Published on:

Two advantages of fixed fees for the law firm: more flexibility in management and freedom to take initiatives

A long article describes Pfizer’s dramatic move to have 19 law firms handle more than three-quarters of its US spend on fixed fees. The article is Corp. Counsel, Vol. 17, Jan. 2010 at 66, 70. (See my post of March 1, 2008: fixed or flat fees with 36 references).
Embedded in it are two points worth highlighting.

The first is that the firms like their newfound freedom to allocate resources as they choose – it’s their own dollars they are investing, after all. Harnessed to the yoke of hourly billing, clients are wont to intervene much more in how law firms get their work done. When the payments are fixed, firms enjoy much more latitude.

Second, under a fixed fee, if a law firm suggests to the client that it would like to do something extra or prepare for upcoming matters, clients welcome the initiative. Partners aren’t suspected to be in selling mode, the inevitable suspicion that follows proposals to do more and naturally have the meter tick more.

Posted in:
Published on:

2 responses to “Two advantages of fixed fees for the law firm: more flexibility in management and freedom to take initiatives”

  1. Kevin Chern says:

    Great post, Rees. I think, in addition to fixed fees, many law firms will turn to alternative billing arrangements and practices in 2010 to make sure that clients pay and pay on time.

  2. We have been using flat fees for five years, along with other forms of billing (e.g., capped fees).
    More than 75% of our work is done this way but flat fees are a mixed blessing for both counsel and client. Counsel must be careful not to insist on having lower-level associates utilize forms without closer inspection just because it is cheaper. Witness recent decisions on NDAs and LOIs.
    Flat fees should be part of a mix of billing structures and both counsel and client should agree to a mechanism for adjustments.
    We also have a quid-pro-quo: Various fee structures (tantamount to a discount) in exchange for invoices without hourly entries, prompt payment (or pre-payment for flat fees) and electronic payment.