A strong case can be made that law firms, when pitching new business or discussing fee structures with their existing clients, should integrate a discussion of the availability of litigation finance as part of menu of alternative fee arrangements that the firm can offer. Doing so will demonstrate that the firm is a thought leader offering a complete arsenal of alternative fee tools and that the firm is actively anticipating the client’s needs and concerns.
There is little dispute that the competition among law firms to acquire and retain clients is high. With the clients’ increasing sensitivity to the arbitrary nature of the billable hour, clients are demanding more creative fee arrangements that align the interests of the lawyer and the client. As a result, law firms can no longer rely upon loyalty to control the legal spend of existing clients and upon reputation and competence to attract new clients. While the subject matter expertise and chemistry with the legal team are important considerations, cost and fee structure are also at or near the top of the clients’ check list.
For law firms the traditional responses to clients’ requests for alternative fee arrangements include discounted hourly rates, blended rates and fixed fees. Firms that have embraced alternative fee arrangements are often perceived as more proactive and sensitive to the clients’ requirements. Those firms typically have developed robust budgeting and case management systems. Clients welcome the transparency and predictability offered by these tools. The firms that affirmatively embrace these initiatives are most likely to impress the clients with a sense that they understand the clients’ needs and share their desire to manage the costs of litigation efficiently.
In many cases, however, the clients’ needs and objectives go beyond the transparency and predictability that these traditional alternative fee approaches have offered. The needs of clients that are highly motivated to preserve cash and avoid incurring extraordinary expenses are not serviced by the increased predictability. Similarly, clients are often reluctant to embark on even meritorious litigation because of the inherent risk that something may go wrong. These clients would ordinarily be drawn to a full contingent fee arrangement where the lawyers must carefully assess the risks and rewards of the litigation and bear the risk of loss. However, many firms are not capable of offering contingency funding often for financial or cultural reasons.
Litigation finance is the solution for those law firms and their prospective clients. The law firm that gets out in front of this issue and introduces the client to the availability and utility of litigation finance products is most likely to land or retain the client. Using litigation finance, the cost sensitive client will be able to retain the law firm based upon its competence and chemistry while the risk averse client is also getting the benefit of an objective third-party opinion of the merits of the case from the litigation funder before initiating litigation.
The resulting alignment of interests and expectations will go a long way toward establishing a bond between the law firm and the client as well as with their litigation funding partner.