A fixed-fee arrangement, for environmental litigation, and some of advantages and worries

In 2004, after eight rounds of a competitive bid run by eLawForum, Unocal chose Howrey to handle its entire environmental caseload through 2009 on a fixed fee. Litigation 2005 spells out the details of this arrangement. At the time, the average case took three year to resolve, cost $500,000 in legal fees, and resulted in resolution costs in the single digit millions of dollars. The General Counsel of Unocal at the time, Samuel Gillespie, estimated that “Unocal will save $160 million in legal fees and resolution costs for the 200 matters predicted to arise under the five-year contract.” Howrey and Unocal would split any savings if Howrey managed to bring in matters under the company’s cost target.

The article surveys the pros and cons of fixed fee arrangements. “General counsel worry that they’ll commit to paying a fixed fee for cases that might settle immediately or potential litigation that never materializes.” They fret that fixed fees might reduce the incentive for outside counsel to litigate vigorously. Law firms worried that clients might take advantage of their fixed fee and treat it as an “all-you-can-eat buffet.”

Advantages, however, do accrue to fixed fee arrangements. In-house lawyers can bring in outside counsel more often and earlier, which increases the chances for a quicker and cheaper resolution. Also, fixed fees “free outside lawyers from the need to press clients with their thoroughness.” Results count, not a willingness to invest late nights and weekends. Additionally, “Fixed fees eliminate the nagging suspicions that firms secretly relish their clients bad fortune.” The deals also provide a negotiating edge in settlements, because plaintiffs counsel knows legal costs are no longer a factor for the defendant. Finally, partners can staff matters as they see fit, including letting associates cut their teeth on real cases.