Making Alternative Fees Work in Litigation: How to Approach and Craft AFAs
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Making Alternative Fees Work in Litigation: How to Approach and Craft AFAs FEATURED FACULTY: Nicole Auerbach, Partner, Valorem Law Group 312-676-5469 nicole.auerbach@valoremlaw.com Gerry Riskin, Founder, Edge International 202.957.6717 riskin@edge-international.com
Speaker Bios Nicole Auerbach, Partner, Valorem Law Group Nicole Auerbach is one of the founding partners of Valorem Law Group (www.valoremlaw.com), a business litigation firm formed in January 2008 with a focus on providing alternative billing arrangements to clients. Nicole handles general commercial litigation matters in federal and state courts around the country. She also represents clients in arbitrations, mediations, appellate work and provides “second opinions” to clients facing key strategic issues in lawsuits. Prior to forming Valorem, she practiced for nearly 15 years in the Chicago office of Katten Muchin Rosenman, where she was a partner in the litigation department. In 2010, Nicole was named “One of the Top 50 Women Lawyers in Illinois” by Illinois SuperLawyers magazine. In 2005, Nicole was named one of “Forty Illinois Attorneys Under 40 to Watch” by the Law Bulletin Publishing Company. She was featured on National Public Radio in November 2008 regarding her view of the future of the “billable hour.” Gerry Riskin, Founder, Edge International Gerry Riskin is a Founder of global consultancy Edge International. He is an internationally recognized lawyer, author and management consultant. A graduate of commerce as well as law, he practiced since 1973 and was Managing Partner of a firm in Canada and Hong Kong. Gerry has been coaching managing partners and practice, industry and client team leaders on Alternate Fee and Project Management for over a decade. He serves on the advisory board of a leading AFA and Legal Project Management-based law firm. Gerry is author of The Successful Lawyer Text and Audio Program (ABA best sellers). For The Institute for Best Practices, Gerry co-authored two works for those in firms with management responsibilities: Herding Cats and beyond KNOWING, both of which became management best sellers. He is co-creator of the acclaimed video productions Practice Coach® and Rainmaking®., has served on the Conference Board of Canada and is a Fellow of The College of Law in London and a visiting Professor at the University or Pretoria in South Africa. Peter served as chairman of the American Corporate Counsel Association (ACCA, now the Association of Corporate Counsel) in 1991 and on ACCA's Board of Directors and Executive Committee for a decade. He serves on the Board of the Public Law Center in Orange County, California, the International Institute for Crisis Resolution and Prevention in New York, New York, and the Strauss Institute for Dispute Resolution at Pepperdine University School of Law in Malibu, California. A fellow of the College of Law Practice Management, Peter graduated from the University of Wisconsin at Madison and St. Louis University School of Law, where he was elected to Alpha Sigma Nu.
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jill.adler@meeting-matters.com.Making Alternative Fees Work in Litigation:
How to Approach and Craft AFAs
Nicole Auerbach
Nicole.Auerbach@Valoremlaw.com
Gerry Riskin
riskin@edge‐international.com
What’s all the fuss about ?
History Lesson –
40% increase
Movie Star in jail lesson
It’s hard to quit
1Arrangements Based on Hourly Model
(not alternative fees)
• Capped fees
• Volume discounts
• Blended rates
Alternative Fees (aka “value fees”)
• Flat fee
• Fixed fee
• Risk Sharing
210/13/2010
AFAs that Work In Litigation
(1) Flat fee, no bonus –
– Assess matter to determine fee
(can be phases)
– Decide payment structure
(monthly installments, quarterly,
all in one lump sum)
(2) Flat fee, with bonus –
– Assess the matter and determine
total fee;
– Decide what hold back or bonus
structure
– Decide payment structure
AFAs that Work In Litigation
(3) Flat Fee & Contingency –
– Decide amount that will be paid
as a flat fee (usually some
portion of the assessed fee for
the whole matter)
– Determine the % of contingency
fee for the remainder.
4)) Pure Contingency
g y–
– Decide amount of contingency
(plaintiff) or reverse contingency
(defendant)
3What is the benefit for the firm and the client
in using AFAs?
• Hourly fees result in a fee
that is either too high or too
low
• Clients get better value
• Lawyers get compensated
more fairly
Things to Keep In Mind
• Communicate
• Document Agreement
• Maintain data for future use
• Assess at the end
4Which Cases Are Best??
• Level of analysis must increase
• The more known data, the better
‐ jurisdiction, party, opposing counsel, contract terms
• Appeals, arbitrations ideal
‐ fixed period of time, known scope of
matter/discovery
• Repeat litigation is ideal
• Contingent matters – if you think it’s a loser, don’t do it
• You know your client, you know your firm
• Use phases if scope of litigation is unknown
Which Cases Are Worst??
• Unknown client
• Complicated matter that doesn’t lend itself to easily
establishing what is a success
• Client who demands a great deal of hand‐holding
• Case where you do not believe you can achieve the
goals set by the client
• TRUST YOUR GUT!!!
5Identifying Clients Needs
for Successful AFAs
• “That which interests my boss fascinates me”
• Budget certainty – fixed fee
• Routine litigation ‐‐ client wants to concentrate on
other aspects of his/job
• Series of “losses” – results‐driven arrangement is best
• Cash flow/recording issues – may impact when fee is
paid
• Cycle‐time impact – design fee accordingly
How to foster necessary communication
with clients in crafting an AFA
• Trust
• long term objectives
• fairness, resilience and flexibility
• willingness to review and revisit
• building New Models
6Must‐haves for your AFA
• Written agreement (preferably, signed by client)
• Definition of bonus trigger
• Discussion of scope (if fee is “up to trial” must say this)
• Note that bonus occurs if settlement or judgment (and
anything else that may trigger it – the defendant gets
out of the business)
• Discussion of who is responsible for costs (especially in
contingency)
• Decide in advance what would cause a “re do” of
agreement – should be very limited circumstances
• Payment deadlines and triggers
• What documentation you will provide with invoice
• Check your state ethics rules
How to ensure the AFA remains
profitable
• Running lean and mean
• Getting fat out
• Motivate to peak performance
• Cull the herd
• Hire those who can help your team
7Culture Shock and Partner Push Back
• Education
• Prototyping
• Reality Check – who sets fees
• The cold hard truth
Q ti
Questions
Nicole Auerbach Gerry Riskin
Nicole.Auerbach@Valoremlaw.com riskin@edge‐international.com
8Making Alternative Fees Work in Litigation:
How to Approach and Craft AFAs
Nicole Auerbach
Nicole.Auerbach@Valoremlaw.com
Gerry Riskin
riskin@edge‐international.com
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