For months, we talked to counsel about our prospects in the case. He was sanguine:
“There’s nothing to worry about here. The plaintiff put a huge number in its prayer for relief, but you can’t possibly lose that much. Plaintiff’s liability case is thin, and the damages are inflated. You’ll probably win. If you lose, you’d lose no more than $1 million on an average day. On the worst day known to man, you can’t even theoretically lose more than $5 million. I wouldn’t offer more than a couple hundred grand to settle.”
A few months before trial, we ask counsel to put some skin in the game: “It’ll be expensive to try this case, and you feel good about our prospects. We’d like you to propose an alternative fee agreement that aligns your interests with ours. We’d like to pay you less than your ordinary hourly rates in the months leading up to trial, but we’ll give you a success fee if we win. Please think about it, and let us know if you have any ideas.”
A couple of weeks pass, as counsel discusses the case with his firm’s “senior management.” When the alternative fee proposal arrives, the goalposts have miraculously moved! In the course of just two uneventful weeks, our prospects for success have changed entirely!
It used to be that the world of corporate transactions was the sole province of Biglaw. After all, handling complex matters like mergers and acquisitions required manpower and overhead — and lots of it. Well-paid junior associates were an integral part of the process, and the costs of doing business were driven by corporate clients’ expectations of grandiose reception areas and white-glove treatment as proof of both commitment and excellence.
These days, however, technology has leveled the playing field, making it possible for boutique law firms to compete with Biglaw in ways never before possible. Many of these boutique firms, comprised of Biglaw lawyers seeking to practice law on their own terms, have sprung up in the wake of large-firm mergers and dissolutions. Creative thinking and the innovative use of technology have been the keys to their success, allowing these boutiques to reduce overhead costs and run their practices more effectively and efficiently, saving their clients time and money.
Don’t believe me? Well, look no further than Bailey Duquette, a Manhattan-based boutique law firm….
While the benefits of flat-fee billing, including cost certainty, increased efficiency, and administrative simplicity are well documented, there’s not much guidance on how lawyers can implement fixed fees in practice. As a result, many lawyers shy away from fixed-fee billing, fearing that if they charge too little, they’ll be stuck working for free if the case winds up taking more time to resolve than originally anticipated. Meanwhile, many lawyers who experiment with fixed-fee billing claim that it doesn’t work — largely because they haven’t implemented it in a way that benefits the lawyer as well as the client.
So below are a half-dozen tips to help solo and small-firm lawyers implement fixed-fee billing without paying the price. Though not exhaustive, these suggestions may help lawyers currently contemplating fixed-fee billing get started, or convince those who’ve tried flat fees unsuccessfully to reconsider…
Growing up in Biglaw, I always thought pricing services for clients was easy. Conversations with clients went as follows: “Our rates range from X to Y, and are very competitive with our peer firms. If you have the audacity to ask for a break on these prices, we can offer you a 10% ‘courtesy discount,’ but will include language in our engagement letter allowing us to recoup that discount and more a few months into the engagement.” Of course, even in the mid-2000s (crazy that those days are nearly a decade ago), X was roughly the monthly lease payment on a well-equipped Honda Accord — for the least “experienced” lawyer in the entire firm — and Y was in the range approaching the monthly mortgage payment for a decent-sized colonial in a “pleasant” suburb. That was how things were priced, and depending on your firm, your rates were either considered cheap or expensive. But that categorization was always relative to other firms in your city, with a usually self-selected “peer group.” So there was always a “premium” (but unnecessary) firm more expensive, and on the other end of the pricing spectrum, a “discount shop” that could be sneered at for trying to undercut the market with low prices aimed at masking subpar legal ability.
When there was a surplus of demand for Biglaw’s services, the above approach was a tenable one. Once that surplus turned into a surfeit, firms needed to get a little more creative. At first, the tendency was to simply offer bigger discounts, with the “courtesy 10% off” turning into 25% off or more. Then clients started informing their firms of new “billing guidelines” where certain types of work would no longer be billable. Or where certain lawyers, such as junior associates whose time would no longer be paid for by clients, were magically transformed from revenue-producers for the firms that hired them to deadweight cost center investments in the “firm’s future.” Add in competition from other firms for a shrinking pie of business, and thinking about pricing became more rigorous. In fact, pricing expertise is one of the only Biglaw job skills with a growing rather than shrinking potential employment base….
The glory days of 2006 and 2007 may never return. They call it the “new normal” for a reason.
But things at least can get better incrementally. And this is what might be happening in the in-house world, according to two new surveys. These studies report that in-house legal departments are increasing both their hiring and their spending — which could be good news for the law firms that service them, as well as all the Biglaw attorneys who dream of making the jump to in-house.
Don’t say that we never give you happy news around these parts….
Each year, Corporate Counsel compiles a list of the law firms that Fortune 100 companies use as outside counsel. This year, to change things up a bit, it seems like the list has been expanded to cover the entire Fortune 500. From Apple to Yahoo, and every billion-dollar company in between, these corporate clients expect nothing short of the best in terms of legal representation when dealing with high-stakes litigation and deals. If you’re looking to line your firm’s pockets, you better head to the RFP line when these companies seek lawyers.
Up until last year, only the most prominent Biglaw firms (like Cleary, Davis Polk, Cravath, and Simpson Thacher) topped the list of those that had the pleasure of doing business with the country’s biggest companies. Things changed rapidly, however, when Big Business tried to cash in on deals for legal services. The firms that were willing to cave to the pressure of providing alternative fee arrangements won in a big way, and the rest were left in the dust.
Have these prestigious firms changed their ways? Is Corporate America again willing to open its fat wallet for them? Let’s find out…
Ed. note: This is the latest installment of The ATL Interrogatories, brought to you by Lateral Link. This recurring feature will give notable law firm partners an opportunity to share insights and experiences about the legal profession and careers in law, as well as about their firms and themselves.
Jeffrey E. Stone is Co-Chair of McDermott Will & Emery LLP and Chair of the Firm’s Management Committee. In addition to his management roles, Jeffrey is a nationally recognized trial lawyer and a Fellow of the American College of Trial Lawyers. He concentrates his practice in the areas of white-collar criminal defense, complex commercial litigation, internal investigations and RICO. He represents corporations, boards of directors, senior executives and other individuals in a variety of complex civil litigation and criminal prosecutions, involving a broad range of industries, including health care, manufacturing and financial services. He has tried more than 40 cases to verdict before juries in federal and state court.
Jeffrey has served as National Chairman of the Stanford Fund (responsible for all annual giving to Stanford University), as a National Trustee for the Lawyers’ Committee for Civil Rights Under Law, as outside counsel to the Illinois Judicial Inquiry Board, as a board member of the Jewish Federation of Metropolitan Chicago, and as president of the Jewish Family and Community Services agency. He currently serves as a member of the national Board of Governors for the American Jewish Committee.
1. What is the greatest challenge to the legal industry over the next 5 years?
Is the slowdown in Biglaw that we’ve seen since the Great Recession a long-term trend or just a temporary blip? Only time will tell, but in the meantime, the debate rages on. (The latest salvo: New Republic editor Noam Scheiber’s response to critics of his controversial article, The Last Days of Big Law.)
Because of its power, prestige, and profitability, Biglaw gets a big proportion of the media coverage that’s aimed at law firms. But let’s not overlook small firms and solo practitioners, who make up about 70 percent of American lawyers in private practice.
One often hears stories about small firms, especially boutiques formed by ex-Biglaw attorneys, that are thriving. The tales are inspiring; the small-firm lawyers talk about how they enjoy their practice more, have greater autonomy, and make the same or even more money than they did back in Biglaw.
But such information is anecdotal. How are small law firms doing compared to bigger firms on a broader level? A new survey has some answers….
I recently heard the managing partner of a regional law firm say that alternative fee arrangements are like teenage sex: “More of it is being talked about than is actually being done, and the little that’s being done is being done poorly.”
My corporation now uses alternative fee agreements for a large percentage of its work. All of those arrangements have worked out acceptably, and one (which I’ll discuss after the jump) has played out spectacularly. The harder question is this: How does one convince tens of thousands of readers to click through the jump (and “continue reading”) a column about alternative fee arrangements (because clicks through the jump are, after all, the relevant metric to the Above the Law gang)?
I’ve got it! Gin up a riddle, and put the question before the jump and the punch line after. What reader could resist?
So — riddle me this:
What’s the similarity between discussions about alternative fee agreements and elephantine mating?
Both take place on a high level, involve much trumpeting, . . .
Ed. note: The Asia Chronicles column is authored by Kinney Recruiting. Kinney has made more placements of U.S. associates, counsels and partners in Asia than any other recruiting firm in each of the past seven years. You can reach them by email: firstname.lastname@example.org.
Please note that Evan Jowers and Robert Kinney are still in Hong Kong and will stay FOR THE REMAINDER OF THIS WEEK. We still have a handful of available slots for meetings with our Asia Chronicles fans. If we have not been in touch lately, reach out and let us know when we could meet! There is no need for an agenda at all. Most of our in-person meetings on these trips are with folks who understand that improving a legal practice through lateral hiring is an information-driven process that takes time to handle correctly.
Regarding trends in lateral US associate hiring in Hong Kong, we of course keep much of what we know off of this blog. Based on placement revenue, though, Kinney is having one of our most successful years ever in Asia. We are helping a number of our law firm clients with M&A, fund formation, cap markets, project finance, FCPA and disputes openings. These are very specific needs in many cases, so a conversation with us before jumping in may be helpful. As always, we like to be sure to get the maximum number of interviews per submission, using a well-informed, highly targeted, and selective approach, taking into account short, medium and long-term career aims.
Making a well informed decision during a job search is easier said than done – the information we provide comes from 10 years of being the market leader in US attorney placements at the top tier firms in Asia. There is no substitute for having known a hiring partner since he/she was an associate or for having helped a partner grow his or her practice from zip to zooming, and this is happily where we stand today – with years of background information on just about every relevant person in all the markets we serve, and most especially in Hong Kong/China/Greater Asia. So get in touch and get a download from us this week if we can fit it in, or soon in any case!
The legal industry is being disrupted at every level by technological advances. While legal tech entrepreneurs and innovators are racing to create a more efficient and productive future, there is widespread indifference on the part of attorneys toward these emerging technologies.
When the LexisNexis Cloud Technology Survey results were reported earlier this year, it showed that attorneys were starting to peer less skeptically into the future, and slowly but surely leaning more toward all the benefits the law cloud has to offer.
Because let’s face it, plenty of attorneys are perhaps a bit too comfortable with their “system” of practice management, which may or may not include neon highlighters, sticky notes, dog-eared file folders, and a word processing program that was last updated when the term “raise the roof” was still de rigueur.