Can Big Law Buck the Billable Hour Through Contingency Fees?
Large clients often use their leverage to push for discounted fees on billable hours when working with Big Law. Defense litigators have consequently suffered reduced profit margins. It is no surprise, then, that the largest multinationals have been exploring alternative fee arrangements for years. Still, most remain heavily reliant on billable hours.
In what may signal a shift in Big Law, last week the biggest revenue-generator of all, Kirkland & Ellis, indicated they think contingency fee work is worth investing in as a potential lucrative alternative source of revenue.
In a July 10 press release, Kirkland announced the formation of a trial group focused on plaintiff-side litigation. According to Reed Oslan, a litigation partner at Kirkland, the firm is seeking to grow its special fee arrangement program. As part of this, the firm wants to increase its plaintiff-side litigation tenfold.
According to competing firms and some former Kirkland associates quoted in a law.com article, questions remain on whether this is a fundamental shift in philosophy at Kirkland, which has historically won some big settlements for plaintiffs involving complex torts. Kirkland may be seeking to get its name out for potential plaintiff-side work for cases that it would have accepted in the past, making the press release as much a marketing strategy as anything else. How significant a departure this is in practice remains to be seen.
A Focus on Alternative Fee Arrangements
Kirkland is by no means the only one in Big Law attempting to rely less on the billable hour. Baker McKenzie recently promoted David Cambria, hired to improve the firm’s alternative legal services offerings, to chief services officer. The move to project work and automated e-discovery services is one path to additional revenue. Kirkland’s push to take on more contingency fee cases reflects another. It appears many firms are looking to diversify revenue sources in this new age of pressure to reduce or cap billable hours.
A seismic shift toward plaintiff-side litigation does not come easy, however. In addition to potential conflicts, there has traditionally been a reluctance for Big Law firms to invest their own capital too heavily in litigation. For now, it is worth monitoring whether Kirkland and other firms in Big Law will continue to push for contingency fee work and alternative fee arrangements as additional sources of revenue.