1 corporate counsel seminar alternate billing practices: thinking outside of the.10 increments...
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Corporate Counsel SeminarAlternate Billing Practices:
Thinking Outside of the .10 Increments
November 10, 2010
Miami, Florida
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Moderator & Panelists Moderator
Richard Montes de Oca, Esq.Associate Vice President and Assistant General CounselGlobal Compliance & EthicsRoyal Caribbean Cruises Ltd.
Panelists Joseph Nuñez, Esq.
Senior Group CounselTarget
Luis Consuegra, Esq.Contract AttorneyChevron Products Company
Mario D. Carballo, Esq.Assistant General CounselLNR Partners, LLC
Stephanie Chin, Esq.Senior Associate General CounselSection Head Tort LitigationWal-Mart Stores, Inc.
Moderator & Panelists
CABA Corporate Counsel Seminar
November 10, 2010
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Economic crisis has forced corporate legal departments to cut costs
Despite economic conditions, law firms continue to increase rates
South Florida law firm rates at $785 p/hour; NY rates at $1,000 p/hour
Corporate counsel placing increased focus on value vs. hours
Alternate billing is improving efficiency and cost effectiveness
Many law firms remain unwilling to “play ball” or put “skin in the game”
Alternatives to traditional law firms are becoming increasingly attractive
Source: POSTLEWAITE, SUSAN: “Riding A Wave Of Misfortune” at dailybusinessreview.com
Introduction
CABA Corporate Counsel Seminar
November 10, 2010
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Alternate Billing Practices
CABA Corporate Counsel Seminar
November 10, 2010
Alternate Billing Practices
“Waterfall” Discounts
Hybrid Fees
Discounts Based on
No. of Matters &Total Spend
Flat Fees
Discounted Hourly Fees
Blended Rates
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Discounted Hourly Fees
Description
• Across-the-board reduction in the standard hourly fees
• Percentage reduction on all bills
• Usually, 5% to 15% discount
Types of Matters
• International Work (e.g. Chevron)
• Judicial Foreclosures (e.g. LNR)
• Personal Injury (e.g. RCL)
Discounted Hourly Fees
Incentive to employ firm Reward clients with larger
billings, number of matters Advance efficiencies of practice Drive business
Precedent-setting concerns Administrative concerns Managing expectations Risk to “standard” billing
rates
CABA Corporate Counsel Seminar
November 10, 2010
PROS CONS
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Blended Rates
Description
• Attorneys’ time is billed equally, regardless of seniority
• Require close management of attorneys to ensure oversight
• Approx. $350 per hour (e.g. partners $500; associates $275)
Types of Matters
• Tort Litigation (e.g. Wal-Mart)
• Real Estate Litigation (e.g. LNR)
Blended Rates
Concerns about quality of work
Administrative concerns Risk to “standard” billing
rates
Encourage more efficient staffing and lower rates
Promote simpler record-keeping and billing by outside counsel
Simplifies bill review and budgeting
CABA Corporate Counsel Seminar
November 10, 2010
PROS CONS
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“Waterfall” Discounts
Description
• Stepped discounts – the percentage of discounts increases as the amount of money billed on the matters increases (e.g. 5% discount on first $100k, 10% on next $200k, 15% on anything over $300k)
Types of Matters• Real Estate Transactions (e.g. Target)• Commercial Litigation
“Waterfall” Discounts
Greater administrative concerns
Managing expectations Apportionment by client
across different matters Risk to “standard” billing
rates
Greater incentives to employ firm Reward clients with larger
billings, number of matters Great incentive for client to pool
legal resources in one firm Drive business
CABA Corporate Counsel Seminar
November 10, 2010
PROS CONS
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Discount Based on Number of Matters
Description
• Discount of 5% if more than X number of matters
Discount Based on Total Spend
Description
• Discount of 5% upon $100K in billings
Types of Matters
• Workouts and Foreclosures (e.g. LNR)
Discounts Based on No. of Matters & Total Spend
Greater incentives than regular discounts Reward clients with larger volume of matters and billings Drive business Advance efficiencies
Administrative concerns Apportionment by client across different matters Risk of inconsequential file openings
CABA Corporate Counsel Seminar
November 10, 2010
PROS CONS
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Flat Fees
Description
• Specific services for a set price during the course of a specified period
• Ceiling on what the client pays the law firm for specific services
• Straight (e.g. $5k for retail lease negotiation) or graduated (e.g. $5k for first 5, $4k thereafter)
Types of Matters
• Labor and employment (e.g. Wal-Mart; RCL)
• Corporate Secretarial Services (e.g. RCL)
• Uncontested Non-Judicial Foreclosures (e.g. LNR)
• Real Estate Closings (e.g. Banks and Financial Services)
• Real Estate Files Reviews (e.g. Target)
Flat Fees
Concerns about quality of work
Managing expectations within firm
Careful analysis on an ongoing basis
Drive business Advance efficiencies Advance expertise/SME
proposition Easing of administrative concerns Predictability
CABA Corporate Counsel Seminar
November 10, 2010
PROS CONS
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Hybrid Fees
Description
• Combination of a discounted hourly rate and contingency fee arrangement
Types of Matters
• Commercial Litigation
• Class Action Litigation
• Anti-trust
• Intellectual Property
Hybrid Fees
Easy to negotiate and administer Client’s control of litigation
expenses Incentives to both the firm and
the client
CABA Corporate Counsel Seminar
November 10, 2010
Concerns about quality of workManaging expectations within firmCareful analysis on an ongoing basis
PROS CONS
1111
DON’T send inaccurate bills or nickel and dime (e.g. bills for .10 hours)
DON’T automatically increase bills (e.g. focus on merit, expertise and inflation)
DON’T be afraid to be creative (e.g. reverse auctions; travel time, contract attorneys)
DO make billing statements, relationships and discussions easy
DO promote diversity within the law firm
DO consider using technology (e.g. Serengeti)
DO’S & DON’TS
CABA Corporate Counsel Seminar
November 10, 2010
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QUESTIONS & ANSWERS
CABA Corporate Counsel Seminar
November 10, 2010
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Corporate Counsel SeminarAlternate Billing Practices:
Thinking Outside of the .10 Increments
November 10, 2010
Miami, Florida