Alternative Fee Structures – It Can Work
By: Abbey L. Kaplan
There has been a lot of talk recently in the legal profession about alternative fee structures and how law firms have been slow to shift away from the billable hour. For more than 20 years, the principals of Kluger Kaplan have created alternative fee structures that enable our business litigation clients to manage their legal expenses while the firm shares in the risk of litigation and is rewarded only if it succeeds.
Kluger Kaplan is involved in many highly complex business disputes where the client seeks to recover a substantial economic value (be it cash, property or ownership rights such as stock) but also needs to manage the cost of the litigation. We work closely with our clients to develop a confidential fee structure that works within their budgets and capabilities.
For example, clients may seek a cap on the monthly fees or only pay for a percentage of the billed hours. If we are successful in obtaining an economic benefit for the client, the firm receives the amount of the “hold-back” – the portion of the fees that were worked but not billed – plus a multiplier. This way, Kluger Kaplan shares in the risk with the client. Of course if Kluger Kaplan isn’t successful the client’s fees are minimized and the firm forgoes the payment of the “holdback” and also gets no success fee.
There are three factors that must be present to consider this type of structure
1) The client must be seeking cash, property, stock or something else that will create an financial benefit (as opposed to injunctive relief, declaratory relief, etc.);
2) The estimated economic value of the reward must be at least two to three times the amount of the total fees that could be incurred; and
3) We and the client must evaluate the case and come to a conclusion that the fees will not be exorbitant in proportion to the potential reward.
This system makes Kluger Kaplan a strategic partner when our clients are facing high-risk, “bet the company” legal disputes.