The ACC/TAL Survey: In-House, Outside Counsel 'on Different Planets' When It Comes to Fees
Law.com
Shannon Green
Corporate Counsel
December 01, 2010
When it comes to their perceptions about law firms' willingness to offer alternative billing arrangements, law firm leaders are from Mars and general counsel are from Venus.
"They really are on different planets," said Susan Hackett, general counsel at the Association of Corporate Counsel.
In a joint survey conducted by the ACC and Corporate Counsel sibling publication The American Lawyer, 93 percent of law firms reported an increased willingness among firms to discuss alternative fee arrangements in 2010. Responding to the same question, just 61 percent of general counsel at companies with revenues of $1 billion or less and 69 percent at companies with revenues greater than $1 billion said more firms were willing to step away from traditional billing arrangements.
The difference may lie in what firms and law departments want out of alternative arrangements, said Nicky Mukerji, director of business intelligence at Legalbill, a Nashville-based legal consulting and analysis firm that helps reduce legal spend.
"Corporate counsel are looking at a much bigger shift than firms are willing to offer," he said.
The ACC/TAL Law Firm Leaders Survey 2010 was conducted online in September and October 2010. The ACC surveyed 453 corporate chief legal officers and general counsel, 128 of which worked for companies with annual revenues of $1 billion or more. The American Lawyer compiled data from the heads of the AmLaw 200, the 200 top-grossing firms in the country.
Perceptions aside, 53 percent of general counsel at the smaller companies reported flat-fee billing for an entire matter this year. That number is up 5 percent from last year.
"That's a huge change from the way people used to do business," said Hackett. Companies have been gradually increasing their use of flat fees over the last few years, but primarily on a piecemeal basis. "They had no ability to figure out what the entire banana would cost," she said.
Hackett said that companies are developing the confidence they need to rely on alternative arrangements. She says flat fees constitute a re-balancing of the conversation about who's bearing the risk in the relationship between companies and firms.
"Let's face it, nobody's really got much of a track record," she said. But she's seeing companies demanding that firms assume some responsibility for managing the risk that a matter poses.
Hackett has seen agreements that range from two-page engagement letters to complicated agreements full of contingencies. "I don't think there's any one norm," she said.
"Alternative fees are on the rise," Mukerji said, "Law firm leaders are much more ready to talk about alternative fee arrangements than ever before," he said.
"They're saying, 'We want to partner with you. We will help bring some predictability to your spend,'" Mukerji said. These arrangements are much better for both sides, he said. "This is good news."
General counsel at large and small companies used a range of alternative billing methods in 2010. Sixty-two percent of top corporate counsel said they used flat fees for entire matters and 41 percent for some stages. Of that group, 34 percent also used collars or caps, and 27 percent used incentive fees.
At the smaller companies, 34 percent used flat fees for some stages of a matter, 30 percent used collars, and 18 percent tried incentive fees. Just 13 percent of general counsel at large companies and 22 percent at smaller companies reported using no alternative billing arrangements in 2010.
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