Wednesday, November 07, 2007
Another good insight on flat rate v. billable hours...
Once again, my students and former students are making a lot of sense. In an emailed follow-up to a recent post on billable hours, an especially accomplished former student made this important point:
Flat fees do much harm to clients and don't increase the quality of life
for lawyers. Most small scale insurance defense is migrating to flat
fees. The whole game with flat fees is doing as little as possible to
earn the whole fee. There is no incentive for quality. And, when the
partners figure out just how fast you can complete the various tasks,
they expect it done in the shortened time period and load you with more
work to fill the gap.
The best fee arrangement is the contingent fee but it only works in
certain situations. In other words, you can't really do contingent
small divorce cases. Nor can you defend a lawsuit on a contingent
basis. We do some reverse contingent appeals but we have a fixed dollar
amount, stemming from the judgment, so it is easy to work backward to
calculate a fee based on savings. The contingent fee is great because
it aligns the lawyer and client's interests to the greatest degree
possible. One problem, though, is that it does not align the lawyer and
client with the interests of society as a whole. There are times when a
$200 million judgment is not a good thing for the economy, a particular
company, or a town that relies on that company.
