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Flat Fees in Commercial Litigation

Stephen J Curley


  • What do you do when the metrics of a case and your billable rate all but make the journey too expensive to start?
  • Setting a fair flat fee is one part science, one part art, and one part sorcery.
  • Flat fees represent a technique for managing risk for both clients and law firms.
Flat Fees in Commercial Litigation
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The topography of complex commercial litigation is a challenging one for the solo and small firm attorney. Its map is peppered with cavernous research, mountainous discovery, and expansive briefs. Your opponents are frequently large and well-equipped law firms. Getting your firm and your client from case intake to disposition is daunting enough when you have the financial resources to complete the journey, but what do you do when the metrics of a case and your billable rate all but make that journey too expensive to start?

Model Case

The scenario is not an unfamiliar one. A client comes to you with a piece of litigation that has a difficult fact pattern and arcane legal issues. The case is promising but difficult. Your intellectual curiosity is piqued. The problem is that the amount in dispute is, at best, “middle level”—too big for small claims but too small to justify an unlimited monetary commitment. How can you help your client while being financially responsible to both it and your firm?

Conventional Options

You first consider taking a traditional approach to fund the litigation through a retainer, but your experience tells you that this will not necessarily be a quick or inexpensive matter, and, no matter how low you might set your retainer, it would likely have to be refreshed several times before the case is resolved. This, in turn, would have your client invest more than it stands to gain or preserve in the litigation. It is far from an attractive option.

You may also consider taking on the matter on a contingency fee basis. While that alternative presents some initial appeal to the client, you soon realize that your firm (unlike a personal injury or professional malpractice firm) is not designed to handle such matters. Moreover, the prospect of pouring dozens or hundreds of hours into the case with little or nothing by way of compensation will not please your colleagues or your bottom line. The billable hour is still the predominant means of income for your practice, after all.

The Flat Fee Alternative

Setting a fair flat fee is one part science, one part art, and one part sorcery. Selecting a figure that reflects a tolerable balance between a quick settlement and drawn-out litigation follows no set formula, but one rule of thumb that may prove attractive to both the firm and the client and that builds on the contingency fee model is taking a third of a third. Most commercial litigation clients have at least some concept of the traditional contingency fee of a quarter to a third of the gross proceeds of a settlement or judgment, which may be used in collection, medical malpractice, and personal injury matters. Setting a flat fee of a third of a third of the projected damages or the value of the asset sought to be preserved may attract a client to such an arrangement. For example, if the client is facing $150,000 in potential damages in a breach of contract action, a flat fee of approximately $16,666.67 (or thereabouts) for your legal services through trial may seem reasonable against the alternative of a $10,000 “evergreen” retainer. The certainty of the expense level may also bring budgeting benefits for the client and help avoid challenging future discussions concerning past due invoices and exhausted retainers.

Note that flat fees work best when they are (1) exclusive of out-of-pocket or reimbursable expenses (such as filing fees, depositions transcripts, and expert witness fees) and (2) documented in an engagement letter that makes plain to the client exactly the scope of work paid for and deems the fee “earned when paid.” The benefits of such an express agreement, beyond compliance with the Rules of Professional Conduct, are self-evident.


A flat fee empowers your client with a key strategic advantage: tactical asymmetry. Freed from the restrictions of the billable hour, your client may now elect to initiate litigation measures that normally would be too expensive to pursue in a “middle-level” case, such as conducting more extensive third-party discovery, seeking partial or full summary judgment, or filing motions in limine. A flat fee may also liberate the client to invest more resources into experts than it otherwise would be able to do. Extraordinary steps that may bring asymptotically better results are far easier for a client to take when made without direct financial consequences. With a flat fee, the small firm litigator can more readily use the tools traditionally reserved for larger firm opponents (including more extensive discovery and sophisticated motion practice) that may increase an opponent’s legal expenses and, in turn, help drive settlement.

Weaponizing Disclosure

Moreover, with your client’s permission and with an eye toward such a settlement, you may elect to disclose to opposing counsel that your client is truly “all in” on the case because it no longer has any incremental legal expenses to concern it. “Weaponizing” this disclosure—especially to an opponent facing its own ever-mounting legal costs—may assist in concluding a satisfactory settlement.

The Gamble

Flat fees represent a technique for managing risk for both clients and law firms. Perhaps that is a polite way of relating that they are gambles. The law firm may place too low a value on its most important resource (attorney time) in favor of its most constant need (operating capital) and find itself shackled to a matter that drags on beyond on all predictable schedules. A client may end up paying a large premium for a result that could have been obtained much less expensively through conventional hourly billing. Flat fees nevertheless can prove a useful alternative tool to permit meaningful complex commercial litigation to proceed against parties that did not expect litigation. At the very least they may be intriguing material to discuss with your client when that next “middle-level” case arises.