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Is Widespread Use of Alternative Fees Still a Long Way Off?

Posted in Marketing Plans, Marketing Tips

According to a feature article in this month’s InsideCounsel one consultant who helps clients structure alternative fee arrangements "estimates that only about 2% of total legal billings currently are being done on alternative basis – but he contends it’s an increasing trend." That certainly isn’t a surprise.

He goes on to say "I’d expect that almost 20% of all billings would be on alternative billing in eight to 10 years…" According to the article, 35% of respondents to Fulbright & Jaworski’s Litigation Trends survey said that the down economy has pushed them "to increase their use of alternative fees.”

Based on that, I guess I’m just surprised to hear that it’s going to take close to a decade for alternative fees to get up to 20% of billings. I’m just not sure I buy that. I believe that there will be quite a bit more than that by then.

InsideCounsel reports we’ll hear from law firms in Part II of the article next month. If you don’t want to wait that long, and want a more in-depth viewpoint from law firms, get a copy of my colleague Jim Hassett’s survey report of his interviews with more than 1/3 of the AmLaw 100 law firm leaders. It was released recently, and only costs $395 (no, I don’t get a penny of that). Find out more about it on Jim’s Legal Business Development blog .

So, if it does take awhile for alternative fees to hit main street, it still gives small and medium-sized firms plenty of time to make inroads into the world of larger companies by offering alternative fees now, especially in the current economy.

  • http://blog.martindale.com Mike Mintz

    That is a surprisingly low number from the Inside Counsel article. We did a poll in Connected about big legal news in 2010 and 30% of respondents said “law firms flock to alternative fees.” Do you think part of what accounts for the low number of firms using alternative structures in the Inside Counsel statistic is the timing of data? If firms are just starting to use these fee structures perhaps there isn’t enough feedback on these programs yet. I am interested to see how far firms move the needle this year.

  • http://www.methnerlaw.com Matt Berkus

    The problem with alternative billing is the courts and state ethics boards; at least in some practice areas. If you ever get in a fee dispute, the (insert your own adjective) attorneys on the ethics boards want to see hourly billing. For example, look at bankruptcy; here is a field that is ripe for value billing, but not only are you limited by the ethics boards but also the courts which require fee applications and will even dictate your hourly rate, even after the client agreed to the rate, if the judge, based on his “intuition” feels the fee is excessive.
    Until you rewrite MRPC rule 1.5 and remove or at least define “reasonable fee”, alternative billing will still tread in the grey area.