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Practical Responses to Client Demands for a Fee Cut
In a previous article in November 2009, we discussed some key questions about law firm billing: What is a reasonable fee? Can an hourly rate be justified, and who determines its value? Does a fee reflect cost of operation, and how can a lawyer demonstrate that fact? These are all important issues, but they presuppose a reasonable and unemotional discussion about fees. The recession, however, has created an unreasonable problem: A law firm's largest client suddenly demands a 10% rate cut. Without it, the client will stop sending new work to the law firm.
Firms respond in different ways to this dilemma. Some feel that there is no alternative but to agree because the recession has turned nearly all legal services into commodities. Others feel that the firm can push back by asserting the uniqueness of its practice and services, but this is a difficult point to prove ' most clients view all lawyers as equally qualified, and conversely (no matter what their own rhetoric) all lawyers can't be the best at their practices. Then there is the desperation strategy: Agree to the 10% rate cut, then pad the bill here and there to make up for it.
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