Alternatives to Hourly Fee Arrangements

Image


SBC has been entering alternative-fee arrangements with its clients for nearly 20 years. Instead of billing a client for the time we spend on a case, we earn our fee based on the value of the services we provide. We have found that, given the opportunity, most clients choose alternative fee arrangements. They provide predictability in the cost of a legal project and create an incentive for the law firm to complete the project efficiently and expeditiously.  

Alternative fee arrangements can take many forms: fixed fees, contingency fees, success fees, or some combination of those alternatives. Which arrangement or combination of arrangements works best, depends on the client’s individual circumstances and what type of matter is involved.

Fixed Fee/Flat Fee.
A fixed fee, or flat fee, works well for clients that want certainty before they commit to a project. SBC will agree to handle a matter for a stated amount. The amount can be a single payment, a monthly fee, or broken down into payment due at the beginning of each phase of a more involved project, and capped to keep it from going above expectations. Any changes that come up during the project can be addressed through a change order with a reasonable adjustment up or down, depending on the situation.

Contingency Fee. A contingency fee arrangement can apply to a wide variety of legal matters, but it is attractive for clients who are involved in pursuing claims, or those who are buying or selling a business or who are engage in some transaction that might not be completed. SBC receives a percentage of the recovery in the case or a commission-type payment if the deal closes.

Success Fee. A success fee arrangement works nicely for clients defending a claim or suing for a non-monetary recovery. The client places a fee with the firm, which can be paid in installments over time, in some instances. The law firm and the client identify an acceptable range of outcomes at the beginning of the matter. The client’s success fee is held in trust until the conclusion of the case, at which time it is either earned or refunded, depending on the outcome. 

“ given the opportunity, most clients choose alternative fee arrangements”
Image

Here are some examples of the arrangements we made for clients:

  • A franchisee was sued by the franchisor for breach of contract. We made an early assessment of the case and determined that there was a likelihood that the franchisor violated franchise disclosure laws at the outset of the relationship. We agreed to handle the defense of the case and the prosecution of the counterclaim on a hybrid contingent-fee, flat-fee relationship.

  • A minority owner of a business was forced out by the majority owner. We agreed to pursue claims for breach of duty on a pure contingent fee basis.

  •   A buyer of a business believed he had been defrauded by the seller, who had shown him false financials to induce him to purchase. We handled the case on a hybrid flat-fee, contingency-fee basis. After we won the case, the seller appealed. We agreed to handle the appeal on a pure contingency-fee basis. 

  • A client needed to complete a short-sale of his hotel in the attractions area. We agreed to accept a portion as a fixed fee with the remainder being a success fee that didn't become due unless the deal closed.