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January 10, 2008

Value price this. Part V.

There's more commentary--to your right and below--including Allison Shields', and her fine post "Even More Talk About Pricing". WAC?'s continuing take: billing by the hour for our firm--which depends on repeat business from publicly-traded clients we have represented in many cases for decades--is not a broken system for us. When it breaks, or if the markets change, we'll fix it and/or adjust. And quickly. In the meantime, we know lots of ethical, forward-thinking, ultra-competent lawyers who provide value for GCs the "old way".

But let us change the subject(s). If you want to improve things, work to: (1) eliminate contingent fee agreements (the greatest anti-client device ever), (2) replace the popular election of state judges (an embarrassing, medieval travesty) with a merit-based selection system, and (3) make the lawyers and all staff in your shop profoundly and religiously client-focused. Further, please oh please work (4) to take the emphasis off "lawyer comforts" like (a) "professionalism"; it encourages lawyer clubbiness and compromises clients by, for examples, taking emphasis off procedural rules when you really need them, and turning local litigation counsels into wimps who won't go to bat for clients. And like (b) "work-life balance". Yeah, practicing law is hard.

Posted by JD Hull at January 10, 2008 11:59 PM

Comments

A few questions and observations:

How does charging by the hour deliver better value to the client than contingent fee arrangements do? Under a contingent fee engagement, the lawyer has a powerful incentive to provide maximum value to the client; a win for the client is a victory for the lawyer -- and the only way he'll get paid. Under an hourly one, the lawyer pockets his hourly fees regardless of the result.

How does an hourly fee align the lawyer's interest in maximizing income with the client's interest in obtaining the most favorable outcome at the lowest cost? The hourly fee encourages the lawyer to bill as many hours as possible -- an obvious conflict with his client's interests.

The post calls contingent fee deals "the greatest anti-client device ever" but offers no explanation. What is the explanation, if there is one?

Posted by: Blawgletter at January 10, 2008 11:55 AM

I agree with you on this one Dan. Whatever the origin of the hourly rate it's a decent solution that flat rates don't match. Buying lawyer time isn't like getting shelves from Ikea. If you work effectively and charge a realistic rate the punter is going to be happy. Flat rate just shifts a client relationship problem from once place to another.

Posted by: Geeklawyer at January 10, 2008 12:25 PM

Barry/Blawgletter:

Thanks for reading. Part of the problem in all these comments on value pricing may be that many lawyers (no, not the commenters--all these folks are pros) traditionally have had mediocre ("us" v. "them") relationships with clients. Value pricing is a nice alternative to hourly fees. But hourly fee systems in the hands of the right people--like people who watch a GC's budget--do work. If you have the trust of your client, it works.

But contingent fee agreements make relationships even worse. They let lawyers do what lawyers want when lawyers feel like doing it--and to settle cases when the law firms need the money. The risk sharing goal is defeated or minimized. Client interests and client service are compromised. The main event is the lawyers. Clients, as usual, become equipment. It's just not client-oriented. Barry, I am sure that you and yours are different--but in 25 years, I've not seen a lawyer who treats a contingent fee client any better than a troublesome peasant, dog or house plant.

Posted by: Dan Hull at January 10, 2008 02:26 PM

Many thanks, Dan, for your thoughtful responses.

I'm sorry that you've had poor experiences with lawyers who worked on a contingent fee basis. My experience is just the opposite.

Maybe the difference is that you're talking about personal injury cases and my practice involves commercial ones.

In my 22 years of handling business cases, contingent arrangements help forge stronger, more trusting relationships. Clients tend not to second-guess the lawyer because they understand that the lawyer hurts himself if he does anything that diminishes the value to the clients of the potential recoveries. Our clients are our partners, and they actively participate in case strategy and have the final say on whether, when, and on what terms to settle. It's worked terrifically well.

Experience in contingent fee work also translates into good habits in the hourly matters that we handle. Efficiency is a habit that's hard to break. And it helps assure that we provide good value to our hourly clients.

Posted by: Blawgletter at January 10, 2008 03:29 PM

One of the challenges of operating a part-time blog is Time. Our blog is for fun, to trade ideas my firm really believes in and has implemented for years, to demonstrate our genuine interest in client service, and to teach it. CS is no cynical joke with us. We don't use the blog to market directly; our clients (GCs) are not blog readers and they probably don't like to see working lawyers "blogging".

But the comments on the VP issue have been both interesting and helpful to me as a business-owner. I have a few thoughts of my own--and I'll get to them soon. (I'm getting ready to go to Tennessee on Monday.) In the meantime, I appreciate the education. I majored in History and English at Duke--historically not a bastion of cutting-edge business thinking--and so I leave a lot of the law firm economics in my firm to people with better backgrounds. I.e., www.hullmcguire.com/lawyers/jmcguire.htm... And I have decided to get around to reading at least one of Ron's books--right after I finish The Long Tail, which I have been negligent in not reading. But I do have a few ideas, actual experience with "value adding", and a confession here and there. Soon...

Posted by: Dan Hull at January 12, 2008 12:04 PM

Dan:

I can't wait to read your thoughts and experiences on the topic, especially after you've read some of Ron's. And I am aligned with you in the genuine interest in client service, and in improving the experience have with lawyers (both as a general matter and for my lawyer-clients specifically). And while I also agree that practicing law is hard, I still believe that, in order to provide the BEST client service and the best client experiences, lawyers have to be whole, fully functioning human beings. Which means that they can't devote their entire lives unceasingly to their business concerns. And thus, although I may not always use the term 'work-life balance,' I do think that the issues generally discussed in that arena are important to lawyers and clients alike.

Posted by: Allison Shields at January 13, 2008 11:57 AM

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