July 27, 2011 Articles

Alternative Fee Arrangements as an Alternative Billing Model

New innovations in hourly billing do not always address the core issues that are more ably addressed by alternative fee arrangements.

By Olivier A. Taillieu – July 27, 2011

In 2009, the Association of Corporate Counsel surveyed corporate counsel about their most pressing needs. At the top of that list was the need for new legal fee arrangements that more closely met the needs of their companies. The situation today is no different. Companies continue to search for new ways to get the legal representation they need without bankrupting the company. While there may be a few companies still willing to hand over millions after millions in legal fees without a second thought, most of us are not so lucky. Instead, in-house legal counsel is faced with the daunting prospect of presenting huge legal bills to boards of directors that are looking to trim the fat anywhere possible, and outside counsel is tasked with bringing those companies in the door in the first place.

One option for meeting both of these objectives is to cut corners in legal representation. Restricting the number or type of attorneys working on the case, declining to engage in discovery, or even foregoing legal actions altogether, are but a few examples. Each of these options bring with it a new set of consequences that is likely to be worse for the company than the legal bills—a case of the cure being worse than the ailment. If this is your chosen course, you should look elsewhere for advice.

If you are interested in a more palatable option, you might consider looking into alternative fee arrangements. The default hourly billing model has seen modest improvement in recent years, most notably with the almost universal adoption of billing per 1/10 of an hour increments and the adoption of ABA task codes. However, at its core, this billing model still relies on the decades-old platform: A team of lawyers works many hours on a number of tasks and then presents the client with a bill at the end of the month. New innovations in hourly billing do not always address the core issues that are more ably addressed by alternative fee arrangements.

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