Three-Quarters of the AM Law 200 Predict Fixed Fee Arrangements with their Law Firms Over the Next Ten Years

The Am Law Daily blog, sponsored by the American Lawyer, has an interesting article written by Aric Press concerning changes which will be coming to large law firms over the near term.  While the concept of alternative and fixed fee arrangements have been discussed for over a decade, GAL has been predicting an accelerated adoption of such fee arrangements by law firms and their clients given the economic downturn.  Mr. Press, against his own better judgment, tends to agree.

One area that may be an exception is the advent of fixed–or alternative–fee arrangements. Even as I type those words, I can't help but chuckle. "Stop writing that story," one managing partner insists in the magazine. "It's not going to happen!" If it doesn't, there are really only two interested parties to blame, the law firms and the clients. The zeitgeist certainly seems to have changed. In our annual survey of the heads of the Am Law 200, we asked whether over the next ten years they thought that "many if not most" big firms will have to change their billing practices. About three-quarters said yes. And two-thirds of them volunteered that fixed-fee deals were in the offing.

And that’s not all.  “…84 percent of the lawyers working at companies with revenues of at least $1 billion predicted a move toward value billing.”  A link to that article can be found here.

It was interesting that Mr. Press notes that the corporations apparently blame the large law firms, and large law firms blame the corporations, for the failure to implement alternative and fixed fee billing arrangements more quickly.  Mr. Press further notes that, while large corporations regularly press their large law firms for concessions, they really fire those law firms when concessions are not forthcoming.

Perhaps it won’t be the largest companies that bring on the long expected billing changes which many have seen on the horizon for a long time.  Perhaps it’ll be the small- and medium-sized companies – you know the ones that are supposed to be the engine of the U.S. and global economies – which lead the way.  Perhaps it will be the law firms which offer those services and create a new niche within the market which will drive change.

I have always opined that our law firm will see even more aggressive growth once there are others within the legal community who offer flat and alternative billing arrangements.  Right now, most of our clients only learn about our alternative billing offerings by sheer chance.  What would happen if such billing arrangements became commonplace enough that consumers of legal services were aware they existed?  What would happen if consumers actually sought out lawyers who were willing to provide defined deliverables on a flat fee basis?

I know the answer, of course.  In fact, I’m betting on it.