Generally, lawyers’ legal services are followed by a bill (which is often much larger than expected). The vast majority of people pay the bill regardless of the result or services provided. However, that is not the case with many corporations and self-made millionaires. According to many self-made millionaires, legal fees are voluntary “ALL THE TIME.” So, when should people pay their legal bills? Only after receiving valuable legal services, millionaires say.
State and municipal budget problems have been well documented over the last few years. The last thing counties need are inflated legal bills. But that’s exactly what happened to Luzerne County, Pennsylvania. According to the Times Leader, Luzerne County spent $334,000 on legal costs for parents in Children and Youth cases last year, more than twice their $125,000 budget.
A Times Leader investigation revealed that the high bills were at least in part due to improper attorney billing practices, including one lawyer who doubled billed the county for travel time. After being approached by a reporter, the offending attorney admitted her mistake, alerted the county, and hired a forensic accountant to audit her records. The audit revealed that the county had been overcharged by $59,042, largely due to the burden of a heavy case load and errors in the way bills were processed.
In a business model somewhat foreign to attorneys here in the United States, Riverview Law, a corporate services firm specializing in fixed-fee billing, has rolled out a new divorce service with fixed-fee packages to minimize the unexpected legal costs of divorce. However – one aspect that should be familiar to stateside lawyers is that the top quality legal service supplied in this situation is unavailable to those without the means to afford it. The Wall Street Journal’s Market Watch reports that the service will include access to the nation’s best divorce attorneys at guaranteed prices; but only if your assets are worth an excess of £500,000.
The Wall Street Journal reported this weekend that law firms have become more receptive to flat fees and other alternative billing arrangements.
During the economic downturn, corporate clients were able to push back and demand breaks from typical hourly billing. However, even as the economy shows signs of recovering, alternative-fee agreements continue to rise. According to a Citi Private Bank survey of managing partners from 40 U.S. firms, the percentage of revenue from alternative-billing arrangements is expected to hit 13.4% this year, nearly double what it was in 2008.
The Washington Post recently reported that the use of alternative fee arrangements in law firms has not only become much more prevalent but has also contributed to an increase in client billing. The Post notes the success of “flexible” and efficient billing strategies among small law firms and the digression from the individual hourly rates system.
The Association of Corporate Counsel (ACC) recently released the results of its 2011 Chief Legal Officer survey. Almost two-thirds (63%) of in-house counseled surveyed said they are now using some form of value-based fee agreement. This percentage is up considerably from prior years. Value-based fee agreements are fee arrangements that are typically not based on billable hours. The survey found that these types of arrangements represented 10% or more of the work performed by outside counsel, as reported by the respondents who use such arrangements.