Posted by: johnocunningham | June 25, 2012

Legal Clients Looking More to Alternative Fees

Those law firms that figured out long ago how to do budgets using alternative fee methods are now reaping the rewards.

Alternative fees – such as flat fees, contingency fees, “all you can eat” plans with monthly retainers, and other creative billing arrangements – now generate 13.4 percent of law firm revenues (according to a Wall Street Journal article) and that is double the share they generated just four years ago.

Furthermore, In House, the FindLaw corporate counsel blog, has noted that in-house lawyers are increasingly dictating their billing preferences to outside counsel, and some are even training them how to be more efficient and how to work as part of a team of outside firms who all get annual fees to handle a massive volume of work.

The growing class action practice provides another example of what clients are demanding. At the start of 2012, a group of more than 300 General Counsel projected that class actions would rise again this year, but they also budgeted 17 percent less for outside counsel fees associated with defending these actions. These GCs plan to take a variety of cost control actions, such as monitoring outside bills more closely, allocating more resources to risk management and prevention, making better use of alternative fees, bringing some work in-house and taking other actions to insure that their outside counsel are performing at maximum efficiency.

Some firms continue to resist the alternative fee trend, but it is apparent now that in-house lawyers will no longer wait for their legal service suppliers to offer these arrangements. For matters and cases where alternative fee arrangements are feasible, the clients are simply demanding the arrangement they think is workable.

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