56 LEXPERT MAGAZINE
|
MAY 2018
IN-HOUSE ADVISOR
IT TURNS OUT
THAT HOURLY RATES
AND ALTERNATIVE
FEE ARRANGEMENTS
ARE NOT MUTUALLY
EXCLUSIVE.
BY JULIUS MELNITZER
Alternative…Billable Hours
WHEN IT COMES TO ALTERNATIVE FEE arrangements (AFA) and
legal project management (LPM) in Canada's legal market, it's hard to rationalize
the buzz with the numbers.
e buzz is that AFAs and LPM are all the rage, a response to clients' insistence
on having more say in how their lawyers arrive at the fees that they charge and how
much that fee will be. Common thinking has it that hourly rates are going the way
of the dodo.
e numbers, however, are a mite confusing. Indeed, a close look at recent statis-
tics suggests that billable hours aren't going away anytime soon: they may even be
making a comeback.
In 2015, Canadian Lawyer's Corporate Counsel Survey found that 12.7 per cent
of respondents used AFAs with their primary law firms; in 2016, the number had
dropped by over 60 per cent, to 4.9 per cent. And 2017 saw another reduction in
the use of AFAs, this time to 3.2 per cent. Meanwhile, resort to billable hours rose
slightly, from 46.8 per cent in 2015 to 50.2 per cent in 2016 and 50.5 per cent in
2017. But combinations of billable hours and AFAs also rose, from 42.9 per cent to
44.7 per cent.
Perhaps most tellingly, only 6.3 per cent of respondents used AFAs for more
than 75 of the legal work they sent to external firms, effectively unchanged from
the 5.9 per cent who did so in 2016. For their part, flat fees remained by far the most
unpopular means of billing, representing only 1.6 per cent of arrangements, down
from 2.0 per cent in 2016.
Still, it's not as if the future doesn't continue to hold promise for AFAs: some
78.8 per cent of respondents to the 2016 survey said they were interested in engag-
ing with their law firms about AFAs. And almost one-quarter of the 21.2 per cent
who weren't interested said they didn't fully understand AFAs. Otherwise, Chica-
go-based Patrick Johansen, formerly global director of client value at Reed Smith
