One of the difficulties with alternative fee arrangements is that early in a matter it isn’t possible to foresee future events and craft a fee arrangement that complements what is likely to happen. Who can know enough about the other side, the court, the issues, and the external actors who will appear?
For this reason, sometimes law departments agreed to pay on an hourly-fee basis for an initial period, perhaps 30 or 60 days, and then negotiate something other than hourly billing. The initial period, often referred to as “early case assessment,” covers basic fact investigation, preliminary strategy sessions, budgets, and familiarization with each other (See my post of Jan. 4, 2006 on early case assessment.). Both sides thereafter have a better understanding of what will be involved and costs.
The problem then becomes whether the law department has any realistic leverage once it starts to negotiate alternative fee arrangements (See my post of July 21, 2006 disputing the putative losses from transitioning ongoing work to another law firm.).