To flat-fee or not to flat flee, that is the question.
Or at least, that is the question addressed recently by out-going Qwest Communications GC, Richard Baer. Baer recently addressed the flat fee and alternative fee arrangements with outside counsel that are becoming so popular with the in-house crowd.
Baer's opinion? He turns the idea of alternative fee arrangements down flat.
Rich Baer comes to the conclusion that no better result can be reached with outside counsel using the stick of a flat fee arrangement, writes The Wall Street Journal. According to his article in Corporate Counsel, Baer says the idea of "value based billing" may not give in-house counsel the value he or she thinks it will.
Baer's logical, if unfashionable, argument is this: If you think a flat fee arrangement will prevent outside counsel from soaking you for billables, are they really the firm you should be hiring? Baer writes:
"At bottom, those who are [un]comfortable with the hourly rate believe that their lawyers will intentionally be inefficient and will not seek to achieve the best result because, in so doing, they will make more money. If I really thought my outside counsel would intentionally be inefficient and would not be focused on achieving a great result, then shame on me for having retained them."
What, an outside counsel (or any other attorney for that matter) motivated solely by fees? Baer pushes that idea to its farthest conclusion as well. According to The Journal, when discussing the success-based fee structure, he finds its success can be difficult to define. "My second and greater concern is this: Do I really want to engage an outside counsel who will only try harder to get a better result because they have a financial incentive to do so?"
Despite the predictability of a flat fee agreement and the savings it may represent, Baer should not be dismissed as a proponent of the billable hour because he does not embrace change. Recall Qwest's legal department was named law department of the year in 2008 by Corporate Counsel and one of the "Ten Most Innovative Law Departments in 2010" by Inside Counsel magazine. Maybe Rich Baer has given in-house counsel something to consider.
- Not Really An Alternative (Baer, Corporate Counsel)
- Alternative fee arrangements with law firms can be beneficial (Denver Business Journal)
- Alternative Fee Arrangements Becoming More Popular (FindLaw's In House)