The Great Recession forced everyone to rethink how things get done. For law firms, the elimination of hourly billing could be the new name of the game. Flat fees offer firms an opportunity to attract and retain clients by reducing their anxiety about cost while forcing the law firm to be more efficient about the services it provides.
“This strategy reduces overhead costs and increases scheduling flexibility for the staff,” says Carol Bailey of the recently formed Seattle-based Main Street Law Group. Main Street woos clients by charging flat fees for all of its services, including family law, elder law, business and corporate law, and will and estate planning.
The concept is not entirely new to the legal field—services such as estate planning, which have predictable workloads and outcomes, are widely offered at guaranteed rates—but Bailey notes few firms offer flat rates on the scale that her firm does.
“People complain [about law firms] and it’s generally about fees,” says Bailey. “It’s unpredictable. They don’t know if it’ll cost $5,000 or $25,000.”
But how can law firms negotiate guaranteed rates for notoriously unpredictable legal cases such as child custody disputes?
To determine an estimate for any legal service, Bailey says Main Street conducts an initial assessment meeting with potential clients to arrive at a guaranteed fee unique to that case. For straightforward cases, an advertised rate is already in place.
“Variations mean you can’t predict the workload, so you must have parameters,” explains Baliey. “We gauge on the complexity of the case and who the players are. We can tell if it’ll take a lot of time.”
Kellye Testy, dean of the University of Washington School of Law, is intrigued by the idea but not convinced of its universality. She fears the guaranteed fee could push a lawyer to take shortcuts or charge a large flat rate.
“I’m hopeful lawyers and clients can find a middle ground that makes sense,” Testy says.
Bailey remains resolute. “We’re assuming that the unpredictable will happen, but we’re trying to change how we think and get away from monetizing hours,” she notes. “… We want to build trust by pulling the billable hour out of the equation. I think it’s an outdated way to do business.”
Bailey also thinks flat rates will make lawyers feel better about their profession. “Most people I know who get out of law school get into the system where there are required billable hours and they lose their purpose. They ask, ‘How am I making a difference?’ I think that’s sad.”