Ohio Law Firm Switches to Success-Fee Billing
Updated: The ABA Journal recently called the billable hour “the dandelion of law practice: pervasive and not so popular.”
The billable hour billing system has been criticized for fostering inefficiency and putting the interests of lawyers and clients in conflict.
Now an Ohio firm is joining a few law firms that are changing the way they bill clients. Waite, Schneider, Bayless & Chesley recently adopted a success-fee billing method for its corporate clients.
Name partner Stanley Chesley, who made a name for himself as a plaintiffs lawyer, told ABAJournal.com he has learned over the years that corporations want to resolve lawsuits expeditiously, economically and efficiently. Now he is putting that knowledge to use representing corporate defendants in securities litigation and antitrust cases.
Chesley told ABAJournal.com that the success fee may be based on several factors. They include whether a corporation is able to get the case dismissed or to settle the case within a defined time period, whether the payout is less than a set amount, and whether the corporation’s insurance carrier covers the payout.
Insurance policies that cover directors and officers liability typically pay attorney fees and settlements out of the same pot, so corporations have an incentive to settle before legal fees eat up the money, Chesley says.
He explains the kind of contract he might negotiate with a corporate defendant this way: “If I can get it settled within your policy limits, and there’s no money coming out of the corporation, then we put together a compensation package based upon how much I save” the company.
Besides the success fee, the corporation will typically be asked to pay reasonable expenses to cover such costs as expert witnesses and travel.
“My primary goal is to do the negotiation and settle the case,” says Chesley. “Very few cases are going to trial. Corporations are spending millions of dollars in defense costs, and they’re huge budget issues. And at the end of the day, the cases are settled.”
“I think many cases should be settled before summary judgment because the cost of discovery is not only the lawyer fees, it’s also the corporate executives and all the department heads” who have to spend valuable time giving depositions and assisting in discovery, he says. The days of settling on the courthouse steps are over, he says. “All I’ve done is seize the moment.”
One of the first companies that discussed a success fee with Chesley in a corporate defense case was Procter & Gamble. The company had hired Chesley to help represent it as a defendant in a securities case after Chesley helped it sue over false Satanism rumors.
He says success-fee billing is also more economical for his law firm, which has only about two dozen lawyers. Their time would be better spent pursuing new cases rather than doing the drudge work of evaluating discovery evidence, he says.
Waite Schneider partner D. Michael Grodhaus agrees that corporations like alternative billing approaches. He told the Columbus Dispatch that clients dislike the unpredictability of billable-hour billing. “The billable hour is just a terrible way for attorneys to bill their client,” Grodhaus said. “It doesn’t give the client any certainty, and it doesn’t give the attorney any incentive to expedite the process.”
But some clients are reluctant to change their billing method, says Russ Gertmenian, the presiding partner at another Columbus firm, Vorys, Sater, Seymour and Pease. The law firm uses several different billing methods. “Most of the clients that request for alternative billing options are still opting for the hourly rate,” Gertmenian told the newspaper.
Updated at 11:45 a.m. to include comments from Stanley Chesley.
