It doesn’t matter if law firms make more under an AFA, so long as your costs are controlled

One reason Rich Baer, the outspoken general counsel of Qwest Communications, disparages alternative fee arrangements (AFA’s) is that law firms might make more money than if they bill hourly. He discusses this point in Corp. Counsel, Dec. 2010 at 68, but I think Baer conflates two ideas. Law firm profits are not the same as law department costs.

It is quite plausible that a law department could pay a law firm less for the same quality and quantity of legal services under an AFA while the law firm at the same time increases its profits. The law firm’s revenue may decline, though that is not a given if its scope of work increases, but with improvements encouraged by the AFA the firm can add just as much to partners’ profit.