Flat Fees and Alternative Billing Arrangements.

Posted By Cliff Tuttle | August 25, 2009

Posted by Cliff Tuttle (c) 2009

The Wall Street Journal reported recently that the recession has given corporate clients the leverage to demand and get flat fees for work that was performed on an hourly basis by outside law firms.

Of course, flat fees are nothing new. What’s new is that Biglaw is doing it. Small firms and sole practitioners have been performing many types of services on a flat fee basis for as long as there have been lawyers and clients. Of course, this varies with the type of practice. Civil litigation is prone to turn into a war of attrition and even a solo a lawyer (who presumably doesn’t have to pay others to work on the case) could go broke trying to dodge all of the brickbats the other side can throw if the maximum fee is fixed in advance.

But flat fees are a great marketing tool for lawyers looking for quality work. It only makes sense. When it is possible to state with some degree of certainty how much work will be involved in a particular task, a fixed fee can fulfill the expectations of both sides quite well. The exception can be dealt with quite effectively by an escape clause that provides additional compensation when certain criteria are met. For example, mortgage foreclosures which typically involve a default judgment followed by a quick trip to the sheriff sale, are commonly handled on a flat fee basis, with the proviso that extra work (which is defined in minute detail in the engagement contract) results in extra fees.

When the parties can assess what a case is worth in advance, it is possible to agree on an appropriate fee. Otherwise, when the hourly fee starts to greatly exceed the value of the case, the lawyer finds him/herself in a tight spot and may start discounting or even writing off fees. And, by the way, clients are not the only ones who worry when fees exceed the value of a case. Lawyers fear that disappointed clients may look elsewhere next time — especially if the result was the prime cause of the disappointment.

A flat fee is like settlement. It gives a modicum of certainty in a world that sometimes seems to be spinning, spinning out of control. Ask your lawyer to quote one. You may be surprised.

CLT

Welcome

CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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