When business litigation lawyers are asked to give up their hourly fee and instead prosecute cases under a contingency arrangement, they may have trouble making the math work.
A contingency fee arrangement may not be the best option for litigation matters – at least from the perspective of the lawyers – because many cases are not seen through to a conclusion or may be resolved with a non-cash settlement. Now, many litigation lawyers are offering clients a “hybrid” fee arrangement in which the lawyer reduces the hourly rate in exchange for an upside contingency at the conclusion of the case.
Girard Bengali, APC, a boutique law firm in Los Angeles that specializes in plaintiff’s securities and employment litigation, has used hybrid fee models to great success for both the firm and its clients. About half of the firm’s fees are billed on an hourly basis, a figure it intends to reduce to 20% in the future.
Robert Girard and Omar Bengali, who founded the firm in May 2016, spoke to Forum about how client relationships have changed and why being up-front about pricing is critical in litigation.
FORUM:What’s been the most rewarding part of running your own firm the past two-plus years?
ROBERT GIRARD: Having left a larger firm with an hourly-fee-based model, the most rewarding aspect of running our own firm has been the freedom to work with our clients to craft an appropriate fee arrangement that is to our clients’ advantage and allows us to offer effective representation without compromise.
This also allows us to take on the cases that we want to take and that we truly believe in.
The flexibility also allows us to share in upside potential while also limiting downside risk – which benefits us and our clients alike – and allows us to approach our practice as businessmen who provide high-quality legal services as opposed to lawyers who run a law practice.
FORUM: On the flip side, what has been the most difficult part?
OMAR BENGALI: The most difficult part has been learning to distinguish between problems and cases. We have learned strategies that focus our efforts on carefully evaluating and analyzing cases at the earliest stages to find the “needles in a haystack” so that we maximize our time and resources. In two years, we have learned that not all problems are viable cases.
FORUM: We hear a lot about the changing relationship between law firms and clients. What do you see in the small law firm sector around that?
GIRARD: There is definitely a different dynamic between clients and small firms such as ours. The reality is that there is an overabundance of lawyers in California and firms of every size. With effective online search tools and a plethora of resources, clients can shop aroundand seek out a better deal.
However, clients want experienced specialists who can handle the issue the client is facing right now. They’re not shopping for firms that offer 10 different areas of law with the hope that those other nine fields may come in handy one day.
Luckily for us, a big part of the decision to form Girard Bengali was the fact that we have substantial experience in very specific areas of securities and employment law that support each other, and because we are so specialized, we can offer a level of service to our clients that most “generalist” firms simply don’t have.
BENGALI: And, quite frankly, we do not see the firm-client relationship in terms of “who has the most power.” It is a collaborative effort, which is significantly easier in a small firm setting.
FORUM: We also hear that pricing and value are utmost on clients’ minds now. Do you see that with your litigation clients?
GIRARD: Pricing is important to clients, but high-quality service, aggressive representation and results are far more important to clients.
FORUM: How best do you make the value argument for hiring Girard Bengali?
GIRARD: We explain to our clients that our goal is to maximize our clients’ return on their investment with our firm, whether that be through an hourly engagement or a contingent fee/hybrid arrangement.
Each case is unique, with its own issues and pace to resolution, and we try to work with our clients from the beginning to provide a fee arrangement that is reasonable while still enabling us to provide the high-quality work product that has made us so successful over the past two years.
There is never a guarantee that any case will resolve early or go all the way to trial, but because we are so specialized and have extensive experience, we usually can assess anticipated costs, legal fees and the length of time it will take to shepherd a matter through to resolution after doing our initial consultation with the client. That experience is only borne by time.
FORUM: What can you say about the importance of offering clients pricing options as part of your service?
BENGALI: Being able to offer clients various pricing models is critical to our practice as it allows for clients from all walks of life and of all manners of sophistication to obtain quality legal representation that is reasonably priced under the circumstances of each case.
Not every case can be taken on contingency, and not every case warrants hourly billing. For the right cases, we offer hybrid arrangements where the circumstances warrant, such as capping hourly charges and switching to contingency after the cap is met.
This kind of arrangement has allowed us to maximize our client’s return on their investment in our services and provide them with peace of mind: They know we are invested in their case through to final resolution, regardless of their ability to continue paying hourly, because we now have “skin in the game,” so to speak.
FORUM: Without giving away your secret sauce, is there something you do in your interactions with clients, especially around pricing and value, that you feel makes a difference in how they view your firm?
GIRARD: It is by no means a secret: Be up-front about how much a case is likely going to cost the client. We don’t hide the ball when talking about financing a lawsuit. We are direct and honest with our clients and ask that they be the same with us.
We need to know what their expectations are, and their desired result, so we can gauge whether it is worthwhile for our clients to pursue their claims. Not every client is looking to take things through to trial, and there are cases where it does not make fiscal sense for the client to pursue. We try to explain the best- and worst-case scenarios based on their desired result and give them the detail they need to make an informed decision.
Our clients often feel as though they have been taken advantage of by their brokerage firms, employers or business partners. They do not want to feel taken advantage of by the person who is supposed to be righting those wrongs.