20. Alternative billing
overview
Now to the tough part. It’s one thing pointing out the flaws with the billable hour. It’s another coming up with alternatives.
That said, there are alternatives, which are already in daily use by lawyers who, for whatever reason, are not wedded to selling their services in six-minute parcels. I know — I am one of them. If you move beyond the billable hour, you may be departing from the norm — but you will not be heading up a path on which no other lawyer has yet to tread.
Before getting into the alternatives, let me just say that it may not be until you move away from the billable hour that you realize just what a millstone it has been in your professional life. There is a sense of liberation. Of spring in the air. Trust me, it is worth it. And if, by chance, you don’t like it, you can always go back. Although I suspect that few do.
As a roadmap for the discussion that will follow, here are four broad categories of alternative:
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(1) Result-oriented fees: This is where all or part of the fee depends on the outcome of a case. This includes the classic contingent fee — widespread in personal injury — which is the best established and most common of all of the alternative billing methods. However, result-oriented fees can have wider application (especially when combined with other fee arrangements).
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(2) Flat fees: This is where a lawyer quotes a fixed price for a matter at the outset. The price quoted is the price paid, so long as the work stays within the agreed scope. A variation — which makes sense when it seems too difficult to know in advance what work will need to be performed — is to have a series or menu of fixed fees for different possible components of an overall course of representation.
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(3) Budget-based billing: This is where a lawyer handles a matter on a not-to-exceed budget. Up to the budget, the lawyer may be charging by the hour or by some other method. But there is an agreed cap beyond which the fee will not go.
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(4) Value-based fees: This is where a flat fee is not agreed at the outset, but the lawyer instead charges an amount based on an assessment of the value delivered, taking into account a variety of factors — including the time that was spent. This, in essence, is the “old-fashioned” method of billing — discussed in Chapter 2 dealing with history — that predated the onslaught of the billable hour. However, in its reinvented form, the client can be involved in the process of determining the amount that should be paid.
Hybrids
This list is by no means exhaustive. In particular, one can devise hybrids — for example, a flat fee with a success-based bonus.
Hybrids need not only blend different forms of alternative billing. One can also have a hybrid that blends the billable hour with an alternative method. For example, a reduced-rate hourly amount with a success-based bonus. Of course, hybrids that keep the timekeeper’s meter ticking are always still subject to many of the underlying concerns about hourly billing in general. But they can be a whole lot better than the billable hour in its unadulterated form.
One type does not fit all
Keep in mind that a billing method that might work in one context may not be applicable in another. For example, a risk/reward-sharing system such as contingent fee billing really doesn’t work with most transactional types of law, such as preparing a will or drafting a contract. This is because there is no clearly quantifiable “reward” or “risk” to share.
This is in contrast to hourly billing, which — if one can live with all of its flaws — does “work” in just about any context. In other words, if you want a universal method of billing, you are probably stuck with the billable hour. But why fixate on having a one-size-fits-all solution?
With those thoughts in mind, let’s take a closer look at each of the alternatives.
Entire contents © 2008 John Derrick