Carve-outs have two different meanings in fixed fee agreements

I have used the term in my consulting projects for those matters that will NOT be included in the bundle of matters a firm agrees to handle on a fixed fee. So, for instance, class action lawsuits are carved out of the portfolios of litigation, or matters that involve Canadian law are carved out, or cases that go to trial (See my post of Sept. 10, 2005: exclude trials in fixed fee.)

A second use of the term came to my attention in Lit. Mgt. Mag., fall 2011 at 51. This new publication from the Council on Litigation Management described an alternative fee arrangement where it was “understood that occasionally a case would change during the course of litigation requiring a transition from a fixed ‘phased’ litigation budget to straight time and expense billing. This ability to carve out specific cases was essential …” Here the carve out happens because a particular matter changes during the course of its prosecution to something not covered by the fixed fee. Instead of being carved out ahead of time, the passage of time unveils the carve-out.