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The New Normal

Pay Outside Lawyers Now, Or Pay Later by the Hour? Later Will Cost You

Posted Feb 10, 2011 3:36 PM CDT
By Patrick J. Lamb

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Patrick Lamb

My partner, Nicole Auerbach, and our client, Karen Klein, the general counsel of Kayak.com, have been blogging for the Association of Corporate Counsel on issues of value from the perspectives of outside and inside counsel. In her initial post, Karen spoke about her hesitancy in utilizing nonhourly fee arrangements because of the upfront investment of time in the matter at hand. I recently heard this described as trying to service your car engine while driving 80 mph down the road. This hesitancy is understandable and common, but if time is viewed as an investment, it is based on default judgment rather and an appropriate investment analysis.

On an hourly rate matter, you take the complaint and send it to chosen counsel and tell them to defend you. It is a small investment of time at the outset of the matter. It’s easy. And it reminds me of that old commercial, with the guy saying “pay me now, or pay me later.” The later is always much more expensive. In many cases, the same results happen to in-house counsel.

There are now a plethora of studies that show that work that is picked up, put down, picked up again and so on is incredibly inefficient, and much more time in the aggregate is spent on the project that if a block of time was invested to address the project. These findings are perfectly consistent with the “pay me now or pay more later” commercials, and with the way most people lead their everyday lives. We take our car in for service and regular oil changes. We do this so the engine doesn’t seize and require a more expensive repair, taking more time, at some later date. We take time to organize our day, sometimes the night before. Busy families plan out a weekly menu. We spend time analyzing a potential investment before making it. In all these instances, the time invested at the front end pays dividends at the back end.

Why wouldn’t the same “investment” analysis apply to retaining lawyers to handle a dispute? People who have made the leap and overcome the time barrier that stalled Karen Klein’s conversion have learned the profound value (and net time savings) that result from the investment of a modest bit of time at the front end of the case. Weak cases are identified and disposed of more quickly. Business leadership buys into a course of conduct, eliminating or at least reducing second-guessing. The principals help the lawyers accelerate through the learning curve, focusing on the wheat while ignoring the chaff. All to the good.

Having said all this, when your day is filled with countless appointments and unscheduled phone calls, it is tempting to “just get this off [your] desk.” Discipline is never easy. If it was, none of us would ever need to diet or have to drag ourselves to the gym. We would want to work out, and we would naturally eat healthy foods in just the right amounts. These things are battles, but they are important ones worth fighting. The proper time investment in cases likewise is one of those important battles worth fighting.

Patrick Lamb is a founding member of Valorem Law Group, a litigation firm representing business interests. Valorem helps clients solve their business disputes and coping with pressures to reduce legal spend using nontraditional approaches, including use of nonhourly fee structures, coordination with LPOs or contract lawyers, joint-venturing with other firms and implementation of project management tools to handle lawsuits or portfolios of litigation.

Pat is the author of the the recently published book Alternative Fee Arrangements: Value Fees and the Changing Legal Market. He also blogs at In Search Of Perfect Client Service.

Editor's note: The New Normal is an ongoing discussion between Paul Lippe, the CEO of Legal OnRamp, and Patrick Lamb, founding member of Valorem Law Group. Paul and Pat spend a lot of time thinking, writing and speaking about the changes occurring in the delivery of legal services. We hope you will join their discussions.

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