Wall Street Journal: “Billable Hour” Under Attack

11_22_6_prevAn article on the front page of today’s Wall Street Journal (“Billable Hour Under Attack” – available online here for subscription-holders only) highlights how an increasing number of corporations are demanding that outside law firms enter into predictable fee arrangements (such as flat-fee arrangements), rather than continue billing by the hour.  Ashby Jones, one of the article’s co-authors, comments on this phenomenon on the WSJ online blog:

People who follow the world of law firms know, among so much else, two things: 1) that billing-by-the-hour has long been the way law firms get paid and 2) companies have over the years had only limited success in getting firms to agree to do it any other way.

That’s changing. In a big way. Companies are starting to ditch the hourly structure — which critics complain offers law firms an incentive to rack up bigger bills — in favor of flat-fee contracts and other types of arrangements.

The article focuses on Pfizer’s switch to flat-fee arrangements, and a video interview with Pfizer’s general counsel, Amy Schulman, is available here.  In the interview, Ms. Schulman deconstructs the traditional law firm’s business model, and explains why flat-fee arrangements are much preferable to her company.  I couldn’t explain it better myself.

Like Ms. Schulman, Belin Law Firm recommends and prefers “alternative” fee structures such as project fees, monthly retainers, or incentive-based fees.  Thus far in its short operating history, the firm has been successful in agreeing to such arrangements with most of its clients.


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