Pat Lamb, in his very good book on value pricing Alternative Fee Arrangements: Value Fees and the Changing Legal Market, says that the fees and costs of a trial should never be built into the fixed fee proposed to a client. "Never"? Really?
Really, says Pat. Paraphrasing what he says in his book, virtually all cases settle, so including the cost of trial in the fixed fee is perceived by the client as overpayment, or could dissuade a client from accepting a settlement because they believe they have "already paid" for the trial. Plus including expensive trial costs and fees might create sticker shock that scares away the client. Pat also makes the compelling point that it is not until you are close to trial that lawyer and client appreciate the real costs and risks of trial, such that the determination of the price for taking the case to trial is best left until then. In other words, carve out trial from the price for your legal services, thereby allowing you to give the client a much lower price than you could if trial was included, and proceed under a fee structure that incents early settlement/resolution of the litigation (the earlier the resolution, the greater the profit made by the lawyer).
I’ve migrated from a first impression rejection of Pat’s recommendation to grudging acceptance of his logic. Check out my thinking process after the jump.