FAQ's About Alternative Fee Arrangements

What We Do

FAQ’s About Alternative Fee Arrangements for Litigation:

 

Q: What is the traditional method used by lawyers to bill for their fees?

 A: Most firms bills by the hour. The amount you pay depends on the amount of time it takes the lawyer to do your work.

Q: What is wrong with billing on an hourly basis?

 A: Lawyers get paid more if they work more. The behavior rewarded under the hourly approach  is not aligned with your economic interest. It’s common that the legal team is larger than needed and more hours are generated than needed. There is no incentive to lower costs; to the contrary, under the traditional model, working efficiently reduces profit.

Q: What is different about how Valorem generates fees?

 A: We structure our fees to incent the outcomes you want.  Since no client wants simply to buy hours, we try to avoid hourly billing.  Our fee structures can take many forms, but the essential characteristics are that: 1) the lawyer shares some portion – if not all (for example, in a full contingency case) of the risk of predicting the cost of legal services; and 2) the lawyer has “skin in the game,” that is, the lawyer has the risk that it will not be paid as much for a lesser result than it would be for a greater result.

Q: What’s the ideal fee arrangement?

A: There is no one fee arrangement that aligns the economic interests of the client and the lawyer perfectly for all cases. We use the fee arrangement that best fits your situation: retainers; flat fee per case, project or phase of the matter; flat fees paid in lump sum or by installments; fixed fee for a portfolio of related matters; flat fees with holdbacks, success rewards or contingency fees of all types, to name just a few.

Q:  Why are your fees lower than billable hour practices?

 A: First of all, there is a lot of fat to be trimmed from the traditional billing model. “We had 20+ years of living off the fat of the land, with 5-10%/year rate increases, 5-15% /year revenue growth, and 5-15%/year growth in profit, until we began to think of them as a God-given rights,” according to Bruce MacEwen in his well-regarding blog on the economics of law, AdamSmithEsq.com. This creates opportunities to lower prices by 20-30% or more while still making a profit. Also, we have significantly lowered the cost of delivering our services, resulting in cost savings that we pass on to our clients in the form of lower fees (while still allowing us to make a fair profit).

Q: How have you been able to lower the cost of delivering services?

A: In law, experiences counts for everything. We use small teams of more senior and highly skilled lawyers, allowing us to work more effectively and efficiently over a shorter period of time. We don’t maintain a standing arm of inexperienced associates billing at high rates to support great art collections and extravagant offices across the globe.  We make use of tools like Lean Six Sigma and process mapping to increase the efficiency of operation, just as many of our clients have done. We use our strategic alliances for both legal and non-legal services and use those efficient, lower cost legal specialists to further lower our overhead.

Q: How does the success reward work if there is a settlement?

 A: As a party involved in litigation, a successful outcome for you is not just prevailing at trial or having a judgment entered in your favor by the court before, during or after trial as a result of motions practice or other activity in the case. A successful outcome also includes a negotiated resolution between the parties. Since settlements are consensual, your decision to agree to a settlement will reflect your view that it is a successful outcome.

Q: What happens if you exceed your budget?

 A: We respond the same way you do in your business - we stand by our price. If our budget turns out to be inaccurate, or even if we are not as efficient as we hoped to be in handling your matter, you do not pay more. Only where there is a substantial change in the assumptions or circumstances both of us relied on to come to an agreement on fees, might a modification of the fee agreement (up or down) be worthy of discussion.

Q: Isn’t litigation too unpredictable to set a single flat fee?

 A: Not at all. It is widely accepted within the legal community that litigation of all sizes can and should be conducted on a fixed price basis. For a senior trial attorney, pricing litigation is far easier than many of your business decisions.

Q: Why should I be confident that together we can come up with fair price for my case?

 A: Our clients trust us to help them get beyond the billable hour and thereby reap the major benefits of using an alternative fee structure. Our team has decades of experience as partners in premier national law firm litigation developing accurate budgets for complex cases worth hundreds of millions of dollars. We apply that experience in extensive pre-engagement due diligence (at no cost to you), making a detailed early assessment of your case and the likely associated fees and costs. We also use our experience to identify benchmark litigations in our history, your history, or both, that most closely replicate the case at hand; from there we adjust for case specific circumstances, e.g., opposing counsel, the judge, the expected case schedule, specific legal principles or evidentiary rules that may apply under the circumstances, etc. We are highly incented to get the case assessment right because we bear the risk of getting it wrong. Unlike billable hour firms, we do not have the luxury of getting paid for a poorly developed case strategy.

Q: What if, at the outset of a case, we don’t know enough to set a price for the entire case?

 A: For reasons discussed above, we are confident that we can arrive at a mutually agreeable price at the outset of the case. Nonetheless, on the rare occasion where either you or Valorem requires more information, we will provide you with our proposed fees and costs for an initial, strategically significant, phase of the matter, typically in the range of 3 to 6 months. We will charge a flat fee during this initial phase, with the expectation of proposing, upon completing the initial phase, a mutually agreeable fee arrangement for handling the rest of the case. This arrangement allows both you and Valorem to move forward in a timely fashion, and at the same time provides the additional information necessary to arrive at a mutually agreeable price for the remainder of the matter.

Q: How do you handle "larger" cases?

 A: We are asked this question all the time, and our answer is the same: we litigate against Goliaths (i.e., large firms or companies) all the time.  The truth is, all cases, even large complex commercial litigations, are best handled by a small team of senior, experienced, trial attorneys.

[B]ased on our experience (which includes over $20 B in legal fees), you will be pleased to know that there is strong support for [the] proposition that cases are most cost effectively handled by small teams, often teams of one, and that the optimal staffing profile includes what can best characterized as junior partner level attorneys.” John Weber, CT TyMetrix, Legal OnRamp.

“Three highly experienced partners will always do a much higher quality job than 20 associates, 4 junior partners, chief trial lawyer, etc. WHY? Because it makes no sense to have people preparing a case for trial who have never seen a trial. Such novices will always waste huge $$$ doing ‘projects’ that will never see light of day at trial or change anything.” Fred Barlit, Bartlit Beck, on Legal OnRamp.

Valorem assembles a team customized for your case. We take advantage of the depth of experience among our senior trial lawyers and we harness it by collaborating at the highest level on a regular basis. When opposing counsel tries to drown us, and their own clients, in voluminous data, we use our strategic partnership with Novus Law to tackle the volumes of documents. Our experience also demonstrates that our team at Valorem is far more nimble than the layers of lawyers most large firms use. As a result, we can respond quickly and efficiently while they often have to go through multi-layers of approvals and reviews before they can take action on a case.

Q: How do I know you are good?

 A: We encourage you to conduct the same due diligence on us that you would on any lawyer.  Merely being affiliated with a large firm is not a guarantee of quality.  As with any lawyer, the best predictor of future success is past success. Valorem attorneys are experienced trial attorneys with lengthy track records of success in high value, complex litigation cases. We are graduated from top law schools and spent years in some of the best law firm litigation practices in the nation. And, of course, if you do not already know our reputation for excellence, read what others have to say about Valorem.  But perhaps this is most important.  We offer a Value Adjustment Line on every invoice, so you get to adjust our fee if you’re not satisfied.  Ask any other lawyer you’re considering if he or she will do the same.  (They won’t, so should ask yourself why not.)

 Q: Why not use an AmLaw 200 firm that has cut its hourly rates or capped its fees?

 A: Because your case would be the lowest of all life forms in BigLaw - the case which is not making any money. Under those circumstances, you should have no realistic expectation of receiving the talent and attention your case deserves.

A lot of large law firms are trying to win back or hold on to clients by dropping hourly rates or capping hourly fees. However, the cost to these firms of delivering legal services remains extraordinarily high, several hundreds of thousands of dollars per lawyer, and the firms have failed or are unable to develop more efficient and effective delivery systems.  That’s why they often say they are using fixed fees, when, in reality, the “fixed” price is merely the starting point for a negotiation.

The large firms trying to use a discounted model cannot generate any profit on these cases. They assign their most talented and productive lawyers to profitable “full freight” hourly cases, while their discount cases are handled by less motivated, less experienced and less capable attorneys making reduced compensation.

Finally, there are both volumes of anecdotes and data showing that discounted hourly rates are the poorest form of reducing cost.  Firms care about their revenue numbers—if the return on hours drops, the evidence is that total hours increase to offset the discount.

 Q: Why not use the small firm with very low hourly rates?

 A: Hourly firms sells hours, not results, no matter their size. Whether done by large or small firms, and whether the rate is high or low, hourly billing rewards inefficient conduct, drives work to the least qualified lawyers, and subjects you to repeated surprise cost overruns.

On the other hand, “by basing their prices on the client's value on solving a problem and by setting those prices up front, [alternative fee] firms work more effectively without all the waste caused by hourly billing and its related systemic problems”. Jay Sheperd, The Client Revolution.

And don’t assume your small firm “trial“ attorney has ever tried a case before, let alone handled a multi-million dollar commercial litigation against a litigation savvy adversary with a war chest. Your company cannot afford the drop-off in quality from senior, experienced and successful litigation attorneys.

 Q: What about the associated costs of litigation?

 A: Your total price includes both the fees for legal services plus the costs (aka “disbursements” or “expenses”) incurred in providing these services. Valorem includes as much of the costs as possible into our flat fee. When this is not practical, Valorem provides an upfront estimate of the amount of the costs broken out according to the predicted case schedule.

Q: Are clients charged for Valorem’s overhead expenses?

 A: No. Valorem knows the difference between our overhead - the regular expenses incurred by Valorem in doing business as a modern law firm - and costs. Valorem does NOT charge for:

  • Online legal research
  • Secretarial time and overtime
  • Word processing
  • Internal copying
  • After-hour meals
  • Faxing
  • Local or long distance telephone

 Q: What are the costs typically charged by Valorem?

 A: Valorem does not “mark up” any of its out-of-pocket costs. The costs typically charged by Valorem are the following:

  • Court/filing fees
  • Courier service fees
  • Discovery vendor fees
  • Experts
  • Deposition fees
  • Demonstrative exhibits or models prepared by graphic artist
  • Photocopying by an outside reproduction firm
  • Express mail fees
  • Out of town travel

Q: Are local counsel fees included in Valorem’s fees?

A:  If we have the ability to choose and oversee local counsel (i.e., we have the power to fire them), we will include local counsel fees in our overall fee to you.  If you choose the local counsel and we do not have the ability to control or limit their work, as needed, then the local counsel fees are separate and in addition to your fee arrangement with Valorem.  Most clients are happy to be relieved of local counsel responsibility unless they have some prior relationship with a local firm. We have a wide-network of local firms based on our national practice, so we are happy to draw upon our relationships for your benefit.