The ticking of the clock generally coincides with the rising cost of a client’s bill. More hours means more money, but economic conditions and increasing client demands are leading more firms to consider alternative forms of billing.
Fee flexibility is not new at Faraci Lange LLP, which has offered a variety of billing alternatives for its clients since its inception in 1968. Now, it is extending the options to its new Faraci Lange Business practice.
Historically, the firm worked on a contingency basis with a concentration on personal injury cases, said partner Stephen G. Schwarz.
“We’re taking our business model into an area that it has not been used historically,” he said. “We are results oriented. That creates a whole different dynamic than the billable hour. We believe the time has come for an alternative.”
The firm’s attorneys concentrate on resolving cases in the most efficient manner and don’t believe that can be done by watching the clock. They also think billing by the hour encourages attorneys to be less efficient if they are expected to bill a certain number of hours, thereby rewarding them for their time and not the results produced.
Faraci Lange prefers to offer fee flexibility to resolve business disputes more cost effectively. They don’t sweat the small stuff, like billing for every phone call, office supplies and other incidentals.
Partner David L. Cook said the firm offers a “smorgasbord” of fee structures that still include billable hours. There is also a contingency/favorable outcome fee in which the firm is compensated based on a percentage of the recovery, with zero compensation if the case is unsuccessful. In commercial defense where there is no financial recovery, the firm will work with a client to determine the value of a favorable outcome to the client’s business and develop a fee structure to reflect the value.
Clients may also select a flat fee based on a predictable cost, or a blended fee that includes a significantly reduced billing rate for all attorneys involved in exchange for a favorable outcome bonus.
Cook, who spent more than 20 years with Nixon Peabody LLP, joined Faraci Lange to help the firm with its new venture. He has a wide range of commercial litigation experience.
Faraci Lange is not the only firm using alternative billing. According to a national survey from legal consulting firm Altman Weil Inc., almost all firms with 50 or more lawyers offer some form of alternative billing. For those with 50 to 99 lawyers, the figure is 90 percent. The percentage rises with the size of the firm, hitting 100 percent for firms of 250 attorneys or more.
The issue is also being looked at by the New York State Bar Association and the American Bar Association. The state Task Force on the Future of the Legal Profession, in its report issued in February, recommends creating a best practices manual and related CLE seminars concerning the economics of alternative fee arrangements and value billing to assist NYSBA members. The task force was co-chaired by T. Andrew Brown of the Rochester firm Brown & Hutchinson.
Schwarz said Faraci Lange approaches cases in the same way it has, but uses different efficiency models. Efficiency is also increased by using the minimum amount of people necessary to work on a case and overhead costs are reduced by having less ornate offices and furniture.
Like anything else, there are risks. Schwarz said the attorneys acknowledge there will be cases where they will lose money or that the time spent on one may bring in less revenue than another case that required less time.
“It requires a partnership structure to say ‘We’re in this together,’” Cook said.
To achieve their goals, the attorneys at Faraci Lange are more selective about which cases they take and will tell a client up front if they do not think a case is winnable or the cost to pursue it may exceed a settlement.
“One of our core values is to only take cases that have merit,” said partner Brian M. Zorn.
Schwarz said another thing about Faraci Lange is that its attorneys take more cases to court and have more trial experience, which allows it to offer alternatives other firms cannot.
“We have the luxury of screening our cases to take the ones we think will be the most successful; the ones we can win at trial,” he said. “Our reputation spills over. People know if we take a case, we’re going to take it to the limit. Our aura is more intimidating to most opponents than a big law firm’s.”
“There are some lawyers out there that are terrified of going to trial,” Cook said. “This firm has a reputation of trying cases. People know that when this firm takes a case, that it’s probably got some legs.”
The firm also has a new website (www.faracibusiness.com), launched in February, which not only includes details about its services, but a digital stopwatch calculating fees, based on a typical hourly rate of $350, as the seconds tick away.
“We’re different at Faraci Lange,” it says. “We prefer to link our fees to the success of your case.”