Page 10 - CCCA Magazine Spring 2014

{ LEGAL MARKETPLACE } GAINING EFFICIENCIES IN LEGAL FEES By Milan Seres While lawyers in private practice are rewarded for hours worked, of a certain area of law, such as putting preventative measures in place. For ex- in-house counsel is motivated to keep costs low. A constant challenge ample, if there is a decline in the amount is trying to get more for less out of the legal department’s budget. of labour disputes year over year, a perfor- mance bonus can be justifed. Arguably, phased fees provide the great- orporate counsel must therefore re- fexibility of the rate is dependent upon est promise simply because they are based peatedly assess the value being received the less-expensive individual’s ability to do on the idea of breaking a matter down into Cfor the money spent on legal services. the heavy lifting so the more experienced its constituent parts. Work can be com- counsel can stay on in a supervisory role. moditized while allowing for tailored ad- Managing external costs Collared fees provide a range as opposed vice. In a litigation, document review, legal To determine value for money, consider- to a fx amount. An agreed upon total fee is research, litigation support and electronic ation should not be limited to the hours established, and should the total hours fall disclosure are just some areas that can be outside counsel spends on a fle. In fact, above or below the estimated amount, a separated and not be subject to the same through billing arrangements that are not percentage — normally 50% — of the ex- fees as strategy, tactics and advocacy (these based on hours worked, in-house counsel cess amount would be credited or paid. latter tasks being of higher value). With re- can deliver results while minimizing fees. In a performance-based arrangement, a spect to transactional work, similar argu- Volume-based discounts are common. low hourly rate is established, but a bonus ments can be made. Due diligence, legal However, another approach is through is given if the result exceeds agreed upon research and document management are the use of fat-rate billing. While this gives criteria. The criteria in question will vary just some areas that can be separated from the client cost certainty, it is not a popular based on the matter. Performance-based the more expensive negotiations and fnal option among lawyers in private practice. arrangements can also use fxed fees. risk assessments. However, a fat rate that satisfed both For example, a daily payment in a litiga- In managing costs, an effective knowl- parties can be reverse engineered from tion can be 80% of a fxed fee. If there is edge management system needs to be in reasonable hourly rates. For more time- a positive settlement, the frm will receive place to deal with the mass of information consuming tasks, a daily rate or a tiered the withheld 20%. If the matter goes to expected from in-house counsel. A solid approach can be used. Using discovery as trial, and the result is more favourable system allows internal counsel to better an example, one rate may apply for up to than what could have been achieved at understand the issues and avoid unneces- X amount of documents and subsequent settlement, the frm will receive 125% of sary costs for preliminary work. Outside increases for each specifed amount. the fxed fee. If the results are not posi- counsel can then provide guidance, such A blended rate is where one hourly rate tive, whether through trial or settlement, as reviewing facts, law, corporate policies applies to all lawyers working on the case. the frm will receive only the original or directing strategy. In-house counsel This can allow for experienced counsel to 80%. Performance incentives are also ef- will beneft from outside expertise while better utilize less-expensive lawyers. The fective when outside counsel is in control reducing outsourcing fees. 10 CCCA MAGAZINE | SPRING 2014 PRINTEMPS