Confusion over alternative fee arrangements (AFAs)

During May 2006, 162 readers of InsideCounsel completed a survey sponsored by a law firm, Butler Rubin, regarding alternative fee arrangements in litigation. As noted before (See my post of Sept. 17, 2006.), 40 percent of the respondents had zero experience with AFAs in litigation.

Thus, as reported in InsideCounsel, Nov. 2006 at 45, about a hundred respondents could have answered the question, “Why do you negotiate an alternative fee arrangement with your outside counsel?” Some 32.9 percent of them selected “belief in risk sharing with outside counsel,” while 38.4 percent selected “desire for predictability of legal fees.”

What troubles me is that the results confound plaintiff cases, where there is a risk of low or no recovery, and the much more common defendant cases. Risk sharing applies to the former, where the law department has a chance to recover money and use it to reward the firm; fee predictability applies to the latter, as a defendant. There are really two situations being described. What also troubles me is that the survey and discussion seem pitched to single case situations. They make no mention of portfolios of multiple cases handled under an alternative fee arrangement.

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