firm bills at a reduced hourly rate, and
also receives a percentage (smaller than
normal) of the recovery. If a firm's normal
contingency fee rate is 33 percent, they
may take only 15 to 20 percent here,
while also billing at about 50 percent
of their normal hourly rate. This type
of agreement can work well in many
instances, as the law firm is guaranteed
some money on the reduced hourly rate,
but there is also some risk-sharing and
aligning of financial interests provided
to the client. This AFA is most common
on a plaintiff claim but can also be
structured as part of a defense file, with
contingent money kicking in if agreed
upon results are achieved.
attractive and they can be tailored to
a number of different situations and
circumstances. A flat fee can be a one-
time agreed upon payment up front, or
made in increments. It can be a fixed
number paid on a monthly basis, or a sort
of hybrid hourly fee setting, it can be a
ceiling on the amount of hours billed per
month, providing some certainty to the
client as to what the maximum exposure
will be. This type of agreement is
versatile and can provide efficiency and
certainty to both law firm and client.
can be tailored to fit a number of matters.
In this AFA, a portion of the attorney's fee
is paid up front, with another portion to be
paid in the end, contingent upon certain
agreed upon milestones or measures of
success being reached. In this setting,
the law firm is guaranteed some money
without having to bill by the hour, which
is nice, and has also aligned its interests
with the client.
Clients and Firms
will mean a net reduction in money to the
firm without first putting the time in to
evaluate the positives that could result.
When a firm is not tied to just billing
through as many hours as it possibly can,
it is freed up to discover and entertain
other opportunities.
The old model of "no stone unturned"
on hourly files is a dying breed, except
for at the largest of companies and on
multimillion-dollar files. Clients, instead,
are asking now for a more efficient,
value-based approach. We see more
reductions in time entries being asked for
every day for tasks the client deems were
unnecessary, or not technically a "legal"
task, etc. More and more clients are also
refusing to pay full price for associate
work, making the partners spend more
time on matters that are not their highest
and best use for their law firms.
many of these problems can be alleviated.
Associates are freed up to work on the
matters entrusted to them, while partners
are able to spend more time adding value
to the firm in other ways. Efficiencies can
be achieved in multi-tasking on several
matters at once that were not possible
under hourly fee arrangements. Also, the
certainty in the fee provided by many of
AFAs helps firms more accurately forecast
the money that they will have to invest
in other matters, which again can lead to
pursuing opportunities that firms would
have been more hesitant about in the past.
Likewise, as discussed above, AFAs
can inspire more confidence among
clients that their lawyer understands
their needs and goals. Clients become
more likely to view their outside counsel
as a partner, with aligned interests,
working together to accomplish goals and
achieve success. The expectations tend
to become more defined both ways, and
clients are provided more clarity and
predictability, enabling them to plan and
make decisions more accurately.
The bottom line is that if
employed thoughtfully, smartly and
appropriately, I believe AFAs to be
win/win arrangements where the client
appreciates that you've thought about
and accommodated their situation and
aligned your interests with theirs, while
also providing your firm the opportunity
to use resources more effectively,
resulting in a net increase of business
and productivity.