Lawyer Quadruples Work from a Client with Fixed Fees
from the Chicago Tribune:
Fixed-fee arrangements between lawyers and their corporate clients are gaining popularity, but are they economical for both sides?
For Lake Forest-based Brunswick Corp., its flat-fee contract for national litigation has exceeded expectations, said Kristin Coleman, general counsel. The maker of boats, billiard tables, and fitness and bowling equipment cut the amount it spent on outside lawyers working on litigation by 30 percent in 2009.
On the flip side, David Rammelt, a partner at K&L Gates, said the volume of work he did for Brunswick last year quadrupled, a positive outcome in a year that was slow for many lawyers. But Rammelt had to switch law firms to make the arrangement more profitable.
Coleman and Rammelt's flat-fee contract is in its second year and includes product-liability and breach-of-warranty cases. Their experience provides some lessons to other lawyers and companies considering alternatives to the industry standard of billing clients at an hourly rate.
They debunked several myths regarding fixed-fee arrangements, including the notion that lawyers working under fixed fees will not work as hard."The lawyers who provided the service did a great job," Coleman said. "There were some skeptics among my team."
The contract also forced Rammelt and his team of five lawyers to be efficient, an anomaly to the law-firm business model that incentivizes attorneys to rack up hours.
"Brunswick said, 'This is your all-in pot of money. You be efficient now,'" Rammelt said.
Cost savings also came via technology. Kelley Drye built Web-based case management software for Brunswick. The database contained every document for every case Rammelt's team worked on, eliminating the need to ship documents overnight. Brunswick lawyers could access the system at any time, eliminating the need for quarterly status reports from Rammelt. When Rammelt left for K&L Gates, the firm bought the software from Kelley Drye.
On the downside, using metrics based on the traditional hourly-fee model, Rammelt's realization rate — the rate of collection versus hours billed — is not as high as he would like. He and his team still keep track of the time they spend on Brunswick matters to have a benchmark to compare to the fixed-fee contract.
The two sides tweaked the contract in its second year to provide some protections for the law firm. For example, if a case hits a ceiling on fees then it gets removed from the fixed-fee program and gets billed by the hour.
Art Block, the general counsel top in-house lawyer at Comcast Corp., froze its legal spending in 2009 after years of annual law-firm increases of 5 percent or more. Block says the freeze was partly in response to the recession, but also was triggered by the belief that hourly rates, particularly for first-year associates, had gotten out of hand, according to
Far and away the biggest development of the last 12 months is the prevalence of alternative fees. Dan Currell, Senior Member of the General Counsel Roundtable, told me that law firms that offer alternate fees are "eating the other law firms' lunch." Roughly half of all clients are using alternative fees, according to the new Fulbright & Jaworski survey of in-house lawyers (see the chart) -- and see the article
The most popular alternative fee arrangements are, in order:
The recession in the legal profession appears to have bottomed out, according to a new Hildebrandt Peer Monitor Report for the second quarter of 2009.
According to
More economic indicators for the legal profession show that the recession is ending and that a recovery is beginning.
Clients are inquiring about alternative fees, which leave most law firms flummoxed. Hourly billing is all that many law firms are familiar with. Now Susan Van Dyke, the president of the Vancouver Chapter of the Legal Marketing Association, demystifies several alternative billing models:
Lawyers USA has a great article on the effects of billing clients for certain costs. In the case of a major New York law firm it led to a class action lawsuit. The plaintiff argues that the firm violated California’s ethics laws as well as the state’s unfair business practices statute by overcharging him for computerized legal research.
An 85-lawyer firm is the first recipient of RainMaker Software’s $1 million 



