Pressure Mounts as More Corporate Clients Favor Flat Rates over Billing by the Hour

We have heard the battle cry before, and the wires are abuzz again about having law firms abandon the billable hour, according to Slate.

Though few companies openly discuss alternative billing arrangements, there is ample evidence to show that alternative billing is overwhelmingly favored over the hourly rate model.  Companies favor flat fees and discounts for volume legal work to control costs and more succinctly forecast legal spending.  Most critically, perhaps, a fixed rate model engenders risk sharing and trusting relationships.

Chief legal officers under pressure to lower overhead cannot treat litigation engagement costs as a wild-card on the balance sheet any longer.  Chief executives expect law departments, most of which include compliance and records management on the portfolio, to have strategic plans and budgets. The use of alternative fees and availability of collaborative technology, make litigation expenses more predictable than ever before.

Notwithstanding these benefits, the economics of supply and demand will ensure that not all legal engagements end up with a fixed fee billing standard any time soon. Top dollar lawyers and firms who offer specialized legal work will continue to find a line at the door of clients willing to pay top hourly rates. 

Managing Ethics in E-Discovery

David G. Keyko
New York Law Journal
January 3, 2008

Cases like Qualcomm Inc. v. Broadcom Corp., S.D. Cal. 05-cv-1958-B (SLM), have highlighted the dangers to lawyers and their clients of not properly managing electronic discovery. In Qualcomm, during the last day of trial, on cross-examination, a Qualcomm witness revealed the existence of certain unproduced records. After the trial, which Qualcomm lost, Qualcomm produced the records its witness belatedly disclosed, which totaled 200,000 pages.

The court found that the plaintiff’s counsel was involved in the misconduct and concealment, despite the lawyers’ claims that they had been misled by their clients. The court required Qualcomm to pay Broadcom’s litigation costs, which will be millions of dollars, and entered an order to show cause requiring Qualcomm’s attorneys to appear and show cause why sanctions should not be imposed upon them.

Making matters worse for the attorneys, Qualcomm blamed the problem on counsel for not requesting the relevant documents and the court declined to allow the lawyers to introduce litigation records the lawyers asserted evidenced their innocence. Those records were protected by the attorney-client privilege, which the client declined to waive.

In a major document case, it is almost a certainty that some documents not called for will be produced, and some documents that have been requested will be inadvertently overlooked. Qualcomm underscores the necessity of attorneys carefully fulfilling their obligations to collect, review, process and produce information during litigation.

ATTORNEYS SHOULD:

Make sure there is a clear division of responsibility if multiple law firms are involved and between inside and outside counsel. This will limit finger pointing about whose job it was if records are overlooked. The client will probably want an estimate of the costs involved, and that presents a good opportunity to document who will perform what role. If responsibility is given to those who are not attorneys, the lay people should be supervised carefully by counsel.

For more see law.com.

Which GCs Are Most at Risk in Backdating Cases?

Firm partner’s research shows that general counsel who understood backdating’s accounting implications are getting hit hardest

Corporate Counsel
January 3, 2008

Why is the government taking action against some general counsel who backdated stock options, while letting others off the hook? According to John Villa, the key is whether GCs knew that backdating creates an accounting problem. If they did — and did nothing to fix it — they’re more likely to face a civil suit from the Securities and Exchange Commission or criminal charges from the U.S. Department of Justice.

Villa, a partner at Williams & Connolly, reached his conclusion after looking at the cases of seven general counsel who face criminal or civil charges for backdating. He recently published his findings in ACC Docket, the magazine of the Association of Corporate Counsel. Though Villa’s article does not name all of the seven legal chiefs that he studied, they are Lisa Berry of KLA-Tencor Corp. and Juniper Networks Inc.; Nancy Heinen of Apple Inc.; Myron Olesnyckyj of Monster Worldwide Inc.; Kent Roberts of McAfee Inc.; Kenneth Selterman of Take-Two Interactive Software Inc.; Susan Skaer of Mercury Interactive Corp.; and William Sorin of Comverse Technology Inc.

For more see law.com.