In-House Counsel

A rationale for high fees paid for matter-influencing partners

By Rees Morrison

A very smart general counsel shared with me an iconoclastic view. He argued that excellent partners only bill a fraction of the value they deliver and gave an example.

Say your company has decided to buy a company for $100 million. You know partners at two law firms who could handle the transaction, but you believe that one of the partners is five percent better than the other. Five percent of $100 million equals $5 million, so the argument of the general counsel is that paying the superior partner anything less than $5 million is a bargain.

That argument would hold up better if the success of the deal depended only on the work of the partner. It doesn?t, not at all, nor do even the legal services depend only on the work of the single partner. In-house lawyers are not potted plants and the partner is not the only lawyer from the law firm who works on the matter.

Even so, whether you single out a partner or extend the argument to the team that works on the matter, a quality differential that materially influences the outcome may be under-compensated. For ?game-changing? lawyers on big lawsuits or deals, a slight edge in ability ? and thus directly or indirectly in the outcome ? perhaps deserves much more than hourly rates.

Full post as published by Law Department Management on October 19, 2008 (boomark / email).