Part One of this article discussed the general concept of flat fee litigation, and the associated relative risk shared by attorneys and their clients. Part Two explores potential flat fee litigation schemes further. The greatest challenge in devising a flat fee litigation scheme is making reasonable estimates of the attorney time necessary to effectively litigate any given case. Experienced litigators can distill the facts and the law in advance and make reasonable estimates of the time necessary, and they routinely offer estimates to prospective clients in the billable hour context. Unfortunately, lawyers’ estimates are often understated and clients end up paying significantly higher fees than originally expected. This is likely because attorneys are loath to give worse case scenarios and risk turning clients away.
So long as clients are willing to absorb a share of the risk (see Part One) in exchange for certainty in billing, attorneys can and should offer their clients a flat fee option for most litigation matters. In order to reduce the risk to clients of over paying for matters that may resolve in the early stages of litigation, attorneys can offer flat rates for the different stages of litigation. A flat fee litigation scheme may look something like the following: a flat fee for pre-filing negotiation; a flat fee for post-filing/pre-trial litigation; and a flat fee for trial preparation and trial. The pre-trial litigation phase could be broken up further into a flat fee for post-filing/pre-discovery work and a flat fee for all remaining pre-trial litigation including discovery.
The difficulty of course arises in deciding how to calculate the flat fee. Litigation is a complex process mired in factual, legal and procedural uncertainty, and it’s the attorney’s job to navigate the maze for the client. Nonetheless, experienced litigators have the skills required to make reasonable estimates. They can estimate the number of witnesses to be deposed, the volume of documents to review, the potential discovery burden, the extent of expert discovery and an average time for expected motion work. In some cases, they’ll be able to include the skill and determination of opposing counsel in the equation. They will not get it right in every case. In fact, the estimates may be off more often than not. Whatever accuracy is achieved, they can at least assign risk value to the estimates. The goal is to present a marketable alternative to the inefficient and client unfriendly “billable hour” practice.
It’s important to note that setting a flat rate for attorney fees doesn’t eliminate all uncertainty for clients. Litigation costs can vary considerably and attorneys should provide their best estimates of those costs while explaining the inherent unpredictability.
Compared to the entrenched “billable hour” practice, the flat fee approach is an attractive prospect to the San Diego law firm looking at creative billing practices to lure new clients and keep existing clients who are increasingly more frustrated with the status quo.