FMC Technologies General Counsel Jeffrey Carr speaks about alternative fee arrangements at InsideCounsel's SuperConference. Photo by Chris Lake
Alternative fee arrangements (AFAs) with outside counsel are just good business practice, panelists at InsideCounsel's SuperConference said Tuesday.
For Jeffrey Carr, general counsel of FMC Technologies, who pioneered what he calls value-based fees, it's a matter of doing his job.
"In our company, FMC Technologies, it is really simple," he said. "One million dollars saved in legal fees is a half cent per share in earnings per share (EPS), and that's how the company is valued. The higher the EPS, the higher the stock price. If I am not doing everything I can to save money on legal costs, I've breached my duty to the shareholders."
In Carr's view, it's all about results. "GCs should be looking for results. If you pay by the hour, you are paying for hours, not results," he said.
Patrick Lamb, founding member of the Valorem Law Group, said a common misperception standing in the way of AFAs is that "it matters how long it takes to do something. ... At the end of the day, it is about results. When we get a good result, we should be rewarded for it."
Carr contends that even small legal departments can implement AFAs and that virtually all legal work can be billed on an alternative fee basis.
Mary Clark, deputy general counsel of LexisNexis, agreed. "I've never seen any matter that can't be done on alternative fees," she said. She urged in-house counsel to implement AFAs now, while law firms are looking for work and willing to consider alternative arrangements.
"Think about what is going to happen in two years when [the economy] is going gangbusters and law firms are raising rates," she said. "Our [in-house] budgets probably won't go up that much. So what will happen if you don't have those conversations [with your law firms] now?"
Lamb agreed that it is currently a buyer's market. But, he said, "if you let your law firms charge ever-increasing rates, they will charge ever-increasing rates. You have to create an incentive for them to lower prices."