I’m a few days behind on my magazines (actually, more than that judging by the pile on my desk) so I just got around to reading my January 5, 2009 Texas Lawyer, which contains an article entitled DOWN MARKETS REQUIRE CREATIVE CHOICES: Use Flexible Fee Structuring To Add Clients In Tough Times.
In the article, the author, Philadelphia lawyer Gavin Lentz, makes some great points. He states:
While many law firms seem to be bracing for disaster in this market, I see an excellent opportunity to generate new clients while also building an upside into your fee agreements. Although the current economic conditions are causing an explosion of litigation, many clients are experiencing extremely tight cash flow and cannot afford the usual fee structures.
Under these circumstances, how do you turn this to your advantage? The answer is multiple types of flexible-fee agreements that both new and existing clients will greatly appreciate. Firms that refuse to be flexible and creative in a down market risk losing clients and enhanced fees. I have already seen a number of clients that have been turned away by other firms because those lawyers are not taking the long-term view regarding client relationships and the economy.
Although current budget conditions may preclude clients from paying typical initial retainers and monthly fees, I have found that you can solidify your relationship with both new and existing clients by negotiating an upside reward for taking a risk to help clients through these difficult times.
To meet these problems, Mr. Lentz suggests using multi-phased fee agreements (flat fees based on portions of cases) or blended contingency agreements (client pays an initial flat-earned fee and then a percentage of the recovery after that). But Mr. Lentz doesn’t go all the way. Why doesn’t he ever suggest taking a case on a full contingent fee? There are plenty of lawyers (including our firm or my friend Randy McClanahan who has a contingent fee blog) that routinely take commercial matters on a contingent basis. And many of us have been doing it for years, not just now when times are tough.
Don’t get me wrong. There are times and places for hybrid agreements (we’ve used all kinds of hybrid agreements in our practice), but leave open the possibility of a full contingent fee. If you want to alilgn the interests of the attorneys and the clients, the best manner, when possible, is a full contingent fee.
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