Legal Research

"Alternative Fees (Part 12) - What's different for Big Law?"

Posted by Jim Hassett: "On April 15, I moderated a panel discussion for West Legal Edcenter on alternative fees at large firms.  Some of the discussions were similar to those in a related panel on alternative fees at boutiques.  But there were also important differences at large firms.

Harry Trueheart, the Chairman of Nixon Peabody (over 800 lawyers), noted that large firms have several advantages:  they can take greater risks if a client wants contingent or other fee arrangements, and they have a larger knowledge base.  This can lead to greater efficiency and better estimates of what things should cost.  But Trueheart and other panelists also talked about the special challenges in changing the mindset at large firms.

Fred Bartlit noted that at Big Law "there's no such thing as a dry hole."  Large firm lawyers expect to make a profit on every single matter, because every hour is billed to the client.  Clients may win or lose, but lawyers always win. 

At 70 lawyers, Bartlit's firm does not fit the traditional definition of Big Law, but it IS the largest firm in the world that refuses hourly work and works exclusively on an alternative basis.  Bartlit & Beck structures every fee so that the law firm and the client win together, or lose together. 

Just as oil companies must accept the fact that they may invest millions drilling for oil where there is none, Bartlit says that law firms must accept the fact that in order to win big you have to be willing and able to sometimes lose.  This is such a fundamental change in mindset that he thinks it will work best in "greenfield" operations, where a new law firm is started from scratch to focus strictly on alternative fees.

But some large firms are beginning to embrace this philosophy...

Harry Trueheart explained that as legal clients move in this direction:  "A lot of education will go into this and it's not cheap.  Law firms will pay dearly as we as a profession learn to do this.  There will be winners and losers on the economics.  But many contractors manage their business this way and lawyers must learn this too."

For firms that do invest in mastering these new ways of doing business, the payoff could be enormous.  When clients leave the billable hour behind, they are more willing to pick up the phone to ask for advice because they know it will not increase the cost.  "It invites the client to engage with us and increases the ties that bind," said Rosenblatt.  "We're now on the same team, and more likely to get the next engagement."  The implication is obvious: "This is an opportunity to get a bigger share of a shrinking pie." 

For a summary of this series, see the LegalBizDev Guide to Alternative Fees, in the free resources section of our web page." 

Full text and active links are available at the source site listed below.

Source: Legal Business Development, 6 May 2009

Full post as published by Stark County Law Library Blawg on May 11, 2009 (boomark / email).