Alternative fees go mainstream

by Vault Law Editors | September 25, 2009

  • My Vault

Vault Law Blog special legal correspondent Raj Selvadurai is down in Washington, DC this morning at a symposium sponsored by BisNow on rapidly changing relations between law firms and corporate law departments.  The panel includes Citigroup’s GC Michael Helfer and 3 of BigLaw’s biggest machers: Eric Friedman of Skadden, Bruce McLean of Akin Gump, and Tom Yannucci of Kirkland & Ellis.  The topic:  The “tectonic shift” in the legal profession, including alternative fee arrangements (including fixed fees and performance incentives), the role of junior associates (or lack thereof), changing expectations for results and delivery of services, and more.

One interesting aspect of the discussion is the public airing of alternative fee arrangements expectations and practices.  According to Helfer, alternative fee arrangements account for 30% of Citigroup’s total legal spend (the bulk of that fixed fee), and plans to increase that percentage.  All to the panelists reported that their firm use discount (or “alternative,” or “special,” depending on the firm’s jargon) fees to varying degrees.  Discount rates make up about 15% of Akin’s revenues and about 10% of Kirkland’s (most all in litigation).  Skadden has just begun experimenting with alternative arrangements, which currently constitute less than 10% of the firm’s total. 

Questions to Helfer: Is it relevant to GCs how law firms are run?  Do they care about law firm profitability?

Paraphrased Answer:  Yes, of course.  GCs value stability and morale in their outside firms.  But what is most essential is developing and maintaining business trust, and key to that is flexibility and reasonableness of billing arrangements.  For example, clients should not be expected to subsidize the training of junior associates.

                                                                                  -posted by brian

 

 

Filed Under: Law

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