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Tiered discounts that depend on the amount of services provided

With so-called tiered discounts, a law firm agrees to a step-wise volume discount off its standard rates. As fees paid the firm exceed one plateau after another, the discount rate rises for the new level. For example, a firm might propose a discount of five percent for the first $1.0 million in fees paid, a discount of 10 percent on fees paid between $1 and $3 million, and a final step increase to a 15 percent discount on fees paid over $3 million (See my posts of Aug. 13, 2006 on tiers based on something other than volume of fees paid; Nov. 25, 2005 on another view of tiered fees; and Aug. 22, 2006 on tiered rates for individual lawyers based on the difficulty of work.).

Typically, stepped volume discounts do not apply to matters under separate alternative billing arrangements such as fixed fee, capped fee, blended rate or incentive, although the fees paid by the legal department under the other arrangements would be included for purposes of reaching the next threshold of discount level. What also may differ is whether the higher discounts apply retroactively (See my post of Aug. 8, 2006 on this topic.).