A lean economy has ratcheted up demand for alternative fee arrangements as well as pro bono services. Local law firms are responding as best they can.
Attorney Eve M. Searls recently completed her first year as an entrepreneur running her own law office. Before hanging out her shingle, she spent five years at the Legal Aid Society of Columbus, representing the poor and senior citizens who need help navigating the judicial system. It's an environment close to her heart, but it also clashes with the reality of developing a financially viable practice.
Searls calls herself a "low bono" attorney, charging low- and middle-income people minimal fees that amount to $250 to $300 per case or $50 to $75 an hour--a fraction of what they would normally pay. It's a balancing act since some of her prospective clients, often a financial rung above the destitute, still have no means to pay a legal bill.
If Searls can't find a way to make a particular case work for both the client and her budget, she makes a referral to an agency such as Legal Aid, which offers help with civil matters such as domestic violence and landlord-tenant disputes. "It has been difficult to serve that population and survive as a business. It's something I'm trying to figure out," she says.
Searls isn't the only Central Ohio attorney caught in such a balancing act. Two elements that have always run through the legal profession in some fashion have gained bigger public profiles since the financial meltdown: corporate clients seeking billing methods other than the traditional hourly rate, and pro bono services.
"I think alternative fees have been around for a number of years, but they're getting a lot of attention because of the economy," says Matt Fornshell, a partner at Schottenstein Zox & Dunn Company and co-chair of the firm's commercial litigation section.
Similarly, the demand for pro bono services has risen as clients who once could have afforded an attorney now see their access to the justice system stymied by unemployment or other economic factors.
"Most people who follow this stuff know that it is growing," says Sally Bloomfied, a partner at Bricker & Eckler, who helps to steer pro bono efforts at the firm and throughout the region.
Her comment dovetails April testimony given by James Sandman, executive director of the congressionally established Legal Services Corp., to the U.S. House of Representatives Appropriations Committee. Sandman said that while funding for the nonprofit's legal aid programs decreases, the population eligible for assistance increases, growing by 17 percent since 2008.
Here's a look at how some local law firms are addressing these issues with current and potential clients.
Fornshell says the media's and legal press's interest in alternative fee structures is a "bigger deal to them than it is to us," although he concedes the economy is leading some corporate clients to seek assurances about how much they will pay and how they'll be billed.
"I tend to believe that [an hourly rate] is still the prevalent model, but it has evolved over time that clients think something should be done at a flat rate," he says. "They reasonably want to predict what the fees will be."
Non-hourly rates have been part of corporate legal work for years in areas such as securities, patent applications and regulatory items that are performed on a consistent basis. Hourly rates remain the norm in litigation, which is more unpredictable. But Fornshell says even that is changing. "Plaintiff law firms have always used contingency fees, and now you're seeing that on the defendant's side, but differently." In such cases, attorney fees might be capped at a certain amount or a bonus might be awarded for a successful defense.
Bricker & Eckler general counsel Randolph Wiseman says alternative fee arrangements come down to value and cost as a law firm and its client determine whether the level of service is sufficient and the expense is perceived as money well-spent. "Is it something we can staff appropriately and still make a reasonable profit?" he says. "Alternative fees give some certainties to the company and law firm so they can make some profit and [firms] can manage cases efficiently."
The arrangements are becoming more prevalent, Wiseman says, because people are more aware of them. Part of what is driving that awareness is "value based billing," which the Association of Corporate Counsel (ACC) has been looking at for the past several years.
The ACC's Value Index measures how satisfied corporate counsel are with the law firms they engage based on these criteria: understanding companies' objectives and expectations; legal expertise; efficiency and process management; responsiveness and communication; predictable cost and budgeting skills; and results delivered. In the most recent index, based on 5,701 evaluations of 1,314 law firms, 93 percent of reviewers said they would use the firms again.
Leveling the Playing Field
Attorney Russ Dempsey says alternative fees are becoming more ingrained in how corporate America works with law firms. The vice president and chief legal officer for Dublin-based United Retirement Plan Consultants negotiates such arrangements and believes they're here to stay.
"I think that alternative fees have become a permanent part of the legal landscape, and the trend is an increasing percentage of legal fees [that] are from alternative fee structures," says Dempsey, who also is president of the local ACC chapter. "Furthermore, a number of firms are completely built upon alternative fees. Partners left traditional firms to create new types of law firms, so they are certainly committed for the long term."
Dempsey negotiated an alternative fee arrangement with his former employer, Porter Wright Morris & Arthur, for securities work. The firm will charge United Retirement Plan Consultants less if its work over the year comes in less than was negotiated and more if the work exceeds the estimate.
Alternative fee arrangements provide intangible and tangible benefits to a firm, proponents say. Attorneys work more closely with clients, for example, and become better at managing caseloads.
For Kegler, Brown, Hill & Ritter, alternative fee options help the firm compete. As a smaller firm--there are 60 attorneys in the Columbus office--non-hourly rate structures put it on more solid ground when bidding against firms in New York City or Los Angeles. That added strength is complemented by Kegler's membership in the State Capital Group, a network of 150 law firms located in 450 capital cities across the globe. "What we say is that you don't have to go to the East Coast or the West Coast to get somebody of value," says Managing Director Michael E. Zatezalo.
He says many lawyers were apprehensive about the nontraditional fee structures, but discovered over time that they foster relationships with clients and align interests for both sides. "I think a lot of lawyers thought it was a ‘heads I win, tails you lose' proposition, but today I think the lawyers are looking at it as a process where [client and law firm] try to find the value."
While requests to help the poor date back to Biblical times, today's economy means there are more Americans struggling now than perhaps at any time since the Great Depression.
The recession has taken its toll on thousands of Ohioans and increased the number of people living in poverty. In 2009, the state's poverty rate reached 15.2 percent with 1.7 million Ohioans living in poverty, according to the most recent data available from the Ohio Association of Community Action Agencies. (The 2009 poverty threshold for a family of four: $21,756) Additionally, there were 85,483 new filings for home foreclosures last year-up more than 20,600 over 2005.
"Absolutely the need h-as increased, and the foreclosure crisis is a perfect example of that," says Jane Taylor, the associate director of pro bono services and communications for the Ohio Legal Assistance Foundation (OLAF), which oversees state funding for legal aid societies.
Taylor credits Columbus law firms for their efforts to provide pro bono help. Aside from helping the community, firms also benefit from the opportunity to get newer associates into the courtroom. "Within the law firms, there is a sense of great commitment to it, and they recognize there is great value to it," she says.
Indeed, some firms routinely assign pro bono cases to their associates because they need the practice and have more time, and it frees up senior attorneys for more complex, billable work.
"Doing pro bono work makes our lawyers more rounded, more experienced and better at what they do," says Scott Campbell, a Thompson Hine partner who helps lead pro bono efforts at the firm's Columbus office.
Pro bono is a topic that candidates often want to discuss during job interviews, Campbell and Bricker & Eckler's Bloomfield say. "It is not uncommon for them to be asking about it," she says.
Bloomfield helped launch a Columbus Bar Association task force roughly six years ago to examine the need for pro bono work and how existing programs were addressing the demand. "We did try to identify what the obstacles were for servicing those who were in need," she says.
Providing pro bono services is an issue attorneys and the legal system have wrestled with, says Chris Davey, spokesman for the Ohio Supreme Court. The subject last arose in earnest in 2006, when a recommendation proposed to the high court suggested that all Ohio attorneys perform 50 hours of mandatory service annually or donate $500 to pro bono causes. Instead, a voluntary reporting system launched in 2008 encourages attorneys and firms to anonymously submit the information. The Ohio Supreme Court and the Ohio Legal Assistance Foundation are using the data to determine the extent of pro bono work in the state and how to improve it.
"The voluntary system so far has been largely well-received and viewed as a success," Davey says. "If the pro bono community comes forward with a new proposal for mandatory reporting, the court has indicated that it would consider that."
Ohio attorneys reported 45 percent more pro bono hours in 2010 than 2009, for a total of almost 140,000 hours--the highest tally in the three years statistics have been collected. The value of those services was valued at nearly $19 million, using an hourly rate of $135. Attorneys also made $312,000 in financial contributions to organizations that provide legal assistance to low-income Ohioans.
OLAF's Taylor says those numbers are likely higher because some volunteers may not have bothered to file a report. Statistics from the Legal Aid Society of Columbus show that local demand for pro bono services is rising, but so is volunteerism among the region's attorneys.
Between 2008 and 2010, nearly 1,700 cases--almost 11 percent of the 15,636 cases Legal Aid took on--were closed with the help of a private attorney. Their contributions amounted to $1.8 million in uncompensated legal services. (See "Tracking Pro Bono")
Steps are being taken to further expand the area's pro bono capabilities.
Former Bricker & Eckler attorneys Bert CKram and Mike Renner are spearheading the Volunteer Resource Center, which hooks up those needing legal representation with pro bono help. Begun in February and initially focusing on eviction cases, the center--part of the Legal Aid Society--has enlisted 80 to 90 solo practitioners and firm attorneys, each of whom will take on a few cases annually.
Firms that have already signed on include Bricker & Eckler; Vorys, Sater, Seymour and Pease; Squire, Sanders & Dempsey; Porter Wright Morris & Arthur; Jones Day; Chester Willcox & Saxbe; and Bailey Cavalieri.
The need is great, says Kram. A single courtroom in Franklin County Municipal Court sees between 200 and 220 eviction-related cases daily, he says, though only about 20 percent of those would be eligible for the center's services. "You don't have to go to a [third-world country] to see people in distress. They're right here in Columbus, Ohio."
Craig Lovelace is a freelance writer.
Reprinted from the October 2011 issue of Columbus C.E.O. Copyright © Columbus C.E.O.