Legal News

Recession prompts firms to rethink the billable hour

By Richard Binder

Thanks to the recession, several law firms in Los Angeles are billing flat fees for a defined project, charging less for an unsuccessful outcome or simply reducing rates.

For example, downtown L.A. firm Sheppard Mullin Richter & Hampton LLP set up an alternative fee arrangement earlier this year with a startup company. The firm charged a flat fee of $60,000 for legal services involved in raising $5 million in financing. By comparison, if the firm?s attorneys had charged their regular hourly rates, it would have cost the client about $78,000.

In the past, law firms have been willing to provide discounts to clients, most commonly by taking a percentage off the total bill or cutting hourly rates. Such discounts and reduced rates are still occurring, but client companies become suspicious that law firms may simply bill more hours, resulting in a final bill that?s as big or bigger than if the firm had charged its standard rates.

Instead, discounts are being replaced by alternative fees. Smaller firms started employing alternative fees, and bigger firms took the cue.

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Full post as published by Legal Pad | LA on December 14, 2009 (boomark / email).