Article

Legal

June 6, 2013

On the litigation side, we are having some flat-fee requests, but they’re still mostly negotiable. We set the rate and then we have regular updates with a client about what it’s costing, what the burn rate is. And then they look at whether we can mush some stuff into the next month or whether we can put more into this month. But we try and give them a monthly budget on a flat-fee basis.

GAYLORD: We do flat fees with many of our real estate and business transactions. It’s very simple in many respects because you know what you’re dealing with up front. You can never really anticipate everything, but with a flat fee it’s there.

With litigation, we find it much more difficult, although clients are demanding at least some potential for flat fees. Just because of the nuances in litigation, it’s very difficult to go from an hourly rate to a flat-fee rate. What we do in those instances, oftentimes, is say, “If you can guarantee a payment to me, then you’re going to get a better discount potentially on an hourly rate.” That gives you an assurance that every 10 days you get your bill and you get paid, versus the client that says, “I’ll give you a retainer,” and then the next thing that happens is the retainer is exhausted or they’re not paying on a regular basis. So the idea is to give them a better rate on an assurance of payment.

HARMAN: Some of our larger clients have required that we provide an estimate each month on what our fees are going to be on each matter so that they can budget. We didn’t have that requirement before the downturn. Obviously, every month there’s fees. We haven’t had a lot of caps, but we’ve had more control from clients. No question.

PINEGAR: Can I ask a question of the litigators around the table? Have you seen clients who might have brought a lawsuit five years ago now not coming to you, but instead trying to find other ways to resolve the problem so the volume of litigation is down?

GAYLORD: No.

LEITHEAD: No. I don’t think the volume of litigation is down.

BARKER: Our litigation volume is up. It was flat for a few years, but this year we’ve seen a significant increase in litigation.

We had a couple of big fixed fees and we’ve gotten pressure to extend the time of those. We’ve done them previously on an annual basis or sometimes on a project basis, and we now have clients who would like to go three to five years. There’s some positives of that, but it’s a little scary sometimes not knowing what’s going to happen to rates and the volume of work. So we’ve tried to be very careful about carving some things out that are a little more unpredictable. Has anyone else seen that trend?

PINEGAR: We’ve seen that, especially with banking clients, for example.

EPPERSON: The healthcare industry is rapidly changing. I’ve been doing nothing but defending doctors for 35 years in malpractice actions, so my practice has been very narrow. Nationally, claims are down about 40 percent over the last few years. I attribute that to plaintiff’s counsel triaging their cases a whole lot better. We’re seeing a lot less frivolous lawsuits that would get nowhere. I think they’re realizing they’re expensive to bring and they’re being more selective.

CLYDE: In the water law arena, we’re seeing some fixed fees in terms of very routine administrative things like filing certain kinds of applications with the state engineer.

The other thing we’re seeing on transactional work is that clients are insisting that senior lawyers be the ones doing the work; there’s a lot less tolerance for young lawyers. Even though it may cost them more initially, they believe they’re getting a quicker, better product by having the experience. They are willing to pay for it, and are less tolerant for educating new lawyers.

How has the change in the economy changed the way you hire new lawyers into the firm?

CLYDE: We’ve done more strategic, lateral transfers rather than hiring new graduates to fill the client demand to get that expertise in the firm.

BARKER: We’ve seen a very similar phenomenon. It’s been a little hard. While we’re kind of back from a couple of flat years—the economy is better—I still don’t hear a lot of shareholders wanting new associates. I wouldn’t want to be a new associate coming out of school right now, particularly because of this phenomenon you mentioned about clients demanding more expertise.

GAYLORD: In terms of associate base, it is a client decision because what clients are unwilling to do now is pay—for example, a lot of us came up through the ranks and we would sit in on depositions as a second chair. Clients refuse to pay for second-chair depositions anymore. So you have to make that decision from an educational standpoint: are we going to educate our lawyers with the idea that we’re bringing them along to make them a partner, which makes them produce more, as opposed to just simply cutting that as a loss leader for you in raising your associates and giving them the education.

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