We believe in an entrepreneurial legal services business model, unrestrained by the billable hour based business model. We recognize that clients place value on shifting legal fee risk to law firms. Shifting this risk to a firm often aligns the firm’s incentives with the client’s, and reduces client risk. In addition, clients who lack financial resource needed to pursue important litigation are provided the opportunity to pursue it. These arrangements provide predictable cash flow and budgeting to both the firm and client.
Alternative Fee Arrangements
Alternative fee arrangements (AFAs) are agreements between the firm and client to provide compensation to the firm through other than hourly billing. These arrangements take the form of contingency fees, fixed fees, value or success based fees or other alternatives to hourly fees, etc. AFA arrangements often span more than one case. We have extensive experience in negotiating AFAs to handle a portfolio of defense cases. Successful AFAs can be achieved if the client and firm understand the risks faced by an AFA, each party’s role in managing the risks, and developing a fee structure that rewards success however defined by the client and firm.
We work on pure contingent fee and partial contingent fee litigation matters. We structure fixed fees in litigated and non-litigated matters. We handle matters with “hold backs”, “uplifts”, and several other risk/reward dynamics. In certain matters, we consider part of our fee as equity or stock. We consider any reasonable risk-sharing fee structure that balances the investment and risk of the firm with the client’s objectives.
Pure Contingency Fee
A pure contingency fee arrangement is the most traditional alternative fee arrangement in which we receive a fixed or scaled percentage of recovery. Typically, the client pays the expenses of the litigation even if there is no recovery.
Partial Contingency Fee
In some matters we agree to receive a portion of our hourly rate plus a percentage of any recoveries in the lawsuit. Partial contingency fees reduce the cost of litigation, while still aligning the firm with the client’s objective. These matters are structured by defining a successful outcome, and then provide for a sum certain, percentage of outcome, or “uplift” in hourly rate upon achieving success.
In certain circumstances, we agree to handle a matter or multiple matters for fixed sum or for a fixed rate per month. Fixed fees include a cap paid up front, or they can be for a fixed amount per month without a cap. These arrangements provide ease of budgeting and cost certainty to clients.
A holdback/success fee arrangement is similar to a partial contingency fee in that the firm is paid a portion of its fees up front, but has a portion withheld contingent upon success in the matter or matters. If concluded successfully, we receive a multiple of the holdback or an agreed upon success fee. This structure is often used in the handling of a portfolio of defense cases.
Often, AFAs cover several cases or matters. For example, we handle portfolios of defense cases on an AFA basis. In addition, we have negotiated arrangements with clients where it handles a fixed pool of defense cases on a reduced hourly fee basis in exchange for handling a group of hourly fee cases.
Appellate matters are well suited to alternative fee arrangements. We are often willing to handle appellate work where some or all of compensation rests on the success of the appeal.
Bespoke Billing Options
The examples provided above are not meant to be exhaustive. The firm considers alternative fee arrangement structure for all different types of matters with clients. As long as the risks are fairly balanced between the firm and client, there is no type of matter that cannot be structured in this manner.
Litigation Finance and Alternative Billing Counseling
We are experienced in negotiating and structuring third-party litigation finance structures. We are often asked to assist clients in evaluating proposals made by other firms. We are glad to provide our input in these situations. We have significant experience with litigation funding entities. Our relationship with litigation funders is a significant asset to our clients, as often clients require liquidity during the prosecution of a trial or appellate matter. We also have been involved in negotiating and purchasing insurance for our clients’ trial victories and have significant experience and contacts with entities that provide these types of insurance products.