About Alternative Fee Arrangements
Pepper is working with many clients on alternative fee arrangements, and we are open to discussing an alternative arrangement for all or any portion of a client’s legal requirements. Alternative fee arrangements offer the opportunity to balance the client’s and the law firm’s interests and needs. Some arrangements achieve this by offering fee predictability for the client and the firm, while other arrangements achieve this by including risk and reward elements. Designing a workable alternative structure typically requires review of detailed information about work to be performed, including, for example, historical volume/billing information, matter assignment, analysis and disposition details, and other information needed to determine the scope, complexity and duration of the work, and to develop a fee structure that represents a strong value for the client and a reasonable return for the firm.
Risk-sharing and incentives for further cost savings and outstanding performance are features that clients and Pepper look to build into alternative fee arrangements. Pepper has negotiated numerous successful alternative fee arrangements in the past, and we would be happy to discuss any of these in which you have an interest. These include:
- Fixed or flat fees. The client engages Pepper to provide a specific service for a set price. In the litigation area, this may be done for a single case or for an entire portfolio of litigation cases. In the transactional area, Pepper may handle a specified transaction for a set price. Fixed or flat fee arrangements are best suited to situations where the time and effort to complete a project are highly predictable.
- Success fees. Pepper would receive a contingent payment if certain legal goals established with the client are met. An example in the case of litigation might be a successful motion to dismiss a case early. This arrangement can be combined with a number of the other alternative fee arrangements described herein.
- Fixed fee for accounting period. Many companies, for budgeting purposes, like to know that their legal fees will be fixed for an accounting period. Under this arrangement, Pepper and the client will agree upon a fixed fee for a matter for an annual accounting period, and the client will pay the fee in twelve monthly installments. At the beginning of the next accounting period, Pepper and the client will review the actual hourly fees incurred for the prior accounting period, and formulate a fixed fee for the next accounting period that makes adjustments for any under or over payments from the prior accounting period.
- Budget-based fees. The client and Pepper collaborate to develop a budget for the work to be performed. This may be used when both parties have a good sense of fees and costs involved in the representation.
- Retainer arrangements. Many legal counseling arrangements may be successfully arranged through fixed payments on a monthly basis, covering issues requiring legal attention from time to time within specified subject areas.
- Contingency fees. The client pays Pepper based solely on results achieved, with payment often expressed as a percentage of the recovery, settlement, or amount saved. This type of fee arrangement is most commonly used for plaintiff-side litigation, although Pepper will work creatively with clients to apply contingent fee arrangements to other types of matters, or discrete phases of a matter, where appropriate.
- Blended hourly rates. All of our time is billed equally regardless of who works on the matter. This may be used where it is easy to predict the required tasks and the personnel mix needed to perform them.
- Collar arrangements. Under this arrangement, Pepper and the client will agree on a target price for certain legal work, and will agree on a “collar” around that target price (e.g., 8 percent above or below the target price). If the actual hourly fees incurred are within the collar, no further adjustment is made. If the actual hourly fees incurred are above or below the collar, Pepper and the client share, on an agreed upon basis, in the savings or additional expense.
- Menu pricing. Under this arrangement, which is most suitable for high volume routine projects or tasks involving a predictable amount of time. Pepper will provide fee quotes on a “per project” or “per task” basis.
- Tiered volume discounts and success fees. Under this arrangement, Pepper would agree to reduce its hourly rates as the volume of legal work reaches certain agreed-upon levels within a specified period. These tiered discounts would be combined with the opportunity for Pepper to earn success payments that decrease in amount as higher tiers of legal fees are reached.
In order to be successful, any alternative fee arrangement must be a win-win for both parties. In this regard, we will periodically review the scope of work and actual versus projected fees and costs with our clients to ensure that the needs of both the client and the law firm are being met. The fee arrangement will be reevaluated and renegotiated as necessary based upon this review.
We want to assure you that we will work with you to ensure that the fees we charge are reasonable and bring value to the client. We are mindful of time and cost expenditures, and we understand the need to carefully manage your budget for legal services.
In order to keep our clients’ legal costs under control, we assemble teams to handle each matter as efficiently and effectively as possible. The key to successfully managing the attorney-client relationship is the responsible partner, who oversees each engagement and ensures that cost-efficiency is being maintained at all levels.