A Debate About Attorneys’ Fees in Foreclosure Cases

In response to my recent blog entitled Paying a Foreclosure Defense Lawyer, I received the following response (below) from Richard Shuster, a bright foreclosure attorney out of Miami.  I thought his post, and my reply thereto, were worth sharing, as they discuss pragmatic issues facing homeowners.  The issue, as you’ll see, is essentially a debate about how much foreclosure defense attorneys should be charging to represent homeowners. 

My point isn’t to say “I’m right” and Richard is wrong, or anything like that.  Rather, my hope is that it helps homeowners understand where I’m coming from in my defense of foreclosure cases and how other attorneys with a different approach view things. 

Richard’s Comment:

Mark… I really do not think you can lump an amazing foreclosure defense lawyer like Thomas Ice in with a factory like Ticktin. Our firm, like Ice Legal charges monthly. If we knock one out of the park and get somebody a free home (we have done it three times working on number four).. our retainer provides for a contingency bonus.. (usually $20,000) but to get it was not only need to get a dismissal with prejudice we have to file a new lawsuit for the client to quiet title. Only we get them the house free and clear are we entitled to the bonus. As I see it if we have a shot to get a dismissal with prejudice, but only by hopping on a plane to take a deposition, we can afford to do this for $500 a month if we have the potential for such bonuses. Thomas Ice takes half day depositions… when necessary to get the job done for his clients. If a lawyer’s fee is a one time fixed fee, or $500 a month it might be difficult to spend $1,600 of time (4 hours at $400 an hour) and $300 to $500 for a transcript to take a deposition
but lawyers like Thomas Ice can spend the money and time if the get a small portion of the benefit that comes form a contingency bonus for an exceptional result. That bonus when the amount is small not the shock the conscious high 40% charged by Tictin can align the lawyers interest with the clients and reward lawyers who go above and beyond to achieve a spectacular result.

My Reply:

Hi, Richard.

I’ve thought a lot about this since I posted this blog. Upon reflection, I agree that you and Ice shouldn’t be lumped in with Ticktin. If that’s how it came across, I apologize.  I respect the work that you and Ice are doing.

That said, I’ve handlled a LOT of foreclosure cases and I’m confident that $500/month is not necessary to defend foreclosure cases.
My firm has handled many foreclosure cases. In my view, it doesn’t take $500/month to defend them, it just doesn’t.
(In fairness, it does seem the market for fees in Miami is higher than in my areas, so that is part of the disparity.)

Anyway, does that mean I think you and Ice aren’t doing $500 per month worth of work? No.
I tend to believe you are, particularly if you’re doing depositions.
(And that’s a big reason where you’re different from Ticktin, in my opinion.)
As you suggest, depositions are expensive, particularly if you’re paying/fronting the costs.

Respectfully, though, I wonder what that work accomplishes in the grand scheme.

Three dismissals with prejudice/quiet titles is great.
But out of how many cases?
That’s not meant to be critical, it’s really not.
Those three clients will love you for life, as they should.
It’s just that I have a handful of quiet titles in the works right now, without the $500/month.
I just don’t think $500/month is necessary, particularly when coupled with a four-figure retainer and a contingent fee.

As I see it, by charging less, my firm appeals to many homeowners who would otherwise not be able to afford an attorney. And for me, that’s a huge part of the point.
Many people just can’t afford $500/month. Many of my clients tell me “If I could afford that, I wouldn’t be in foreclosure.”
My business model is predicated on “what do I really *need* to collect from each homeowner to adequately and competently represent them?”
I’m sure I could (and arguably should) charge more.

But I’d rather put my firm in a position to help as many people as possible, particularly those who cannot otherwise afford a lawyer.

You may argue you do a better job than me. In some respects, maybe you are. I don’t have any quiet titles (yet). But for most of my clients, that’s not even a goal.
Personally, I don’t think that is a reasonable goal for any particular person. From a numbers’ perspective, sure, if any lawyer has enough cases, some of them are going to result in quiet titles.  I just don’t think the chances of that are significant enough in any one particular case to justify extra charges.

As for the contingent aspects, I’m not arguing with the contingency if you get a quiet title. If you get a client a free house, a reward like that is reasonable.
My concern is with contingent fee contracts which call for a percentage even upon a dismissal without prejudice (or a dismissal with prejudice against the wrong entity).

I’ve probably gotten 20 dismissals without prejudice (without leave to amend), maybe more. It doesn’t happen every day, but it happens often enough that I consider it just part of the job.
I don’t see that as a basis to get a contingent fee. Why should I pocket five figures when the client may well get sued again? That doesn’t seem fair.
It’s particularly not fair when you combine that contingent fee with $500/month and a four-figure retainer, as many lawyers are charging. 

I guess when it comes down to it, I want to represent my clients as inexpensively as possible, help them get back on their feet, and when they encounter legal problems in the future, I’m hopeful they’ll remember how fair and reasonable I was with them and they’ll come back to me. 

These are just my opinions. Reasonable people can disagree. This is just how I’ve chosen to do business.

Mark Stopa

Posted in Main | 4 Comments »

4 Responses to A Debate About Attorneys’ Fees in Foreclosure Cases

  1. Mediator Ken says:

    I’m not sure I understand the distinction between Mr. Shuster and Ticktin. Ticktin litigates the hell out of their cases and their depos typically last all day.

    I agree with you Mark. In fact, I’ll go so far as to say that I’m not so sure the monthly fee is even ethical, and the contingency fee wrapped up in it is exorbitant. IMO, foreclosure defense lawyers should take a retainer and bill hourly against it. That’s both ethical and reasonable.

  2. David Acosta says:

    This dialogue is healthy as the consumer defense attorneys continue building in this practice area.

    For starters, I pick up on Mark’s comment about being able to serve the client now and in the future. Not that other attorneys would want it any differently, but a business model that is forward-looking and forward-thinking does not spring to life on its own. It has to be deliberate. I have spent most of my professional career (20+ years) advising business owners, as a management consultant, on these strategies and the view from that perspective – which Mark has picked up on – is what is referred to the life-time value of the client/customer relationship, or LTV.

    In the consumer law space there is a very compelling argument in favor of building long-term relationships that last beyond the current financial crisis. That is, the very homeowners who are seeking protection from foreclosure will have needs in other areas long after things get back to being more normal. Attorneys focused solely on the business flow from the current crisis may have too myopic a view of the opportunities and not get the bigger picture. At some point the paradigm will change and their business model will have to change as well – effectively forcing the enterprise to start over. Contrast that to the law firm that makes the deliberate choice to be in the consumer law space for the long-term and then builds a client base around a value proposition offering a more holistic approach to the client’s needs. In this emerging area of law the latter business model is more likely to succeed long-term.

    Consider all of the new legislation that has recently been enacted and the new laws yet to impact consumers. Most consumers, at some point, will have to navigate new issues against a framework of new and changing laws for which they will need to seek legal advice and perhaps representation. Opportunities will be plentiful for representing clients facing abusive debt collection (some from deficiency judgments); invasive business practices and privacy issues; credit reporting and identity theft; landlord-tenant disputes; real property title disputes (and there will be lots of these) and the list goes on. A consumer will be more motivated to seek legal advice and representation with the same lawyer that helped them last time if they had a good overall experience – not just a good result.

    Any fee-structure or business model that financially stresses the client relationship on an ongoing basis, such as one that charges four-figure retainer and $500 per month (irrespective of the contingent fee arrangement) will be remembered that way by the client. The next time they need a lawyer for a consumer law matter what will come to mind is how they felt having to make that high payment every month and how they had no idea how that money was being applied/spent on their case. Most clients are not likely thinking about the next time they will need a lawyer. But they will not easily forget the experience. A model, such as what Mark proposes, offers the client the balance of fee structure with a value proposition for representation in a way that appears and feels fair. This is likely to appeal to the largest part of the market.

    None of this is intended to take away from the great work being done by exceptional law firms that deliver higher value by taking less cases and litigating them more extensively. The marketplace is always going to have a stratification of providers which will place the price/value up at the top, others in the middle and some at the bottom. Some will want to build a premium brand reputation (together with perception of a premium price). In the consumer law space, where the numbers of possible clients is rather high, that model may have limited perceived long-term value. Stated differently, that model will have lots of perceived value but for a smaller subset of the market. Firms taking this approach will need to charge according to a premium model, and, some clients will prefer to work with that kind of firm.

    I applaud the dialogue.

    This is yet another area that a consumer defense bar could help extend, shape and focus the discussion. We need one of these in Florida.

  3. Christine Springer says:

    I like this post, Mark, and I’m glad to see you starting the discussion about fees.

    I’m in Arizona, a non-judicial foreclosure state, and we have different issues that I think merit monthly flat fee payments. By the way, I’m not a lawyer and I am not entirely familiar with the ethics of various types of fee agreements. I’m a paralegal who helps lawyers figure out how to defend their clients in the area of foreclosure defense.

    The work involved in defending a non-judicial foreclosure is time consuming because it’s just like filing any other lawsuit, except that we have to get a TRO to stop the sale. It’s expensive and there aren’t a lot of lawyers who have done enough of these to turn them into templates so they don’t have to reinvent the wheel for every case.

    In better times, most lawyers I know would charge at least a $10,000 retainer to undertake this type of litigation. Most lawyers I work with don’t get paid anything close to what they’d charge to file a regular lawsuit. (If they did, they’d hire a company like mine to help them manage the case load instead of doing all the work themselves.)

    My observation is that the retainer plus flat fee monthly payments allow the borrowers to spread the cost of filing the lawsuit over several months so that the lawyer gets paid and the borrower has some time to make the payments.

  4. Pingback: Updates from the Foreclosure Defense Paralegal Trenches | Foreclosure Industry

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