A nuance on the applicability of most-favored nation agreements – hourly rates only

Promising most-favored nation (MFN) treatment to a client, a law firm commits that the client will be charged on the best terms the firm has agreed to with any other client. To my understanding, MFN agreements govern the billing rates of individual lawyers. The firm says: “The hourly rates we charge you will be as low as the rates we charge our client who gets the most advantageous billing rates.” An MFN assurance could also apply to flat-fee arrangements.

What MFN does not apply to are discounts off a bill for a matter. After all, no matter can be the same as any other matter, so a firm cannot with any justification promise a favored client that it is getting the best deal possible. Hours are hours, but each matter is unique. Write downs on an individual matter can’t adhere to MFN commitments.

If this reasoning is true, and write offs don’t fall under the MFN guarantees, the barn door hangs wide open.

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