Alternative Fee
Arrangements:
Ethical and
Practical
Considerations
Ethical constraints
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Bob Rohde (Rohde & Van Kampen)
Panel discussion of ethical and practical
considerations
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Parker Folse (Susman Godfrey), Mark Parris (Orrick), Bob Rohde, Isabella Fu
Audience discussion
Contributors: John Wilson (KL Gates), Elana Matt (T-Mobile),
and David Binney (Law Office of David H. Binney)
Traditional hourly billing not
affordable for some clients
Up to 30% of money spent on outside
counsel was billed via AFAs
81% of large companies are satisfied with
the work done using AFAs
Source: Fulbright’s 9th Annual Litigation Trends Survey Report, at
http://fulbright.com/index.cfm?fuseaction=news.detail&site_id=286&article_id=10695
Partial Contingency Fee
 Reduced hourly rate combined with reduced contingency fee
 Reverse contingency fee where client is defendant: discounted hourly
rate plus some percentage amount “saved” from agreed risk
Capped Fee
 Hourly rate up to a cap, often with caps for several litigation stages
Fixed Fee
 Either for entire engagement (e.g., trademark application) or by stage
of litigation (e.g., early stages, through Markman, through close of
discovery, trial). Sometimes for bucket of several projects or cases, or
all matters of XX type that arise during a specific time frame.
Variables in all cases:
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Who pays costs (or percentage shared)
Performance bonuses for non-contingency fee cases,
particularly for caps or reduced rates
“A lawyer’s
time is his
stock in
trade.”
Abraham
Lincoln
RPC and ABA Model Rule 1.5
All fee agreements must be “reasonable,” and a lawyer may
not enter into an agreement for, charge, or collect an illegal
or excessive fee
Specific requirements for contingent fees
For retainers
For flat fee
RPC and ABA Model Rules 1.7 and 1.8
 Lawyers are prohibited from any representation where
there could be a conflict of interest.
RPC RULE 1.5 FEES
All fee agreements must be “reasonable,” and a lawyer may not enter into an
agreement for charge, or collect an illegal or excessive fee
Time and labor required, novelty and difficulty for the questions involved, the skill
requisite to perform the service properly
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Whether the representation will preclude other employment by the lawyer
The customary fee for the locality
The amount involved and the results obtained
Any time limitations imposed
The nature and length of the relationship with the client
Experience, reputation and ability of the lawyer
Whether the fee is fixed or contingent
The terms of the fee agreement between lawyer and client
AFAs may present ethical issues because the interests of the client (best result
possible) and the lawyer (most efficient resolution possible) diverge.
Ethical Pitfalls:
 Using unqualified lawyers: The reasonable fee rule should be seen as a prohibition
against pushing work to a less experienced lawyer to maximize profitability under a
fixed fee arrangement. Rule 1.1 requires a lawyer to always provide “competent”
representation to a client. In certain cases this may prevent using less-experienced
lawyers to maximize the benefit of an AFA.
 Minimizing Time Spent: Attorney efficiency—less time spent on a matter—could
work against the client if the client’s best result will require more time on the
matter. There is an ethical violation if an attorney does not act at all times in the
client’s best interest.
 Curtailing Work: Once the cap in a capped fee is reached, an attorney cannot
ethically curtail the work necessary to continue a matter. The comments to Rule
1.5 impose a high standard on the attorney, who cannot enter into any type of
capped fee agreement that “might induce the lawyer improperly to curtail services
for the client or perform them in a way contrary to the client’s interest.” RPC 1.5,
cmt. 5.
RPC 1.7 – Fee
Arrangements Must
Avoid Conflicts of
Interest
Ethical Pitfalls: