Law Times

Page 10 May 12, 2014 • Law TiMes www.lawtimesnews.com FOCUS Lawyers navigating emerging world of alternative fees Assessing work involved, clarifying services key to move away from billable hour marG. Bruineman For Law Times hen Stephanie Heyens set out to start her own criminal law practice in 2000, she knew she had to do things differently. First, aware that her field is extremely competitive and, hav- ing already practised for three years, she knew women lawyers vying for the business of accused criminals aren't necessarily at an advantage. Working with an oen-impecunious clientele is also something she had to take into consideration given that she didn't want a practice centred on the ever-increasing limitations involved in legal aid cases. "I knew I had to be more cre- ative," says Heyens, who works in the Greater Toronto Area. "Early on, I made sure clients were aware I accepted alterna- tive forms of payments." It took some juggling, but she was able to set up a system to accommodate Visa and Mas- terCard payments. e other approach she relies on is monthly pay- ments through di- rect deposit to her trust account. e business of her law practice re- volves around block fees involving two basic stages. e first is a fee to sit down with the client, sort through the issues, and do some of the preliminary work. Aer that, she deter- mines a fee to carry the case to comple- tion. She can repeat the second stage if additional or un- foreseen work be- comes necessary. And if clients don't fulfil their fi- nancial obligations, Heyens advises she'll have to remove her- self as lawyer of record. But it's a trump card she doesn't oen have to play, she notes. "I have more collection prob- lems with legal aid than I do with my private clients," she says. For a sole practitioner who started from scratch, the ap- proach is relatively easy, cost-ef- ficient for the client, and doable for the lawyer. But what about the bill- able hour? at never really entered into the mix for Heyens, a defence lawyer who could represent the new order of the practice of law. In an increasingly competitive market, law firms are finding they need to change how they do things. Inevitably, the con- versation turns to how they charge for their services. "Billing clients by the hour is the default setting that most law- yers use," says Jordan Furlong, principal of Edge International. e traditional ap- proach, which leaves the total billed at the end of the day up in the air, doesn't always work so well for clients. ey're demanding alternatives of lawyers in all areas of law and all sizes of practices. Equipped with more knowledge, a choice of lawyers, and a gradual loosening of the rules regulat- ing the profession but with less money to spend, clients are oen getting what they're demanding. And with post-recession pressures amid ongoing reports of reduced revenues for law firms, lawyers are finding a need to respond. e problem is that many es- tablished lawyers are rarely sure about what the costs of a file are going to be because they can't predict many of the variables involved. As a result, they need a strategy to carefully execute the transition into a different pricing system. Lawyers who move away from billing by the hour to an alternative way of pricing their services are adopting a whole other approach, says Furlong. "It's absolutely critical to have a very clear retainer letter" as part of the relationship with the cli- ent, says Furlong. It should set out the terms, the underlying factors, and the boundaries and possibilities that could include some sort of allowance in the event something radical or un- predictable happens. e process begins by laying out the all of the costs and goals in a retainer or engagement let- ter. e client needs to be part of preparing it right from the start. e idea is to focus on what the lawyer intends to accomplish for the client beyond the value of the time spent on the file. And that includes the billing pro- cess, whether it's through bill- able hours or a blend of hourly rates, a flat fee, a percentage, an outcome-based charge, retainers or other approaches. But the lawyer also needs to have information going into the conversation. What's the going rate for this type of work? What does it take to do the work? What are the firm's costs and overhead? Matching that information to the client's needs will allow the lawyer to develop a clear picture of the resources required to do the work requested and thereby determine the costs involved. at's something a sole practitio- ner may know instantly but may elude someone at a larger firm. To predict the costs, the lawyer needs to know both the firm's high and low margins. If they agree to a fixed-fee term, the arrangement could include some flexible elements and even a cap on the fee. A cap, considered risky, would have to include some strict parameters. Another billing option is to determine a success fee or a risk and reward arrangement based on the lawyer meeting key per- formance indicators. e ar- rangement needs to strike a bal- ance between what's reasonable for the client and still profitable for the lawyer. "You're really limited only by your imagination" on how a law- yer pursues remuneration, says Furlong. e goal, simply, is to achieve a pricing arrangement that's reasonable for the client and profitable for the lawyer. e billable hour will likely always have a role. It could just play a reduced one that applies in very specific situations or as a starting point accompanied by other methods. For Jeremy Richler, it forms the basis for what he charges. He sees a demand for the unbun- dling approach. For instance, a client may need help preparing a small claims file but wants to represent himself in court. So together, they plan an approach and determine the fee. "A good retainer stipulates what you're doing," says Richler, who has been practising on his own for two years. "So you might base it on your hourly rate. We're moving to fixed pricing because it seems fairer to clients. Clients want a deliverable." at approach, he adds, is more predictable and more transparent for a client who wants to know the bottom line before the work begins. Smaller firms and sole prac- titioners may well have moved to fixed fees sooner than law- yers practising at larger firms because they're closer to their clients, says Mitch Kowalski, a lawyer and author of Avoiding Extinction: Reimagining Legal Services for the 21st Century. "I think it's more common in a smaller firm or solo practice because the market is driving you," he says. "If you're working on residential real estate, you're working on a fixed-fee basis . . . . You have no option. e sole practitioners are being forced by the market." LT Welcome to Carswell Legal Solutions formerly Cyberbahn™ and Marque d'or™ New name. New website. Cyberbahn™ and Marque d'or™ are now Carswell Legal Solutions As Cyberbahn™ and Marque d'or™, we established individual reputations as the leading providers of corporate and litigation support services. Now, as Carswell Legal Solutions, we offer a one-stop source of comprehensive corporate and litigation support services across Canada. Our name has changed, but we still offer the same superior service you've come to expect. Experience our new website • Redesigned for faster, easier navigation • Enhanced login access for easier product sign-on • New powerful search capabilities • Expanded menu options, including new quick links section • Seamless linking of global websites and social media channels • Convenient access to our complete range of Canada-wide products and services Visit us at www.carswelllegalsolutions.com or call 1-800-267-0183 In Quebec 1-800-668-0668 W 'If you're working on residential real estate, you're working on a fixed-fee basis,' says Mitch Kowalski. Photo: Robin Kuniski

• Cover