September 2013 Edition
Outside views on the new normal
Last month in Corporate Counsel Connect, the voice of the in-house bar, Susan Hackett, discussed how Nothing's Normal anymore. This month, look at how the founder of an innovative law firm views the changes in the profession of law.
As an outside lawyer, it has always baffled me why change in our profession occurs, if at all, only at a glacial pace. Early in my career it was gender and minority issues that caused this quandry. Not enough women or minorities on cases or in law firms? Why don't clients simply demand it? (20 years later, I still haven't figured this one out). More recently, it is the continued adherence to the billable hour model and the "boil-the-ocean-to-make-a-cup-of-tea" mentality of handling cases and transactions. If clients truly want to lower their outside counsel spend, bring about budget certainty, and ensure alignment with outside counsel, why aren't they simply demanding a different way?
Five years into founding a law firm that handles litigation using alternative fees (and having worked in BigLaw for the 15 years before that), this is what I have learned. I'm not saying I agree with or can explain the things I've witnessed, but based on my experience of talking with a lot of in-house lawyers who profess they want change but then fail to act, these are my observations (many of which are likely self-evident):
- Lawyers are incredibly risk-adverse. Duh. I've concluded that only the most secure in their positions – i.e., those who routinely act outside of the box (note that this is different than merely "thinking outside of the box") – are willing to try something that has not yet been universally adopted by the rest of the industry. We love these early adopters. They are our best clients and we think they are the ones providing the most value to their companies.
- It's easier not to change than to change. Especially if change requires more work. This is Newton's first law of physics, isn't it? An object at rest stays at rest. Most in-house lawyers (and most outside law firms) have been at rest for many, many years. Best to stay that way. That is, unless of course you have to cut 25% from your legal budget for the second year in a row. There's no question that the hourly model is easier to grasp: x rate times y hours = z bill (as in, "Have you seen zee bill??"). But easier is not always better.
- New or different does not equate with "getting taken advantage of". Even those who are most desperate for a new model or some solution to address current issues seem to believe there's a "catch" or some element of getting taken advantage of if they subscribe to an alternative fee. To alleviate this, we include holdbacks or bonuses in all our fee arrangements, and we have a "value adjustment line" on each invoice, which allows the client to change the amount owed to reflect the value they received. There really isn't an "aha – gotcha!" element with alternative fees, but this seems to alleviate concerns that there is.
- Try it, you'll like it. While everyone wants to avoid a bad experience if possible, you'll never know if something is better unless you try it once. If you want to see the potential benefits to using an alternative fee arrangement in practice, then why not take it for a test drive? I'm not suggesting a bet-the-company piece of litigation, or even something so substantial that it would make a drastic difference if it doesn't turn out well, but there are plenty of routine pieces of litigation or transactions perfect to test drive AFAs. Remember the old Alka Seltzer commercial – "Try it, you'll like it." You just might.
- Trust me, you really DO have the power. Most lawyers today are savvy enough to know that if clients are demanding something, they should do it or risk losing the business. That takes me back to the women/minority issue. If you are giving a firm business and you tell the relationship or managing partner you want a woman or minority on all your matters, my bet is they will do it. Don't believe me? See (d) above. Try it. If one of my clients asked me to do something that I could accommodate, you'd better believe I would do it. If your lawyers aren't doing the same, perhaps it's time to get new lawyers. You've got the power. Use it wisely, grasshopper.
About the author
Nicole Nehama Auerbach is a founding partner of Valorem Law Group. Valorem was founded in 2008 by BigLaw refugees intent on handling litigation on a national basis using alternative fee arrangements. With offices in Chicago and Silicon Valley, Valorem provides clients with high quality representation, budget certainty and results, not hours. Nicole handles general commercial litigation matters in federal and state courts around the country. She also represents clients in arbitration, mediation, appeals and provides "second opinions" to clients facing key strategic issues in lawsuits. In addition to her substantive work, she is committed to working on issues that impact women attorneys.