Legal fees: what is the right level of charge?

expensiveAccording to some who would consult for professional services firms, at least a third of your clients should be complaining about the fees they are asked to pay; if this isn’t happening, you aren’t charging enough. Statements of this kind capture one’s attention, which is what the financial services salesman wants to do. But is there any substance in the argument? Should one be striving to achieve what might be called an equilibrium of dissatisfaction among one’s clients?

In IP Draughts’ view, remarks of this kind should be treated with extreme caution. People don’t always complain; they just don’t instruct you on the next matter. If the fees are known to be high, you may not get instructed in the first place. Complaining mid-transaction or mid-litigation may be thought unwise, if it results in a loss of care and attention from the service provider, or necessitates a change of pilot, mid-stream. Many complaints about legal fees are not about the rates per se, which are usually known in advance, but about over-egged time recording by associates and trainees, which the responsible partner has been too busy, careless or venial to correct. If the issue gets as far as a formal complaint, the relationship may be in severe jeopardy.

Over the years, IP Draughts has advised clients many times on other lawyers’ fees. Sometimes, a quiet word in the ear of the senior lawyer concerned is enough to address the issue. Sometimes, a better process is needed for discussing bills in advance of their being submitted. Sometimes, discretion is the better part of valour. Many years ago, a well-known City law firm advised one of IP Draughts’ clients, a publicly listed biotech company, on a major research collaboration agreement. IP Draughts was asked to assist the CEO with his review of the fees that the firm charged.

can't affordThe first point to note was that fees were rounded up or down to the nearest £2,500. At the time, most of IP Draughts’ invoices were for less than this amount, so a rounding of this magnitude would have resulted in either a free or very expensive service, depending on which way the rounding went!

Secondly, the partner had spent nearly a week drafting the agreement, which seemed ludicrous, both in terms of the time spent and the fact that a senior partner had done the drafting at very expensive rates.

Thirdly, an associate in the firm’s competition department had recorded 8 hours to review the agreement from a competition standpoint. This was a breathtaking amount of time for something that should have taken an experienced competition lawyer (or at least one who knew about IP) no more than a couple of hours.

IP Draughts advised the client to focus on the main drafting time and partner rates, and not to waste powder on the competition law charge. And to consider using a less expensive firm next time. Subsequently, the company appointed a mid-tier London firm to be their corporate lawyers. The previous firm had been a self-indulgent luxury.

For some major public companies, perhaps they need, or think they need, to use a major City firm for large transactions. And perhaps in that situation they are more inclined to complain about fees than switch firms. So, maybe the consultant’s claim, that at least a third clients should complain, works in that situation. IP Draughts recalls a major company CEO commenting publicly some years ago about the fees charged by Slaughter and May. They provide a very good service and charge fully for that level of service, was his diplomatic way of putting it.

cheapIP Draughts looks at the subject rather differently. He prefers to get, and does get, comments from clients that his firm provides a very good service and very good value for money. That doesn’t mean we’re cheap! Marketing experts say one should never claim to be cheap, as the word has the wrong associations. By comparison with High Street firms, we are expensive. Reassuringly expensive, perhaps. By comparison with large IP and commercial firms in London, perhaps we are cheap good value. You decide.

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