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Monthly flat fees for lengthy and expensive litigation; dubious as an alternative fee arrangement

A piece in Corp. Counsel, Vol. 15, May 2008 at 71, states that law firms should propose set payments every month as an “alternative fee arrangement” for costly, multi-year cases. “This benefits the law firm during the valley times and the client during peak times, and overall is a win-win solution for both over the life of the litigation.”

Not necessarily so, Candide. Both sides benefit only if they have hit upon an amount to be paid each month that is fair. A monthly fee that is too peakish favors the firm; a fee too valleyish favors the department. No one can know early on the likely magnitude or timing of costs in a case. More fundamentally, it is not my impression that even payments make all that much difference to a law department.

I have a residual worry that monthly retainer payments make it too easy for the law department’s responsible counsel to pay little heed to the bill. It is a good practice to reconcile the amounts paid against the actual costs accrued by the law firm and perhaps adjust the amount of the payment for the future based on those costs. Even better, set the monthly amount every six months based on a budget submitted by the firm and reviewed by the in-house lawyer that details why the payment should be what they propose (See my post of April 27, 2005: budget only as far as your headlights reach.).