Divorce Analysis Blog

Advanced Ideas About Divorce and Money

How Divorce Attorneys Make Money

Last year in California there were roughly 150,000 divorces. There were also an estimated 15,000 divorce attorneys resulting in 10 divorces per attorney. If the average divorce cost $1,000 then the average divorce attorney makes $10,000 per year. They must be moonlighting as actors. Or perhaps the actors are moonlighting as divorce attorneys. Either way, it is a cut throat compeititve business in which it is very hard to differentiate.

In the area of differentiation, ie, who is a good attorney and who is not: clients are interested in factors such as: litigation skill, negotiation ability, win rate, and customer service levels. Unfortunately none of these is measured or disclosed by attorneys. Certainly there is no consumer reports rating of divorce lawyers. So ultimately they all offer the same set of skills: they finished law school and they passed the bar. That’s it.

Clients often tell me that an attorney was “recommended” or was a “good attorney” but never has a client been able to tell me a good reason why the attorney was recommended. Perhaps another person used them and was happy with their performance however my clients divorce is almost always completely different so there’s no saying the attorney would perform just as well under a different set of circumstances and with a different spouse as their foe. There is also an information asymmetry: if you’ve never been divorced before how do you know if your attorney did a good job?

Perhaps the attorney settled the case. Is this necessarily better than if they had litigated it? Not if you got a bad settlement. Perhaps they were “friendly”. Once again this does not get you the best settlement or the most money. But it is what we at Divorce Analysis are concerned with.

How many attorneys have I met with for an initial consultation who say “I KNOW the judge so they will rule in my favor” or “I know the law better than the judge so they will have to agree with me”. The subtle implication is that our justice system is biased towards certain attorneys or that the system is incompetent – I hardly believe the judges would agree with these statements. I will be the first to acknowledge the shortcomings of the courts however it doesn’t inure to the favor of one attorney.

A note about incentives.

So how do these divorce attorney/actors make their $10,000? A few cases in point and the incentives they create.

Case #1: I don’t have any money and my husband does
In this case, the attorney might get you to sign a motion allowing your husband to “advance” the money directly to them. You go to court and the judge orders the spouse to advance the estimated attorneys fees. This usually comes with the stipulation that this money will be deducted from your future settlement.

The incentives created in this situation are:

1. The payor for the service (the husband) has no connection to the delivery of the service
2. There is no recourse if the service is not delivered
3. Once the attorney is paid (and I know about trust accounts, we will address these later), their incentive is to do as little work for you as possible.
4. Even if they do the work, there is no incentive to produce a quality product.

But this never happens right?

The problem is that this money will eventually come out of your pocket. However since it didn’t come out initially, the attorney will behave as if the money is theirs and not yours. Normally when we pay for a service we are able to ask for estimates and pay once the service is done satisfactorily. In this case, the attorney gets paid and has no incentive to pursue any of YOUR objectives. Ironically, you come last in order of priority behind the court, your spouse and the attorney’s interests.

Case #2: Give me a big retainer and I will take care of your case

In the San Francisco Bay Area, divorce attorney’s $500 (for a run of the mill attorney) to $1,000 (for a run of the mill attorney who will return your calls). In most of these cases, they will ask for a retainer between $15,000 and $50,000. Let’s think about the incentives this creates.

1. Service delivered is not specified in advance. Imagine giving a car mechanic $10,000 and asking them to return whatever is left over after they finish working on your car. How much of that $10,000 do you think you’ll see?
2. High retainer blocks you from switching attorneys mid stream in case they don’t deliver. Why? Because it will be hard to get your retainer back (see #1).
3. Incentive to bill low quality minutes. What is a low quality minute? One spent on administrative tasks, filing, etc. These minutes cost as much as time in court litigating! Why would I do the hard work of litigating when I can bill you for reading a book about the law?

Case #3: The retainer trust fund

Once an attorney receives large retainers whether from you or from your spouse, they are supposed to place them in a trust fund with your name on it and bill that trust fund whenever they have an invoice. At the same time, they are supposed to deliver an accounting that includes your retainer balance and the location of your money. Unfortunately many attorneys bill the retainer and place in their personal bank accounts never to be seen again.

Case #4: Divorce Analysis Clients

Our clients control and minimize their legal bills while getting good results– the right way to pay for a divorce. They align the incentives of the attorney with the goals in their case. They have goals in their case because we work very hard on developing these before the client even meets with the divorce attorney. In this way, incentives are aligned and our clients realize VALUE for their dollars spent. Want to learn more? Get in touch with us!

April 25, 2011 Posted by | divorce | 1 Comment