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In the Wake of the Recession, Alternative Fee Agreements Seem Here to Stay

The Wall Street Journal reported this weekend that law firms have become more receptive to flat fees and other alternative billing arrangements.

During the economic downturn, corporate clients were able to push back and demand breaks from typical hourly billing. However, even as the economy shows signs of recovering, alternative-fee agreements continue to rise. According to a Citi Private Bank survey of managing partners from 40 U.S. firms, the percentage of revenue from alternative-billing arrangements is expected to hit 13.4% this year, nearly double what it was in 2008.

The trend is illuminating. Most companies are simply dissatisfied with the value proposition that is hourly billing. But while flat or contingency fees may offer some relief, a number of corporate counsel remain skeptical of such arrangements in critical cases where outcome may be more important than price.

As mentioned in the article, clients increasingly want to know details about how firms plan to execute their work: what type of work might be performed by junior associates, whether more than one partner may bill for attending the same deposition, et cetera.

No matter what type of arrangement is in place, firms and their clients should agree on billing guidelines at the outset of the relationship and work to ensure they are adhered to in order to truly maximize value.

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