Legal News

Flat-Fee or Hourly Billing, It Doesn?t Matter: Lawyers Will Work Hard

By Ashby Jones

In-house counsel may loathe the billable hour. But one thing the billable hour is good for is getting outside counsel to work. There’s a very simple built-in incentive there. If you pay by the hour, well then, you’ll get hours.

And that’s been one of the hesitations among in-house counsel when presented with the prospect of going to flat-fee arrangements. Sure, the costs might come down, and predictability might go up. But without the hourly incentive, will lawyers work less hard? Will a lower bottom line render a lesser work-product?

Not necessarily, reports the Chicago Trib’s Ameet Sachdev, in this piece, out Tuesday.

Sachdev’s piece focuses on Lake Forest, Ill.-based Brunswick Corp., which makes a whole bunch of stuff, but whose name we associate most closely with bowling, given all that time spent at Tustin Lanes, back in the day. (Tustin Lanes now has a Web site! You go, Tustin Lanes!)

Brunswick reached a flat-fee deal with a lawyer named David Rammelt, formerly of Kelley Drye, now of K&L Gates. Rammelt’s litigation flat-fee contract with K&L Gates is in its second year and includes product-liability and breach-of-warranty cases.

The Tribune couldn’t wrangle out of either side how much Brunswick is paying for the deal. (We say, come on, Brunswick, loosen up!) But the deal, according to Brunswick’s GC Kristin Coleman, has exceeded expectations. The company said it cut the money it spent on outside lawyers working on litigation by 30 percent in 2009.

According to the Trib piece, the agreement provides some lessons to other lawyers and companies considering alternatives to the industry standard of billing clients at an hourly rate, like that lawyers getting paid on a flat-fee will, in fact, work hard for their money. (Maybe lawyers are immune from incentives and disincentives; hard work is hardwired in their DNA.)

Rammelt said the arrangement forced him and his team to, well, be efficient, and to assemble technologies to cut down on waste. (Lawyers are known for a lot of good things; being efficient isn’t one of them. Nor is being tech-savvy.)

One thing Rammelt realized, however: the rate of collection versus hours billed - is not as high as he would like. He and his team still keep track of the time they spend on Brunswick matters to have a benchmark to compare to the fixed-fee contract.

Full post as published by Law Blog - WSJ.com on January 26, 2010 (boomark / email).