Are some law firms making a mistake by handing clients their billable hour data despite working for flat or fixed fees?
If the lawyers don’t want to face even tougher discount pressure, the answer may be yes. For clients, the information can be used to calculate and negotiate a lower fee when the next assignment comes around.
“Fixed and flat fees are structured in 100 different ways,” said Retta Miller, a partner in the Dallas office of Jackson Walker, who chairs the firm’s 150-lawyer litigation section and serves on its management committee.
“Sometimes it’s a fixed fee for a whole matter but you still keep billable hours and time entries,” and the clients ask for copies of those, Miller said.
In those instances, she said, her firm usually complies.
But according to Kristin Stark, a consultant at Fairfax & Associates, all law firms should start getting “more proactive” and resist such client requests—difficult as that may be.
Stark said firms have underestimated the value of their billing and time-entry data to clients, even when those clients aren’t paying by the hour. Meanwhile, a growing number of clients have recognized how such records can help them calculate future discount demands.
“Firms have fallen behind their clients and they are on track to get worse,” Stark said.
Still, it may be counterproductive for firms to get into protracted negotiations about releasing the information, said Tom Clay at Altman Weil.
“Some clients will ask for that,” he said about assignment-specific billable hours and time entries. And if firms refuse, “you just might not get the work,” he said.
“The clients hold almost all the cards,” Clay said.
With a vast amount of generalized law-firm pricing data available through e-billing services and other databases, many clients already have the tools they need to estimate a law firm’s costs and will enter compensation negotiations well-armed regardless, both Clay and Jackson Walker’s Miller said.
“Clients have so much more information than they used to have,” Miller said.
Miriam Rozen covers the business of law with a focus on law firm-client relationships. Contact her at email@example.com. On Twitter: @MiriamRozen.
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