Big law firms love the billable hour. For most corporate firms, the profit model is built on a multiplier of billable hours and associate leverage. The more lawyers that work on a matter and the more hours that are billed, the more their partners make. Metrics like associate billable hours, realization, and underutilization drive the business. And, for the most part, corporate counsel tolerate it. Why is the billable hour an accurate measure of the value of service? It does not have to be—take a look at how plaintiffs’ lawyers do business.
Typically, plaintiffs' lawyers do not bill by the hour. They can't. Their recovery is based on success in a particular case. Before accepting a case, plaintiffs' lawyers must develop a cost model for the case and, usually, structure a fee percentage based on the value of the case. If cases drag on (as big firm lawyers like them too), plaintiffs' lawyers can lose money.
Since the 2008 recession, in-house counsel have fought back against the hourly billing model—sending out RFPs requesting flat fees and alternative fee arrangements. Corporate counsel have successfully implemented the plaintiffs’ lawyer model when their client is suing another large company. But the plaintiffs' model and approach offers some lessons for companies evaluating firms for defense work as well.
We have 10 tips for corporate counsel to keep in their pocket as they evaluate their next outside counsel RFP:
1. Ask about the firm's technology platform
Predictive coding algorithms are here to stay. Prosecutors are accepting them, and so are courts. Some models produce less than a 5 percent error rate—that's better than many associates. And technology can save you millions in discovery costs with software that can conduct first-level document reviews. As the number of emails and electronic documents grow, predictive coding platforms have cut document review requirements exponentially. And plaintiffs' lawyers are happy to accept predictive coding, provided the model is effective and they understand the process. An open dialogue with the plaintiff in the case will pave the way for both sides to save money.
