Fee Arrangements

Tom Wallerstein

A general counsel recently asked me, “Why should my company risk hiring a lesser-known, small firm?”

I told him that it shouldn’t. I don’t think any company should unnecessarily “risk” its business without good reason. I’ll be the first to admit that there are some matters that simply demand big firm attention.

But I also told the GC that there were many matters that I thought my smaller firm could handle just as well as could a big firm, and with cost savings that would be relatively significant given the amount at stake.

I wouldn’t ask someone to hire me if I thought that doing so was risky for them. A client should not have to choose to lose or win; it needs to make sure the small-firm attorneys have the necessary skill and experience. But with that caveat, some matters are particularly well suited for boutique treatment.

Assuming a client can afford to hire a Biglaw firm for a particular matter, why might it consider a small firm or boutique — beyond the obvious lower cost?

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Tom Wallerstein

When I started my firm, several mentors gave me the same advice: Don’t work for free. It’s easy to see the problem with working for free. Giving away what you’re trying to sell isn’t exactly in the business plan. Unfortunately, this sage advice can only really be learned the hard way, through experience.

Working for free can arise in many different ways. The most obvious example is a client who wants you to represent him but can only promise to pay you later.

Even if your gut tells you that taking on that client is a bad idea, this can be surprisingly tempting to a new firm or solo practice. For starters, there is such a thrill with getting your first client, or your first “real” client, or your first big client, or your first whatever client, that the excitement can cloud your better judgment. You will be tempted to overlook the red flags that you will not be paid for your work….

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