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Overview and Negotiation of Special Fee Structures

Overview and Negotiation of Special Fee Structures. Reed S. Oslan, P.C., Partner. Terminology Special Fee Arrangements. “ SFAs ”. THE LEGAL FEE PRICING MENU IS EXPANDING THROUGH SFAs. The Special Fee Relationship. Remains an Attorney/Client Relationship Risk Sharing

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Overview and Negotiation of Special Fee Structures

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  1. Overview and Negotiation of Special Fee Structures

    Reed S. Oslan, P.C., Partner
  2. TerminologySpecial Fee Arrangements “SFAs”
  3. THE LEGAL FEE PRICING MENU IS EXPANDING THROUGH SFAs
  4. The Special Fee Relationship Remains an Attorney/Client Relationship Risk Sharing Potential for Adversity Written Fee Agreement is a Contract Requires Case-by-Case Up Front Analysis Incentives Matter Goal - Strike Fair Balance of Risk and Reward for Firm and Client
  5. Fixed Fee Pre-determined Fee For Entire Matter(s) e.g. $1 Million for Defense of Contract Action Paid Up Front or Over Time Fee Set by Negotiation Between Client and Law Firm Scoping and Budgeting Critical
  6. Fixed Fee – Client Perspective Pros Certainty Risk Above $1 Million Shifts to Law Firm Eliminates Budget Killer Administrative No Need to Track Time or Bills No Need to Supervise Staffing
  7. Fixed Fee – Client Perspective Cons Might Overpay Versus Hourly Billing No Economic Alignment to Result Poor Pricing Could be Problematic
  8. Fixed Fee – Law Firm Perspective Pros Certainty of Fee Possibility of Earning a Premium for Efficiency Addressing Client Concern - Relationship Building Administrative Benefits Less Client Pressure re: Staffing, Time No Billing
  9. Fixed Fee – Law Firm Perspective Cons Fixed Fee Is Too Low Fee Might be too High and Might Damage Client Relationship
  10. Fixed Fee – Strategic Considerations Pair With Result-Oriented Payment for Optimal Alignment Consider Risk/Reward Sharing Make Sure Fee Is Reasonable
  11. Fee Cap Law Firm Bills Hourly Until Hits the Cap - up to $1M Same as Fixed Fee but No Guaranteed Payment No Economic Incentive Below the Cap - for Efficiency No Result-Oriented Alignment Pair with Risk/Reward Sharing
  12. Contingent Fees Law Firm Invests Fee and Payment Is Contingent on Outcome of the Matter Plaintiff and Defense Cases Can be 100% Contingent or Partially Contingent
  13. Contingent Fees – Client Perspective Pros 100% Fee Risk Shifts to Law Firm Budget Relief Law Firm 100% Aligned with Client re: Outcome No Billing or Staffing Concerns
  14. Contingent Fees – Client Perspective Cons Fee Could be Well in Excess of Hourly Fee Law Firm May Require Greater Control Over Strategy
  15. Contingent Fees – Law Firm Perspective Pros Expand Firm Business by Sharing Risk Substantial Economic Incentive/Upside Alignment with Client re: Billing/Staffing
  16. TAKEAWAYS WE ARE IN A PERIOD OF DRAMATIC CHANGE SFAs ARE EMERGING AS NEW MENU ITEMS CLIENTS AND LAW FIRMS SHOULD EMBRACE SFAs, AS THEY ARE HERE TO STAY
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