Boies and Panel Agree Firms Should Take the Plunge Into Value Billing
Posted Feb 11, 2011 6:16 PM CDT
By James Podgers
Corrected: When the subject of value billing comes up among lawyers, David Boies says he is reminded of the little boy standing at the edge of a swimming pool telling everyone he’s going to jump in.
“He keeps saying, ‘I’m going to do it, I’m going to do it,’ ” and it’s the same thing with law firms vowing to take the plunge into value billing, Boies said. “Eventually they will, but it takes some buildup. There’s a big gap between saying you want to do something and actually doing it.”
But Boies and other panelists who spoke at a presidential showcase program today during the ABA Midyear Meeting in Atlanta said all that talk signifies that law firms are edging toward greater acceptance of value billing—essentially, just about any billing arrangement with clients that is not based on hourly fees.
Some statistics on law firm billing methods support that contention. Recent surveys indicate that revenue from nonhourly fees at large law firms is slowly edging up, but still is under 20 percent of total revenue, said program moderator Tea Hoffmann, chief business development officer at Baker, Donelson, Bearman, Caldwell & Berkowitz in Nashville, Tenn. At the same time, she noted, most firms still don’t begin to adopt value billing until clients ask them to do so.
“Although there is a lot of talk about value billing and alternative fee arrangements,” said Boies, who is chairman of Boies, Schiller & Flexner out the firm’s Armonk, N.Y., office, “most work for large firms is still billed on an hourly basis.” Boies said his firm, which has long been committed to finding alternatives to hourly billing, only last year received most of its fees—a little more than 55 percent—from nonhourly billings.
But Boies and other speakers at the program sponsored by the Tort Trial and Insurance Practice Section said there are many good reasons for firms to move toward value billing.
The concept, Hoffmann said, is really not that new. She noted that the ABA outlined potential benefits to alternative billing back in 1989, when it issued a report titled Beyond the Billable Hour. More recently, the Association of Corporate Counsel challenged law firms in 2008 to adopt value billing. The recession has added impetus to the value billing movement.
For corporate clients, value billing can be a make-or-break factor in deciding which firms they will hire. “This is the one area where you can really differentiate your firm with a Pfizer, a Wal-Mart or a DuPont,” said Thomas L. Sager, senior vice-president and general counsel at DuPont’s headquarters in Wilmington, Del. Sager and other corporate representatives on the panel also said collaboration with firms on billing arrangements can be crucial to building ongoing work relationships.
Value billing “is a better model,” Boies summed up. “It’s a better model for the outside law firm, and it’s a better model for the client.”
Last updated Feb. 15 to correctly identify Thomas Sager as senior vice-president and general counsel.