How to Manage Your Law Office: Types of Fees

How to Manage Your Law Office: Types of Fees

Hourly fees are the predominant billing method used by law firms. Beginning in the late 1980s and early 1990s, some clients began to object to this method and to any form of lawyer billing rate increase. Fueled by a recession and growing consumer sophistication, the fees charged by lawyers came under increased scrutiny and attack. Since that time, some lawyers have re-evaluated the way they price services and the hourly billing method to which they have become accustomed.
 
Hourly fees provide little or no incentive to increase efficiency; in fact, they often provide a disincentive to do so. Because of the recognition of this fact by clients, and the pressure on lawyers to reduce fees and begin billing on other than an open-ended hourly basis, the profession has seen some movement to alternative arrangements in pricing legal services.
 
According to Shelby Rogers, formerly Senior Vice President and General Counsel of Texas Commerce Bancshares, Inc., "[t]oo many firms are on a collision course with the billing perceptions and needs of their corporate clients. A law firm that fails to consider billing alternatives is burying its head in the sand."
 
Following is a general discussion of some of the various types of fee arrangements. It is recommended that the reader also review the American Bar Association book that address the issue of alternative billing and pricing policies. Alternative Billing Methods, is available through ABA Publications.
 
In order to discuss the matter of fees generally, it is first important to understand the basic concepts of fee charging, each of which is subject to considerable variation.

Attachment: 4_02.pdf