Transcript Alternative Fee Arrangements: Pros, Cons and Ethical

Alternative Fee Arrangements:
Pros, Cons and Ethical
Considerations
Jean L. Bertrand
Perils and Pitfalls:
Ethical Concerns
Conflict in Every Fee Deal
There is an inherent conflict in
every fee deal
•
If you win  the client was right all
along so why should they have to pay
lawyers?
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If you lose  you messed up and you
charged too much.
Solution
• Give value to the client as
defined by the client
• Let the client set the level of
risk it is willing to take
• Build on a relationship based
on trust
• Incorporate escape clauses for
both client and firm
• Align the interests of firm and
client
Selecting an AFA
Match the AFA to the client’s
driving need
• If the client’s biggest concern is
•
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the end result  contingency fee
If cost is the driver  blended fee
If predictability is key  flat fee
If the client cares most about
access to top legal talent 
retainer/bonus structure
Selected Ethical
Considerations
Our duty to zealously
represent our clients
 Tension with firm’s economic
interests
• Fixed fees
• Capped fees
• Blended rate deals
 A different tension if flat fee is
too low
Solutions
• Disclosure, discussion,
write it down
• Motivate lawyers and legal
assistants
• Reward results
Our duty not to impair the
client’s absolute right to fire
us
 Tension with firm’s
economic interests
• Contingency fees
• Bonus deals
• Other back-loaded
arrangements
Solutions
• Disclosure, discussion, write
it down
• Motivate lawyers et al.
• Use a guaranteed reduced
hourly-rate set-off against
contingency fee recovery
• Be aware of special rules
applicable here
Our fees
must be reasonable
• Tension with firm’s economic
interests
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contingency fees
fixed fees
partner-only deals
bonus deals
• Reasonableness will be
•
evaluated at the beginning
And at the end
Solutions
• Disclosure, discussion, write
it down
• Motivate lawyers et al.
• Quantum meruit conversion
clause
• Escape clause
• Make bonus discretionary
Hourly billing raises ethical
issues too
• Reasonable fees duty
• Obligation to be efficient
Ethical rules govern the way
we handle the client’s money
Tension with
• flat fees
• bonus deals
Solutions
• Disclosure, discussion,
write it down
• Agree in advance on
“milestones”
• Use Trust account