Dallas appellate lawyer David Weiner says he had an epiphany about billing in 2009, which led him to leave his firm and hourly billing behind to open a flat-fee solo practice.
“I had done flat-fee work when I was a younger lawyer doing criminal-defense work, and it dawned on me — I really did have this moment or this epiphany — when I realized I could apply that same model to civil appellate work,” Weiner says.
He notes that flat-fee billing is a natural for appellate work “because people want to know how much something is going to cost them.”
The Weiner Law Firm, which Weiner opened in May 2009 after departing Dallas’ Glast, Phillips & Murray, isn’t the only Texas firm embracing flat fees and other forms of alternative billing. Others include Skiermont Puckett, a newly formed firm in Dallas doing intellectual property, antitrust and commercial litigation, and the Law Office of Thomas Esparza Jr. of Austin, an immigration firm.
Alternative billing isn’t new, and Texas firms have been experimenting with it for decades. But most firms, particularly large ones, cling to hourly billing and offer alternative billing only for certain types of work or clients.
Among the 101 firms that responded to Texas Lawyer ‘s 2011 Salary and Billing Survey, 34 percent said they offer clients blended fees; 31 percent offer contingent fees; 64 percent discount their fees; and 39 percent offer flat or fixed fees. Only 15 percent of the firms report that they bill exclusively on an hourly basis, while a handful indicate they do not bill by the hour, according to survey results.
If firms don’t consider offering alternative billing, they will “go by the wayside over time,” says firm business and marketing consultant Samira Mery Lineberger of San Antonio’s Lineberger Consulting Group. She says clients demand predictability, and alternative billing can make that happen.
“If you can give them predictability in the billing, you are going to have a leg up on the competition,” she says.
Lineberger, who also has a solo law practice, says she rarely uses hourly billing at her firm and does so only when a client demands it. “I do kind of a hybrid most of the time. I have a couple clients I bill [hourly] but . . . if they maintain a retainer, I give them a discount,” she says.
In addition to providing predictability for clients, Lineberger says alternative billing is good for firms because lawyers no longer focus on accumulating and keeping track of hours.
Weiner says the main attraction for his clients in alternative, as opposed to hourly, billing is budget certainty. Most prospective clients prefer alternative billing, he says. The ones that don’t “take their chances” that they will save money through hourly billing.
Weiner says he’s fortunate, because of the nature of his appellate practice, to be able to get away from hourly billing. He uses several variations of alternative billing, such as a single upfront payment or a structured payment plan that calls for a set amount at engagement and additional payments at trigger points when he files certain documents in the appeal. He says he also may offer a hybrid arrangement that blends a flat fee with a contingent fee, in a situation when he’s defending a judgment and there is a set amount from which he can measure his “recovery.”
Weiner says he’s not sure if he has gotten work because he no longer bills on an hourly basis, but he says “it’s a lot happier way for me as a lawyer to work.” He keeps track of his hours, but only informally, because it helps him determine what to charge clients.
Knowing what to charge is key to a successful alternative-fee practice, Weiner says. With the no-hourly-billing business model, Weiner says he needs to do a lot of investigation before quoting a fee that’s fair and reasonable to him and to the client.
“I often will spend days and days and days mulling it over, sleeping on it, because I hopefully reach some point of clarity,” he says.
The Sweet Spot
Paul Skiermont says when he and college friend Donald Puckett agreed to form a firm in Dallas in July, they agreed on a couple of things: no hourly billing; use contractors for “commodity-type legal tasks,” such as document review and basic legal research; and joint-venture big litigation with other firms.
Prior to forming Skiermont Puckett in Dallas, Skiermont was a partner in Bartlit Beck Herman Palenchar & Scott of Chicago. The majority of billing at that firm was alternative, so Skiermont says he knew alternative billing could be effective at his new firm.
Using contractors for the commodity tasks enables Skiermont Puckett to “stay smaller, stay more lean,” he says. Clients would prefer to spend their money on experienced lawyers rather than on associates doing commodity work, he notes.
At Skiermont Puckett, low-level work is built into a flat fee or the client directly pays the outside contractor doing the commodity work. No “important” work is outsourced, he says.
“The alternative- or flat-fee model is particularly beneficial for a firm that doesn’t want to leverage up. . . . We don’t want to get much bigger over the course of three to five years. We’d like to get into a sweet spot of 10 to 15 lawyers, with about half partners,” he says.
Skiermont says he and Puckett, formerly a principal at the Ware Firm in Dallas, know of firms that offer alternative-billing arrangements and some that outsource commodity work, but they believe their firm is unusual in how it combines them in its business model.
Skiermont says they believe they can save clients money — maybe as much as 20 percent — compared to what clients would pay with hourly billing. Also, he says, the firm has potential to make a premium if it prevails in litigation, and the fee arrangement provides for incentives.
“There would be bonuses for different milestones, different kinds of victories, what you would think of as a big win,” he says. “Regardless of how many hours we work each month . . . you are paying for results and value.”
Ever since he opened his immigration firm in 1978, Thomas Esparza Jr. says he has billed clients a flat fee. He says the size of his firm — two lawyers and five paralegals — and the immigration work he does lend themselves to more predictable flat-fee billing.
Esparza says his firm’s flat fees for immigration work range from $1,000 to $35,000. He says the firm makes about $500 to $600 on the typical case — although it would make more for a complicated matter.
Esparza says the majority of his firm’s clients are individuals and small businesses, and he doesn’t want to “nickel and dime them to death” like a firm might do with hourly billing.
Notes Esparza, “A lot of my customers are just everyday working men and women. I just have to be efficient.”
Each year, Texas Lawyer tracks financial trends in the state’s legal industry through its Salary & Billing Survey. The resulting report compiles information provided by firms of different sizes and practice areas across the state. The firms respond to questions about employees’ salaries, billing rates and billable hours.
Due to variations in firms’ data-tracking, these results are not definitive, but they do provide valuable comparative information for firm managers and employees. Not all respondents answered each question. A minimum of three responses was required for every category of averaged data. The numbers in the percent-change columns are rounded to the nearest tenth of a percent.
The 101 firms that participated in this year’s survey employ 8,797 lawyers with 4,223 of those lawyers in Texas. The average survey results are reported by city and by firm size. The firms with lawyers outside Texas provided salaries and billing rates for their Texas offices.
Firms are divided into four regional categories: Austin/San Antonio, Dallas/Fort Worth, Houston and Other. For the 101 responding firms, the primary Texas locations are as follows: 12 are in Austin/San Antonio, 37 are in Dallas/Fort Worth, 28 are in Houston and 24 are in other cities. The size divisions are firms with 100-plus, 50 to 99, 30 to 49 and fewer than 30 lawyers. Of the 101 responding firms, 13 have more than 100 lawyers, 12 have 50-99 lawyers, 14 have 30-49 lawyers and 62 have fewer than 30 lawyers.
The firms responding to this year’s survey also provided 2010 data.
To be added to Texas Lawyer’s email survey list, contact research editor Jeanne Graham at firstname.lastname@example.org.