With the continuing economic slump, law firms have become increasingly creative in crafting alternatives to hourly billing to attract and retain clients who are feeling the financial pinch.
Hunt Valley lawyer Eliot M. Wagonheim, for one, believes he's come up with a new twist. His law firm, which represents small- and medium-size businesses, has rolled out a program called "Empty Hourglass." Under the plan, clients choose to pay $350 or $550 a month — depending on the level of service they want — and get unlimited access to legal advice through phone calls, e-mail and correspondence.
The idea grew out of Wagonheim's belief that the legal profession needs clearer avenues of communication between attorney and client. The billable hour as a business model is antithetical to that, he said.
"Every time a client picks up the phone, what runs through his mind is, 'I'm going to be billed for this,'" he said. "There are times, I'm sure, when people don't pick up the phone, thinking, 'I think I know the answer, but I don't want to get the meter running.' There are times we don't get to offer our best advice."
Alternative billing arrangements have been on the rise for the past two years as the economy has slumped, said Kevin Iredell, vice president of New York-based ALM Legal Intelligence, a research firm. According to a recent ALM survey, one-third of law firms said they offered alternative billing more frequently than before.
The most frequently used alternative methods, according to the survey, are fixed or capped fees and discounted hourly rates. Other methods include hybrid fees, packaged legal services, early-payment or volume discounts. A few respondents said they offered reduced fees for advice given via e-mail versus the telephone.
Wagonheim's plan covers general matters such as employment or human resource questions, contractual interpretation and inquiries about day-to-day business dealings. The plan does not cover matters for which a case file has been opened, such as the defense of a lawsuit or the drafting of a contract.
The idea has drawn interest from current and former clients and is attracting new business for the firm, Wagonheim said.
Craig Hayward, president of The Indusco Group, a Baltimore-based distributor of rigging and construction equipment, was one of the first clients to sign up for Wagonheim's $350-a-month plan. In the past, he said, his company tried to keep costs down by limiting contact with attorneys. Hayward said he would typically deal with attorney calls himself.
"Because of the old-style billable hours rates that many attorneys use, sometimes we weren't as proactive as we could have been in sourcing some professional help," Hayward said. "We might have held off and hurt ourselves. This new program will enable the manager of each of our business units the opportunity to be proactive and lessen the risk of litigation."
The Baltimore office of Jackson Lewis LLP also offers alternative payment structures such as fixed or capped fees and annual fees, said Richard J. Hafets, a managing partner.
"We try to customize an arrangement to fit the clients' needs," he said. "Some clients want the certainty of a fixed number. They want to know the labor and employment budget for a year is not going to exceed 'X.'"
"All firms are offering some type of alternative billing arrangement, simply because you almost have no other choice," Hafets added. "You're not going to retain work or retain clients unless you're willing to do that. What has changed and become more prevalent is the degree to which firms are willing to be creative. Clients are becoming more sophisticated about it and expecting or demanding it."