Law Times

PAGE 12 FOCUS November 29, 2010 • Law Times Fixed fees requiring firms to adapt Controlling costs key despite guaranteed income from clients BY DARYL-LYNN CARLSON For Law Times K eeping track of a law firm's financial vi- ability is often the re- sponsibility of the managing partner. But it can be a diffi- cult task to juggle along with a volume of legal work. As well, some lawyers say more clients, particularly for commercial work, are request- ing legal help for a fixed rate, which is sometimes also re- ferred to as block billing. James Morton, a former president of the Ontario Bar Association and head of the litigation group at Steinberg Morton Hope & Israel LLP in Toronto, says his firm is receiv- ing such requests. "More and more, we're seeing institutional clients, whether they're banks or finan- cial institutions or businesses, wanting to retain a law firm on a purely fixed rate," he says. The trend stems in part from the inspiration of many law firms in the United States. In fact, the fixed-fee approach for commercial clients is rela- tively recent in Ontario, Mor- ton notes. "It can be a good thing in a way as you have a fixed cash flow, which is always an issue for smaller firms," he says. But at the same time, firms that allow clients to retain them for fixed fees must also keep a close eye on their costs. "At my firm, one of the things we do is take a close look at non-essential costs," Morton says. Expenses such as continuing education can be very expensive, so lawyers at his firm don't attend programs that cost more than $1,000. As well, in order to keep a lid on costs, the firm doesn't spend money to advertise or promote itself. "As clients seek to pay in different ways, law- yers are going to have to be- come more vigilant in figuring out their costs," Morton says. For smaller firms, secur- dmitchell@structures.ca president ructured_LT_Sep13_10.indd 1 Henderson Structured Settlements: Your Partners in Service® 9/8/10 4:39:43 PM ing a commercial client that's willing to pay a fixed fee for legal services can be reassuring, which Morton says can ulti- mately make it easier for them to manage their overall bot- tom lines. "There's also a sense that if you have a fixed income stream that you can control your costs because you know what's coming in so you can control what's going out." A fixed-fee arrangement with a commercial client could be worth millions of dollars over one year, he points out. Yet the firm must also en- sure it reduces its expenses and unnecessary costs in order to maintain its profitability. "Watching the firm's costs is something that requires very close attention," Morton says. "You have to be very careful No Cost /Obligation Services www.henderson.ca | 1.800.263.8537 your client very well because they call you on matters they might not otherwise call you on, so the value-added aspect of a fixed-fee rate is very ad- vantageous." King notes that in the event that a client contacts her with a question requiring another lawyer at the firm to get involved, there's no ad- ditional charge for the added input. As well, the firm is frugal in its expenses. "We then try to pass the cost savings on to our clients, and as a service industry, I Firms accepting fixed fees must be vig- ilant about costs, says James Morton. and watch every expense." Jacqueline King is a partner in the litigation department at Shibley Righton LLP in Toron- to, which also accepts fixed fees from clients. The firm touts its lower fees on its web site in the context of providing big firm legal services for matters of all levels of complexity but with a personal touch and at reason- able rates. King says the option is a tre- mendous advantage for gener- ating commercial clients. Most importantly, Shibley Righton has many repeat and long-term clients as a result of the firm's fixed fees. "Lawyers used to get to know their clients and their business and not charge for that, but some are so busy now that they don't," says King. "But when you pro- vide a fixed fee, you get to know believe lawyers forget that we're in this for the client," King says. One of the key expenses the firm has reduced is its volumes of paper for mo- tions. "Gone are the days where you need to file a 60- page motion. You can do it in four," King says, noting that doing so cuts the time lawyers spend on a matter. In fact, King believes lawyers' fees in general have risen to dis- proportionate amounts over the past decade or so and that, as a result, many smaller businesses won't retain a law firm unless they have a pressing legal mat- ter. "I think that it's very im- portant to be able to make legal services more affordable for a range of clients," she says. Smaller firms in particular can win many clients by reduc- ing their costs and adapting to the fixed-rate approach. Ultimately, King says Ontario firms that do reduce their costs for business clients will prosper, while those that don't go that route may not even survive. LT Proud Sponsor of ntitled-11 1 9/21/10 2:45:22 PM Untitled-2 1 www.lawtimesnews.com 10/8/10 9:59:52 AM

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• Relentless Change
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• Focus On Business of Law