Outside Counsel

Alternative Fee Arrangements' Challenge to the Billable Hour

, New York Law Journal


Robert D. Lang and Lenore E. Benessere write: Like Blockbuster succumbing to Netflix or Kodak film being replaced by digital, attorneys do not want their firm to become a case study for how the billable hour was replaced by alternative fee arrangements. While the complete rejection of the fee-for-service model is probably an overreaction, practitioners should learn from the paradigm shift at Microsoft how to successfully enter into, and profit from, AFAs.

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What's being said


    Well it never stops when it comes to finding a way to control legal spend and there have been a myriad of billing arrangements and now its AFA‘s and in my humble opinion will run it‘s course just like the PLA developed by Pfizer which imploded after 5 years. There is an article written about it addressing that millions were saved in legal fees and billions paid out in indemnity payments. There is no panacea in reducing legal spend and I really respect Microsoft because we provided them with our legal cost control services with tremendous results. But many company GC‘s like total E-Billing applications which will cut down on you receiving paper billings and through programmed algorithms and word searches can uncover certain minor billing anomalies. But the only way to actually control legal spend is to have a detailed written set of billing guidelines that all your law firms totally understand and than retain the services of an independent legal auditing company staffed with experienced lawyers and accountants that perform a line item review and than work with all your law firms in order for them have the opportunity to be in full compliance with your billing protocols. We founded the legal auditing industry in 1985 and I truly believe its the only way to control legal spend even though the word auditing sometimes makes firms nervous. On our web site there is a two part article published by The Metropolitan Corporate Counsel entitled, " Myths, Realities and Strategies of Fixed Fees" , which lays out the pitfalls of this practice and we also have other articles that address the subject of AFA‘s. I know before anyone responds that I am not being objective because of what my company has been doing effectively for over 33 years please save it because we know what works and have seen these other strategies come and go sometimes with disasters results. The problem in this small industry that we founded is that we have seen so many companies come and go after causing many problems such as promising a certain amount of savings and Monday morning quarterbacking of law firm strategies and virtually dictating allowable hours for tasks performed by each lawyer. This is something we have never done and never well but no there are so many companies and law firms searching for revenues who proclaim to had the solution to controlling legal spend. All I can say is beware because of them as I refer to as bottom feeders who have very low pricing models primarily because of the use of independent contractors and lesser experienced staff which all can easily been researched. I wish Microsoft the very best as we use their products and its a great company but I totally disagree with this AFA program and of course its just my opinion which is based upon over 40 years litigation and effectively controlling legal spend my entire career.

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