Lawyer, Trust Your Client. Client, Trust Your Lawyer.
In my July 9, 2009, post Overbilling Is Billing Fraud And It Hurts Us All, I lamented the fact that clients who trust their lawyers to handle their most sensitive matters do not trust their lawyers to be honest in their billings. Lawyers, on the other hand, do not believe their clients' justifications for refusing to raise their hourly rates. This mutual distrust is one of the greatest downsides of the hourly rate billing model. As clients are under greater pressure every year to cut their outside counsel costs, they feel they have no choice but to hold the line on hourly rates. In 
response, many firms with outdated business models find themselves tempted to double bill and impose minimal time entries for routine tasks. As I noted in my July 9 post, nearly half of all lawyers surveyed do not believe practices such as double-billing are unethical. So the game goes on.
But it's a game that is damaging our profession. Outside lawyers need to change the way they do business so that clients trust them again. Clients need to be open to new fee arrangements that eliminate the cat-and-mouse games. Alternative fee arrangements can go a long way toward restoring this mutual trust and building a true team spirit. Alternative fee arrangements such as annual retainers and per-matter flat fees eliminate any temptation to engage in "creative billing." An attorney handling multiple matters under an annual retainer, for example, has no incentive to double bill. If he writes the brief for the Burns case while flying to a site inspection for the Smithers case, it does him no good to bill both files. In fact, the incentive is quite the opposite. The lawyer needs to maximize efficiency, so working on the Burns case while traveling for the Smithers case actually increases his profitability. And the client has predictable, controlled litigation costs.
Getting to that point of mutual trust, however, takes some real courage and a willingness by the lawyer and client to trust each other as they never have before. Negotiating an alternative fee arrangement that works, and doesn't result in disaster for the client or the firm, requires a level of candidness unfamiliar to either party. The most successful alternative fee arrangements begin with the firm and the client showing their books to each other. The client needs to openly show its historical billing data, and frankly discuss its cost-savings goals with outside counsel. The firm needs to be willing to take risks, to change its business model, and ultimately to provide billing data so both parties know whether anyone is getting gouged or getting a windfall.
In her June 9, 2009, The American Lawyer article, GCs, Law Firms and Flat Fee Arrangements: A Matter of Trust, Amy Miller gets insight from several DuPont outside counsel on the need for openness between the client and the law firm to make alternative fee arrangements a success. As she says at the beginning of her piece,
Making such agreements work for both the company and its law firms takes more than an innovative proposal and a solid pitch. The success of any alternative fee arrangement depends on mutual trust...
In my experience, the mutual trust and openness required to even begin discussing an alternative fee arrangement immediately strengthens the attorney-client relationship. By the time a deal is inked, both players have everything riding on each other. Both the client and the law firm now need to work together to make the fee arrangement work. You are a team in every sense of the word. And it's a a wonderful feeling to not only exchange high fives after big wins, but also when you both close your books at the end of the year.
