E-Billing Software Aids in Constructing an Effective AFA

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For matters that generate high costs, Weber recommends segmentation by the stages of litigation that most drive cost, such as pleading, document review and filing preparation. Then certain types of alternative fee structures can be assigned to each specific category.

E-billing systems also can drill into a law firm-by-law firm analysis, determining billing rates by level of lawyer, the effective hourly rate for the firm as a whole and the ratio of professional fees to out-of-pocket expenses.

AFAs can also be constructed to change during the course of the agreement. Morrison likes the fixed-fee approach because it promotes law firm efficiency but suggests including "collars" above and below the fixed-fee amount. "If the firm's total cost is more than 20 percent above the fixed fee, half of that the firm eats. That's the penalty," he says. "Maybe the company pays the other half because something big happened. Likewise, if they come in 10 percent below their standard billing rates, the firm gets to keep this as a premium for being efficient."

Morrison says that a billing agreement can also contain protective carve-outs.

Michael Kozubek

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