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6 BIG Things Your Lawyer Won’t Tell You… Must Read!

1. “I don’t necessarily know that much about the law.”

Ask an attorney about anything outside his niche, and odds are he won’t know much. Teacher Marie Karim learned that when she decided to sue the New York City hospital where she had developed an infection and a hernia during exploratory surgery in 1999. Karim hired Sheri B. Paige because her mother had once consulted the Norwalk, Conn., lawyer about collecting a debt. Karim says Paige assured her that she had experience with medical malpractice cases.

More than a year later, Karim says she discovered that Paige had virtually no such experience and that she hadn’t even filed the suit. Worse yet, the statute of limitations had run out. “I wanted to kill her,” says Karim, who got $325,000 from Paige’s insurance company in 2002 with assistance from a specialist in legal malpractice. Paige denies all wrongdoing and blames the entire mess on Karim. But in November 2002, a Connecticut lawyer grievance panel found probable cause to believe that Paige was guilty of misconduct, and she was disbarred in 2005.

2. “I won’t take your chumpchange case.”

Just because you have a strong legal case doesn’t mean a lawyer will take it on—not if it’s bad for his bottom line. That’s especially true with claims involving securities arbitration, usually against brokers who have churned clients’ accounts or put them in unsuitable investments. (Most brokers require their clients to agree to arbitration when opening an account.) There were 3,238 of these cases in 2007, down from 4,614 in 2006, according to FINRA Dispute Resolution, the largest securities dispute resolution forum in the world.

Trouble is, lawyers involved in this growing field generally refuse to handle claims of less than $100,000, because smaller cases generate small fees. Henri Draznin, a retired customer-service rep, found himself in just such a bind. He couldn’t find a lawyer willing to help him recover the $9,000 he’d lost in high-yield bonds, which his broker had put him into without mentioning they were risky for a retiree. It seemed that Draznin was out of luck, until he found a legal clinic at New York’s Pace University Law School, where students supervised by Professor Barbara Black (who has since moved on to the University of Cincinnati) helped him file an arbitration claim, winning him $4,046 in February 2003.

Short of finding a law school clinic eager to help you, what can you do? Visit the website of the Public Investors Arbitration Bar Association (www.piaba .org) to get the name of a lawyer in your area who’s experienced in securities. If you like him and want to work with him, try offering him a little more than his usual percentage—say, 43 percent, rather than 40—to sweeten the pot.

3. “I’ll charge as much as you’ll let me.”

Most lawyers can charge for their services in a variety of ways: a flat fee; an hourly rate, typically $250 to $450 per hour; or a percentage of the award, usually either one third or 40 percent. Which is best for you? If your case is simple, with losses of less than $50,000, a flat fee is best. It gives the lawyer an incentive to solve the problem efficiently. If, however, you’re filing suit for personal injury, employment discrimination, or malpractice, you’re generally better off paying a percentage. These cases are typically more complicated, with many variables involved. The incentive here is to get as much money as possible, fast, and if your attorney fails, you won’t be stuck with a big bill. Have him take his fee after expenses, to keep administrative costs down. Avoid paying a percentage to settle an estate or for a divorce or real estate deal, though. A $1 million closing or divorce is no more difficult than a $500,000 one, so why pay more? In these cases, a flat-fee arrangement is best.

If you have a strong civil suit, your best bet may be a hybrid fee: an hourly rate if the lawyer can solve the problem in a few hours, switching to a percentage if it takes longer or he has to sue. A Fortune 500 company executive hired Kansas City attorney Bert Braud to handle a sex discrimination case in 2001, and the lawyer was able to wrest a six-figure settlement out of the employer in about 15 hours. His fee was $2,000 instead of the more than $33,000 the executive would have paid had he charged a percentage. If a lawyer resists such a deal, tell him you need to interview a few more attorneys before you decide whom to hire. He’ll likely come around.

4. “You could win your lawsuit and still wind up with nothing.”

Expecting a bundle from a big lawsuit? Don’t start spending it just yet. You may be shocked to learn how little you’ll actually get to keep. Lawyers may not like to mention it, but federal taxes—at rates of 18 to 35 percent—can easily wipe out most of the money you win in civil lawsuits; bodily injury cases are the only exemption. Some “winning” plaintiffs even wind up in the hole.

Realizing that such grim victories chill business, members of the National Employment Lawyers Association (NELA) began prodding Congress to stop taxing discrimination awards and settlements, which often take the biggest hit. Their lobbying efforts helped the passage of the American Jobs Creation Act in October 2004 with a provision that exempted plaintiffs from having to pay taxes on the attorneys’ fees portion of their earnings. “It was a partial victory,” says NELA Executive Director Teri Chaw. “But there’s still some way to go.”

5. “You just might be better off without me.”

Many of the things lawyers do, you can do for yourself, provided you have the time and inclination to learn how. You can write your own will, for instance, if you have a relatively uncomplicated estate. A good place to get help is legal software publisher Nolo (www.nolo.com), whose Quicken Lawyer 2008 Wills, for example, sells for $40.

For issues that are too complicated to be handled without some legal assistance, an interim step between going it alone and hiring a lawyer is working with a paralegal. Depending on the state, these professionals can handle living trusts, bankruptcy petitions, real estate closings, and uncontested divorces—often for just a few hundred dollars. The only things paralegals can’t do are give legal advice and represent you in court.

Before you sign on, though, look for experience and expertise in a particular field. It’s also nice—but not essential—for the paralegal to hold a degree or certificate from one of the 800-plus training programs in the U.S. (258 of them approved by the American Bar Association) or be deemed a registered paralegal by the National Federation of Paralegal Associations or a certified legal assistant by the National Association of Legal Assistants.

6. “Okay, so I’ve made some mistakes in the past. Good luck digging them up.”

How do you know whether the lawyer you’re working with is a good egg or not? Trying to learn whether a lawyer has a record of ethics violations or even just a bad reputation can be an exercise in futility. For starters, the American Bar Association does keep a database of known ethics violators online, at www .abanet.org. But the ABA database relies strictly on voluntary reports from state bar counsels, and it costs $10 per name to search.

You could also try calling the bar counsel in the appropriate state—you can find yours listed at www.nobc.org. But that can also be a dead end, unless the attorney has been suspended or disbarred; some states may report that a lawyer is “in good standing” even if she has had lots of complaints or worse. Beyond doing a basic Google search of your attorney, which is free, you can also carry out a background search through commercial sites like www.knowx.com, which charges a fee that ranges from $10 to $100 to check the disciplinary records of a given lawyer.

7. “Wanna sue me? Oops—you signed that option away.”

Most lawyers are competent and ethical. But what if yours messes up? Can you sue him? Not if you agreed to submit disputes to arbitration, where the rules of law and evidence don’t always apply and you’ll have the right to neither a jury nor perhaps even to appeal. Many lawyers insert compulsory arbitration provisions in their retainer agreements, which isn’t unethical, according to the ABA, provided that the agreement doesn’t insulate the lawyer from liability and the client understands what it means. Such a clause should be a warning for you to take your business elsewhere.

Inventor Walter R. Fields says he didn’t realize he was giving up his right to sue when he hired Maslon Edelman Borman & Brand, a large Minneapolis law firm, to sue the builder of his moldinfested $1.2 million house. Disappointed when he lost his case, Fields tried to sue Maslon Edelman for malpractice, claiming among other things that the firm had failed to submit evidence of the mold in time. But in 2001 a Minneapolis court refused to hear the case because of an arbitration clause in Fields’s retainer agreement. Fields also came up empty after arbitrators rejected his claim and two courts upheld the arbitration. As Fields puts it, Maslon Edelman “won hands down.” (Maslon Edelman denies malpractice, claiming the mold was a side issue, and defends the arbitration clause, saying that Fields had weeks to review the agreement with a lawyer before signing.)

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