Evan Chesler, presiding partner at Cravath, Swaine & Moore shocked a lot of people within the legal community with his recent opinion piece on Forbes.com advocating the death of the billable hour.

Basically, he states that the billable hour “makes no sense.” Making more money by dragging out a matter (or in his analogy, making more money by getting “bogged down a land war in Asia”) is “frankly nuts.” Pretty strong words from a firm that doesn’t really have to worry about clients questioning their bills, I wouldn’t expect.

Even though tons of folks (too many people to mention here) in blogosphere, including yours truly, have long advocated doing away with the billable hour, Chesler’s comments, one could argue, clearly takes the debate to a higher level. Not many would expect such a position from a BigLaw firm of Cravath’s stature. Now maybe the concept of alternative fees, although not new, will take on a bit more momentum.

Although there have been many different suggestions for alternative fee arrangements (see Continue Reading below for a few of my posts on the topic), I found a couple of ideas from a named partner in a 10-lawyer Philadelphia area firm worth considering.  Gary Lentz of Bochetto & Lentz wrote an article published in The Legal Intelligencer and on Small Firm Business suggesting a couple of approaches that could attract new clients and enhance fee opportunities  in this down economy.

The following two variations on the same theme are worth consideration by firms of all sizes:

  • Multi-phased Fee Agreements
    • Phase I – an initial flat fee to evaluate the case, develop strategy, negotiate and “prompt resolution” (with a potential for a bonus) and drafting complaint, if necessary;
    • Phase II – a mix hourly, fixed fee and/or contingency, if necessary to file and pursue the matter in court.
  • Blended Contingency Fee Agreements – an initial flat fee to cover the evaluation of the case and drafting the complaint, followed with a contingency fee based on outcome of the matter.

Take a look. They may just work for your firm, particularly with clients who are encountering their own uncertainties in the current economy.


Continue Reading

The billable hour has been criticized by many people in the legal industry, including me. But, from a business development standpoint, I’m not against the billable hour per se as much as I’m in favor of using alternative fees (fixed, blended rates, etc) to increase a law firm’s marketing advantage. That’s not entirely true;

The results of a survey by Bruce MacEwen at Adam Smith, Esq. leads him to conclude that based on responses by 63% of respondents (there were only 87) “the billable hour will remain intact for all practical purposes.” The responses to the question “Will the billable hour ever lose its dominance?” are:
*Yes, but only for commodity work – 31%
*Yes, pretty much across the board – 29%
*Only for clients who absolutely positively insist – 32%
*Over my dead body – 8%
I have a slightly different slant. For years Bill Cobb of WCCI-Cobb Consulting, a consultant for more than 25 years to law firms on strategic and value-added issues, has used an interesting graph to depict the risk factor and legal expertise need based on the variables of the “volume of legal work available” (X axis) vs. “relative value added” (Y) by lawyers. What is especially interesting about the chart is that (based on ABA figures a few years back), commodity work was 60% of volume of legal work available.
If that is still the case (with technology it is likely a higher percentage today), based on Bruce’s survey results above, it can be argued that 60% of the respondents believe that hourly billing will lose its dominance for the majority of legal work available to lawyers.
Interesting.


Continue Reading

Over the years, ABA surveys have indicate that legal fees only get ranked between number 5 to 7 on the lists of top concerns by clients. This fact often escapes lawyers because clients DO COMPLAIN about the cost of legal services. However, when one looks deeper, often what one uncovers is that clients are really