A safety valve in a flat fee litigation agreement that puts off for a later date the negotiation of fees for late phase activities such as trial should probably include at least a default hourly fee pending the re-bargaining of a new flat rate.  (Yes, notwithstanding my strong bias in favor of flat fee pricing, I’m suggesting a possible, limited application of an hourly-based fee.)

My flat fee engagements for litigation services tend not to cover trial or the 60-90 day run-up to trial but instead propose to negotiate a mutually acceptable terms if and when the matter reaches this stage.  This "safety valve" protects against a situation where the time required to provide effective representation increases dramatically due to circumstances not reasonably foreseeable at the outset of the engagement.

There are very good reasons for  building in such a safety valve.  The legal services provided in connection with trying a case are shaped by a myriad of strategic decisions that are made by client relatively close in time to the commencement of trial and these decisions in turn are heavily influenced by case developments occurring over many months if not years.  It often is too difficult at the outset of the engagement to gauge pricing for trial with any precision.

While the presumption is that budgets and workplans should be “sticky,” no client wants an honest firm working at such a deficit such that the lawyers involved are incented to look at how they can cut corners or complete the matter more quickly than advisable. Thus, it is necessary for value-based fee arrangements to consider what kinds of “safety valves” can be triggered in the event the time required for effective representation increases dramatically due to unforeseen circumstances.

“Navigating Professional Ethics Issues in the Changing Legal Service Paradigm,”  discussion draft from Susan Hackett at the Association for Corporate Counsel (available to Legal OnRamp Members here.)

Inserting the safety valve is rarely a deal killer in eyes of the client, who, at the outset of a matter, are focused on reducing the cycle to resolution or achieving a favorable outcome in the near term – trial, in their minds, is far off in the future and easily left for another day.  And why should trial counsel seek to disabuse them of this attitude where the great, great majority of litigations are resolved prior to trial?

However, leaving the re-bargaining of trial services for another day has it’s own issues, as explained (and solved) after the jump.Continue Reading Hourly “Safety Valves” for Flat Fee Litigation