at the outset just what the fee may be. Law, however, does not quite lend itself to allowing for a fixed fee as is generally true in the other professions. In general a doctor, dentist, or veterinarian knows with a greater certainty just what is entailed in a surgical procedure and can render a fixed charge. Likewise, he knows just how much an injection will cost the patient. Because an attorney is dealing with a far less exact science and is often dealing with the vari-
LEGAL PROFESSION AND
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able of human emotions, it is much more difficult to give an exact figure for his fee. Unless he is to give a pre-packaged product which may be designed to cover all cases and not really cover any, his quotations of fees, in general, must be estimates or approximations. The attorneyclient relationship is one which must be based upon trust and confidence. The relationship of mutual trust and confidence becomes especially important when the client must rely upon the attorney to charge a reasonable and honest fee for the services rendered. Most attorneys keep time records from which they determine their billings and they should be prepared to support their charges accordingly when the client asks for the same. Divorce
We have mentioned the "business" aspects of legal advice: incorporation, partnership, leases, etc. What about divorce? Divorce may occur between the practitioner and his wife and between the practitioner and his partner. If the partners have acted prudently they consulted with an attorney when they became partners and made adequate provisions for the dissolution of their practice regarding division of clients, assets, etc.; who should remain at the hospital and who leaves, etc. This is not to suggest that all dissolutions of partnerships can be accomplished without litigation but a well thought out and well drawn agreement executed at the inception of the partnership or at least during the partnership and before problems arise, can go a long way in reducing the area of conflict. In divorce between the practitioner and his wife, the attorney and accountant play an important role. While it may not be possible to avoid the emotional trauma it may be possible to structure the dissolution wherein the parties achieve some reasonableness in the division of property and provisions for support, the result of which is to create a favorable tax impact. For example, the husband may resist all efforts at division of property simply because he is not about to pay any spousal support (alimony), although he will certainly be glad to pay the same amount as child support. While he may derive some tax benefit by taking a dependency deduction based upon child support, if the same dollar amount is called "spousal support" it becomes fully deductible and may well result in an actual increase in the net spendable income of the husband. Thus the advice of the attorney with the assistance of the accountant extends beyond the mere mechanics of obtaining the divorce to the structuring of the division of property and payment of spousal and child support to achieve significant tax savings to the (ex) husband. This is not to say that both parties will always be pleased with the result; emotions often prevent this. But it is the job of the attorney to act in an objective fashion and to avoid allowing the emotions of his client to interfere with the negotiations he enters into with the wife's attorney.
148
EDWARD
A.
TRABIN
Specialty Areas
Just as veterinarians may have a specialized practice, so do some attorneys! While there are postgraduate courses and Master and Doctor of Law Degrees available, most attorneys develop their expertise simply by experience in a particular field. There has long been pressure in the profession to certificate attorneys in particular fields and in the last several years California has recognized several areas in which a "certification" has been allowed: taxation, criminal law, patent law, and workmen's compensation are those areas especially suitable for certification. This does not mean that an attorney who is not certificated is not able or competent to practice in those areas. However, it is certa1nly appropriate for the veterinarian who is faced with an income tax audit, for example, to look to either an attorney who is certified as a tax specialist or who at least engages in some income tax practice to represent him rather than consult with any attorney whose sole familiarity with taxes is knowing he must file an annual income tax return. Obviously, the fees charged by the practitioner who is certificated or who has a better than average knowledge of the area of law are likely to be higher than the general practitioner. Summary
We have attempted to give the reader an overview of the function of the lawyer and his value to the working practitioner and hope that in some small measure the foregoing has helped in this regard. 18522 Hawthorne Boulevard Suite 200 Torrance, California 90504
