This Article Originally Published December 2001
by Jeffrey & Todd Brabec
In a world of extremely complex contracts and business relationships, where 1 word in a 100-page agreement can mean the difference between financial security or bankruptcy, selection of an attorney is one of the more important choices that has to be made. It is even more important in today's entertainment industry, where the lawyer not only has to know the legal ramifications of a particular word, sentence, clause, or paragraph in an agreement (as well as how all the parts interrelate with one another) but must also have a thorough grasp of the practical, business, and financial ramifications of what is being agreed to by the songwriter or recording artist. This dual role of attorney and business advisor cannot be overemphasized, as it represents the crux of the lawyer's role in today's industry.
In most cases, the monetary compensation received by the lawyer is based on a set hourly rate, a retainer plus hourly rate, a flat prenegotiated dollar amount, a percentage of the advances or advances received under the agreement, a percentage of the earnings generated under the agreement, or a combination of some of the above methods.
Many law firms have a policy that charges to a client are based on a set dollar figure per hour of work done. For example, in the entertainment industry, fees can easily range from $150 to $500 per hour for attorneys, with less being billed for paralegals and other assistants. Law firms also charge their clients for increments of each 1-hour period of representation on a pro rata basis. If a particular lawyer charges $300 per hour, a phone call or negotiation that lasts for 15 minutes or less will normally be billed at $75. All actual out-of-pocket costs such as copying charges, fax bills, telephone charges, messenger bills, overnight mail charges, court filing fees, courier bills, secretarial overtime, and so on will be billed to the client, as the hourly fee does not include such costs, also known as disbursements.
Certain clients pay an overall monthly or yearly fee to a law firm, from which actual hourly charges billed during a particular year will be deducted. For example, a client may pay a law firm a guaranteed $1,000 per month, which keeps that law firm constantly available for legal advice during the year. This arrangement is similar to having someone "on call," with any actual charges incurred during a particular month or year being deducted from the prepaid retainer. This type of arrangement is common between lawyers and clients who have continuing legal needs throughout the year.
A fairly common arrangement when an attorney is negotiating a single agreement for a client (e.g., an exclusive songwriter's agreement, a recording artist agreement, a record producer agreement) is the flat fee. Under this type of arrangement, the lawyer tells the client in advance how much the negotiation and representation will cost regardless of the amount of time expended. For example, the attorney may quote the client a $5,000 "all in" figure, and that amount will be the final fee payable whether the attorney spends 10 hours or 50 hours in finalizing the agreement. These flat-fee arrangements many times do not include out-of-pocket disbursements such as telephone, copying, and messenger services, and this issue should be discussed with the lawyer at the time one is entering into such an arrangement.
Percentage of Earnings.
In addition to the hourly and flat-fee arrangements, some lawyers are also entitled to a percentage of the client's income under the agreement that is negotiated. Occasionally, these percentage arrangements apply only to the initial advance received under the agreement being negotiated (e.g., 5% of the advance due the writer upon signing of the agreement). At other times, the percentage applies only to advances that are paid during the term of the agreement. And at still other times, the percentage applies to all income generated by the agreement, regardless of whether the monies are earnings or advances or whether the monies are payable during the term of the agreement or afterward.
For example, if an attorney's percentage is 10% of the initial advance and there is a $100,000 signing advance payable to the writer or recording artist, the attorney will be entitled to $10,000 upon execution of the agreement, with no further payments due. If the attorney's percentage is based on all advances received by the writer or artist during the term of the agreement and the client is guaranteed $100,000 per year in advances over a 5-year period, then the attorney will receive $10,000 each year for 5 years (i.e., 10% of each $100,000 payment).
As with any representation relationship, it is advisable to clarify the financial aspects of the arrangement so that all parties realize what the potential monetary ramifications are in advance.