Alternative Fee Arrangements: Communicating with Outside Counsel

Alternative Fee Arrangements are gaining steam and are increasingly considered a viable alternative to the traditional billable hour model. This article provides an overview of things to discuss with outside counsel when exploring alternative fee arrangements.

Many in-house legal professionals are not sure how to broach the discussion about alternative fee arrangements with outside counsel. This article provides an overview of questions to ask when discussing AFA's with your law firm.

1. Has the firm previously engaged in Alternative Fee Arrangements?

Understanding the general practice of a firm with regards to AFA's can help you understand whether the firm will be open to such an arrangement.

2. What types of Alternative Fee Arrangements has the firm used?

Understanding the types of AFA's a firm has used, the percentage of matters that are handled as AFA's within a firm, and whether they proposed lead counsel for a matter in particular has used AFA's can help facilitate discussions.

3. What have been the firm's positive and negative experiences with AFA's?

Getting a better sense of the firm's successful and less successful experiences with AFA's can help identify opportunities and address concerns early in the process. It's helpful to differentiate between the perspective of the firm and the perspective of the client, when assessing experiences with AFA's.

4. Why were the firm's previous experiences with AFA's perceived as successful or unsuccessful?

What is the firm's assessment with regards to the success (or lack thereof) of AFA's? What was the assessment of the client? Is the firm able to provide Client references?

5. Is AFA willing to engage in an AFA for a this / a particular matter?

If the firm is willing to do so, what kind of AFA would the firm recommend? If the firm is not willing to do so, why not?

6. Does the firm have data reflecting average cost for this type of matter?

Make sure to make a distinction between average costs for a matter as a whole and specific projected phases of the matter. If the firm has data, ask whether the firm is willing and able to share this data.

7. Does the firm recommend that any particular criteria be used to determine success in an alternative fee arrangement?

Determining the appropriateness of various criteria used to measure success will help with successfully implementing an AFA strategy for a matter.