Setting Lawyer Fees
Setting Lawyer Rates
By Gina Gotsill
Digital resources abound, but lawyers still rely heavily on word of mouth in setting their fees.
With stiff competition for clients now a given in the legal realm, lawyers are using a variety of methods to set their rates and calculate their bills. But old-fashioned client word of mouth and personal relationships are still key factors.
Altman Weil, a legal-management consulting firm, found that almost all 238 law firms it surveyed with 50 or more attorneys in 2013 offered flat, contingency, and other alternative fee arrangements (AFAs), as well as traditional hourly billing, and 68.5 percent said their clients had requested AFAs.
Some firms review specific types of matters they’ve handled repeatedly in the past and average what they charged to determine a flat fee (sometimes charging separately for particularly costly elements), says James A. Calloway, coauthor of Winning Alternatives to the Billable Hour. And the online service MatterAnalyzer from TyMetrix lets firms compare their rates against a database of $48 billion in invoices from 2009 to the present (updated twice a year), producing a graph of what similar firms in the area charged for similar work on average, as well as rates both above and below. For instance, for regulatory and compliance work, it shows that partners in Los Angeles charged $618 to $896 an hour at the 100 largest firms, says David Gorman, director of business development.
Still, San Diego (California, United States) ethics lawyer David Cameron Carr suggests that lawyers ask clients what they typically pay. Karen Stambaugh took that tack when she and two partners formed the virtual firm mod4 in Berkeley in 2010; they consulted with colleagues, researched the competition online, and then based their starting rate ($250 an hour) on what their clients – including software developers, home businesses, and artisan food makers – could afford. Says Stambaugh: “We try to be really sensitive about what [clients] can pay because we want to continue to work with them.”
by Logan Orlando
The result, Viewabill, a comprehensive billing transparency software, seems to fill a critical need as attorney-client relationships grow increasingly fraught – some dissolving amid claims of overbilling or even escalating to scandal. Former Kirkland & Ellis litigator Steven J. Harper, author of The Lawyer Bubble: A Profession in Crisis, notes that many companies have resorted to hiring outside auditors to review their legal bills. Harper, now an adjunct professor at Northwestern University, also says the lawyers of the future who attend his classes won’t stand for the billing status quo.
Based in the cloud, Viewabill lets clients track their lawyers’ work on specific matters in real time – viewing raw log entries as they are made. Clients can tell what they owe at any juncture and call a halt with the software’s “pencils down” function. The platform’s online dashboard also lets clients monitor bills pending from a variety of other vendors, including accountants. No Surprises Software, cofounded by Friedman and David Schottenstein, launched Viewabill in March, with Harvard law professor Alan Dershowitz as an adviser.
D. Casey Flaherty, corporate counsel at Kia Motors America in Irvine, expects the platform to save his company money and “lead to more ethical and righteous outcomes.” Flaherty says he’s “attracted to not being surprised,” and to staying abreast. He remembers, from his law firm days, “how quiet my office used to get on the last day of the month when everyone needed to close out their time. People were feverishly going through emails attempting to reconstruct their days and allocate time to their various matters.”
Dan Grunfeld, a partner at Morgan, Lewis & Bockius and leader of its West Coast litigation practice, says inscrutable law firm invoices can frustrate clients. “[Their] demand is manifesting in a greater array of tools and technology to help ensure time and money are not wasted.” Familiar with the Viewabill model but not a user, he says “some [attorneys] find it a valuable internal tool; others find it more objectionable. But everyone agrees that [platforms] of its ilk are here to stay.”