The first two editions of my Legal Project Management Quick Reference Guide were purchased by firms with over 85,000 lawyers.  Today we are publishing the third edition, which adds over 100 pages of new tools and templates that law firms are using to increase client satisfaction, new business, and profitability.

Last February, I published Legal Project Management, Pricing, and Alternative Fee Arrangements to explain WHY firms are focusing on these new areas.  This 226-page Quick Reference Guide is a companion volume and is the only book that explains HOW to implement LPM.

A number of sections were written by 13 contributing authors, including lawyers that have been leading the LPM movement at such firms as Squire Sanders, Morgan Lewis, McDermott Will & Emery, and Valorem. The book also includes a complete list of the readings and assignments from our Certified Legal Project Manager® program.  Readers of this third edition can now complete much of this program on their own, without signing up for certification.

See the book’s description on our web page for reviews by noted experts a description of what’s new in the third edition, and a downloadable free excerpt.

This post was adapted from the new Third Edition of the Legal Project Management Quick Reference Guide. It was written by Steve Barrett, Mike Egnatchik, and Jim Hassett.

 

Scope assumptions

• Based on the attached breakdown of work, we will analyze the legal and factual issues presented by the complaint (including preliminary witness interviews), prepare a memorandum of law in support of a motion to dismiss, analyze ABC’s opposition brief, and prepare for and argue the motion for a budgeted cost not to exceed $XX in legal fees


• Alternate Dispute Resolution (ADR): If we determine to pursue ADR, the budget includes preparation and participation in mediation. The budgeted number assumes a one- to three-day mediation session, the negotiation of a settlement agreement, and limited discovery.


• Fact investigation and development: The budget includes preparing for a case management conference, making initial disclosures, propounding and responding to discovery requests, preparing documents for production and reviewing produced documents, negotiating a confidentiality agreement, and preparing for and attending fact depositions

Discovery budget assumptions

• To the extent mediation is unsuccessful, the case will move into the discovery phase. For budget planning purposes, we have further divided this phase into the following three parts: (i) pre-trial planning, (ii) offensive discovery, and (iii) defensive discovery. Our estimated cost for the entire discovery phase is $XX. 


• A breakdown of this estimate is set forth on the attached spreadsheet. There are several key assumptions in this cost estimate, including: (i) each side will depose no more than five witnesses; (ii) all discovery disputes (if any) will be resolved without court intervention; and (iii) we will not seek third party discovery. These assumptions are reasonable in light of the circumstances of this case; however a change in circumstances may impact the estimated costs.


• Expert Discovery: The budget includes preparation of expert reports and rebuttal reports (we currently estimate a total of three reports to cover the issues of infringement, patent validity, and damages) and preparing for and attending expert depositions. This budget does not include any fees for experts.


• Document Review: All required documents are readily accessible and in a machine readable and searchable electronic format. If a significant fraction of the documents are available ONLY in hard copy format, client agrees to reimburse firm for converting the material into readable/searchable electronic form. If such conversion is not possible, or if documents are damaged beyond acceptable scanning standards, the firm and client will negotiate a formula for their manual review.


• Case preparation includes:
  •  Analysis of complaint and motion to dismiss
  
  
  • Factual investigation
  
  
  • Preparation of discovery requests and review of discovery responses by opponents
  
  
  • Motion to compel discovery (assumes one such motion)
  
  
  • Review of documents produced by the other side (assumes opponent’s production is XX pages)
  
  
  • Responding to opponent discovery requests
  
  
  • Review and production of our documents (assumes production is XX pages)
  
  
  • Responding to the opponent’s motion to compel (assumes one such motion)
  
  
  • Preparing our witnesses to be deposed (assumes XX witnesses)
  
  
  • Preparing for and taking opposition depositions (assumes XX depositions)
  
  

Transaction budget assumption

For purposes of the fee proposed, we have made the following assumptions:

• The target does not have any material or significant legal/regulatory issues that necessitate material or significant changes to the transaction structure or require extensive additional due diligence


• Opposing counsel is sophisticated and knowledgeable in these matters


• Negotiations will take place in [insert city]


• Transaction documents will be executed within XX weeks and the transaction will close within XX weeks from the time of engagement of our firm for the transaction


• Each transaction document will be “turned” in three passes or less


• Diligence documents will be provided electronically or delivered to our firm’s XX office 


• A tax diligence and opinion letter will be delivered by ___ or another leading accounting firm to be mutually agreed upon

This post was adapted from the new Third Edition of the Legal Project Management Quick Reference Guide. It was written by Steve Barrett, Mike Egnatchik, and Jim Hassett.

These posts provide sample wording for various assumptions and exclusions that may be used as a reference to define, qualify, or limit the scope of work in an engagement letter or to plan for any legal matter.

Law firms need to protect themselves by being careful about phrasing assumptions. But if the list of carve-outs gets too long or too specific, it can annoy the client and lead to lost business.

Unfortunately, there is no simple general way to create assumptions that balance client needs and firm needs. The details must be worked out case by case. This can be especially difficult in a highly competitive environment, if clients take advantage of the awkwardness of this negotiation to pressure firms to agree to budgets and fixed prices without adequate protections.

These samples may be especially appropriate when providing budget estimates to clients where key details are not known, such as:

• Number of deponents, expert witnesses, consultants, etc.
• Number of document turnarounds
• Volume of document production requests from investigative agencies
• Quantity and physical condition of discovery materials (electronic, hard-copy, or poorly preserved documents)

For these and similar situations, law firms should develop general standards for use of the sample wording. Firms must constantly balance the level of written detail needed for self-protection vs. the business demands of good client relations.

Lawyers sometimes tend to err on the side of including assumptions and exclusions that protect themselves too well, and could wind up losing the business as a consequence. Excessively protective language in a highly competitive marketplace might result in the client saying, “Never mind. I’ll hire a different lawyer.”

The samples below are designed to give you some ideas about how to word assumptions, exclusions, and carve-outs for your clients.

Catch-all statement for material changes

This statement of work, together with the assumptions and tasks provided, is the basis for our budget estimate.  If there are material changes, it may be necessary to negotiate appropriate budget adjustments.

General assumptions/carve-outs

• Matters not covered above in the “Activities” column of the attached spreadsheet are excluded from the budget 
• Reimbursed costs and expenses are excluded from the fixed fee
• Local and foreign counsel fees and expenses are excluded from the fixed fee
• Any material change to the transaction structure will be handled at the firm’s prevailing hourly rates
• If the closing date of the transaction occurs after [insert date], work conducted past that date will be handled at the firm’s prevailing hourly rates
• An electronic “deal room/litigation room” will be created for the use of all client personnel and relevant counsel and related entities, in which electronic datasets will house all documents produced, including segregation of privileged materials
• Documents sought for discovery and/or due diligence purposes will be readily available in electronic format
• All critical deal/litigation documents will be reviewed and revised in no more than three “turns” of drafts
• The agreed budget does not include risk factors such as extended negotiations on the bank commitment or requirements to increase the level of due diligence as a result of issues uncovered during the due diligence process
• The agreed budget does not include due diligence beyond one week, due diligence in specialized areas (such as employment, IP, IT, environmental, insurance, litigation, competition, real estate), a formal written due diligence memorandum or exceptions summary
• We anticipate that three experts will be needed for researching, vetting and selection, and deposition preparation and/or report analysis

Additional examples will appear next week in Part Two of this post.

There’s no way around it: business development takes time. To build new business, you must follow up, week after week, month after month, and year after year.  As Jeffrey Gitomer sums it up in The Sales Bible: “Most sales are made after the seventh no…It takes 5 to 10 exposures (follow-ups) to a prospect to make the first sale…[so] you’d better have what it takes to persevere through the follow-up process and not quit.”

The first Wednesday of every month is devoted to a very short and simple tip like this to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. This month’s tip was adapted from my book the Legal Business Development Quick Reference Guide.

Blended rates are 100% hourly arrangements, in which a single middle rate is charged for senior lawyers who normally charge more and junior lawyers who normally charge less. Whether the client or the firm benefits from this arrangement depends on the actual numbers in a particular situation.

For example, consider a case that is expected to require 100 hours of senior time at an average of $500 per hour ($50,000) and 100 hours of junior time at $300 per hour ($30,000), for a total of $80,000. A firm might offer a blended rate of $350 per hour, which reduces the predicted cost of the matter to $70,000 ($350 times 200 hours).

But now suppose that once the matter is underway, the firm discovers that almost all the work could actually be performed by more junior lawyers. If the senior lawyers only need to spend 20 hours supervising the matter (which would have cost $10,000 at the original rate of $500 times 20 hours), and junior lawyers put in the other 180 hours (which would have cost $54,000 at $300 times 180 hours), the client who pays the blended rate will actually pay more ($70,000) at the blended rate than they would have at the non-discounted rate ($64,000).

Now you could argue that it’s still a win-win, because if the firm had not offered blended rates, senior lawyers would have delivered 100 hours out of the 200. The client won by paying $70,000 instead of $80,000, and the firm won by charging $70,000 instead of $64,000.

From a marketing perspective, that is a terrible argument. In essence, it implies that senior people never should have been doing the work in the first place and the client must agree to be overcharged a little in order to avoid being overcharged a lot.

Blended rates invite gamesmanship, as individual lawyers may be tempted to manipulate predictions to maximize profit. And they encourage the use of more junior level lawyers, even when it may not be to the client’s benefit. Here’s how the general counsel at Marriott International described his unhappiness with his blended rate experience:

The law firm only assigned to the matter those lawyers whose regular hourly rate was at or below the blended rate, and more senior lawyers were unwilling to engage in significant supervision.

We will leave it to others to argue about whether blended rates are a good thing or a bad thing. In this context, what is important is that there is a philosophical difference between two types of alternative fee arrangement (AFA) definitions: narrow and broad. Our LegalBizDev Survey of Alternative Fee Arrangements used the narrow definition which reserves the term AFAs for fees that are fully or partly non-hourly. In contrast, when ALM published its AFA survey last year (Speaking Different Languages: Alternative Fee Arrangements for Law Firms and Legal Departments) they used the broad definition which includes blended rates.

People feel very strongly about which definition should be used. When members of our Advisory Board reviewed a draft of my book Legal Project Management, Pricing, and Alternative Fee Arrangements, some said that we made a mistake and that blended rates should be considered AFAs. Others said we made the opposite mistake and needed to be much more forceful in explaining that “blended rates are not alternative fee arrangements and are no different than discounting.”

The fact that two conflicting definitions of AFAs are in wide use adds considerable confusion to an area that was already confusing enough. If a firm claims that 50% of its work is performed on an alternative fee basis, that could mean that they are moving away from the billable hour (under the narrow definition), or it could mean that they are engaging in some creative hourly rate discounting (under the broad definition).

Some have a vested interest in maintaining this confusion. Announcing that a firm offers 50% of its work on an alternative fee basis sounds much more thoughtful and less desperate than saying, “Half the time, we have to slash our hourly rates because we need the business.” 

This post was adapted from my book Legal Project Management, Pricing, and Alternative Fee Arrangements.