Though the legal industry's traditional payment method remains dominant, some lawyers are turning to alternative fee arrangements to meet the evolving needs of clients.
Kerry Boyle stands out in his Columbus law firm. While most of his 60 colleagues at Isaac Wiles still charge their clients by the hour—long the legal industry's preferred payment method—Boyle has been offering alternative fee arrangements for years.
“Clients have a right to know what their legal fees will cost,” says Boyle, whose practice focuses primarily on commercial real estate. He adds that he “wants to help clients as much as possible. If the client wants determinate numbers, we want to discuss that because that's probably the future of the profession.”
Alternatives to hourly billing are gaining traction, for a few reasons. One is predictability. Under the hourly billing method, legal fees can vary from month to month, depending on who worked on a client's case and for how long. But alternatives help clients maintain some control over what they're spending.
Transparency is another outcome of alternative fee billing. Being upfront about costs increases the trustworthiness of an attorney, because it indicates the lawyer wants to “help their business be better,” Boyle says. “If that includes alternative fee arrangements, then great.”
There are several ways lawyers and law firms can bill clients other than the ubiquitous hourly method. Certain cases, such as personal injury and workers' compensation matters, are traditionally undertaken on a contingency basis. That means the attorney is paid for their legal services only if the client recovers a judgment. Otherwise, the client generally owes the lawyer nothing for his or her efforts.
Flat fees are another type of billing option. In that scenario, the lawyer charges the client one fee to handle a legal matter. That could refer to a specified aspect of a case through the handling an entire case for one fee.
Dino Tsibouris, namesake of Tsibouris & Associates, which operates in technology, intellectual property law and business matters, says there is a huge potential downside to charging flat fees. “Usually litigation firms do this approach, but many have gotten burned by underestimating their costs by a large amount,” he says.
Another alternative to hourly rates is when a firm charges a client a stated amount, possibly monthly, labeled a “retainer.” In this scenario, the firm or lawyer works off that pre-paid amount at their hourly rate. This method allows a client to maintain control over what they spend on legal fees since the lawyers will work until the retainer is depleted. Of course, nothing's to stop a firm from offering a hybrid fee arrangement comprised of a combination of these options.
Meanwhile, the wonders of technology allowed for the creation of another way for lawyers to charge clients other than hourly, and at least one local attorney is happy about that.
Solo practitioner Ambrose Moses, III, whose practice focuses on business and crowdfunding, discovered Clarity, an online platform geared towards business, three years ago. People seeking experts on a myriad of business-related topics can peruse the Clarity site to find the right specialist with whom to speak. When a conversation ensues between the client and the expert, the customer is charged by the minute. In other words, Clarity is tantamount to the 900-number of expert business guidance.
“The service is designed for the individual to get quick advice from professionals in different disciplines,” says Moses. One reason he likes Clarity is that it allows him to “leverage technology,” and that reduces his overhead.
Currently, Moses charges $2.50 per minute for a Clarity consultation, which he views as “a way to get something for the time I spend.” An added bonus is a Clarity consult sometimes evolves into full-blown representation.
When Moses is not counseling clients in person, virtually or over the phone, he is engaged in another passion of his: increasing access and affordability of legal services for small business owners.
He is currently developing a nonprofit legal services organization in Columbus for the small business community where clients pay their legal fees on a sliding scale. The alternative fee arrangement is similar to guidelines used by the Legal Aid Society, where Moses practiced law for several years.
According to Moses, his legal services group, which he hopes to open in late 2018, will charge clients on a sliding fee scale based on Federal Poverty Guidelines.
Are alternative fees the new norm?
Joseph Dreitler, a Columbus attorney who was in-house counsel with P&G and Anheuser-Busch and a partner with Jones Day for several years before opening the boutique IP law firm of Dreitler True six years ago, says hourly billing became the norm as a response to corporate clients who balked at the monthly billing statements law firms were issuing them, labeling them vague and confusing.
“Corporate clients, especially CFOs, started complaining about getting bills at the month's end from firms with a total number ‘for services rendered,' ” for a specific case, he says. What they clamored for, and eventually received, was a breakdown on how much time was spent on each particular activity and case and by whom, says Dreitler.
But is the appeal of the billable hour becoming passé? For instance, an article about startups published on the website FierceCEO in April didn't mention a word about the law-related costs of jumpstarting a new enterprise. However, it did report that in the first quarter of 2018, job seekers began new businesses at the highest rate since the fourth quarter of 2013. In the first quarter of this year, eight percent of people seeking employment started new companies. That number compares with the five percent of job seekers who began new enterprises in the last quarter of 2017.
So what's the correlation between the increasing number of newbie business owners and the legal profession's adaptation of alternative fees for its clients? For Boyle, the connection is clear. “Especially for young, startup entrepreneurs who may never have used legal services,” so they may be unaware of costs, alternative fees are an equalizer, says Boyle.
“Fees should be a point of discussion” between an attorney and client, says Boyle, adding “lawyers should be upfront about fees, especially with new clients.” It is no secret legal representation costs money. However, Boyle says he hopes the advice he and his colleagues provide their clients justifies the fees they pay.
Tami Kamin Meyer is a Columbus attorney and writer.