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the client's settlement or judgment funds, non-payment risk is
eliminated even though no up-front retainer is required from the
client. The firm must still deal with labour requirement risk, but
carrying a portfolio of contingency cases with different character-
istics mitigates that.
Most people with personal plight legal needs would much
rather pay on a contingency basis than through a pre-paid time-
based retainer. Already ubiquitous in personal injury and class
action cases, contingency fees could be adopted by more firms in
areas such as employment law and estate litigation. Some prov-
inces permit their use in family law cases not involving children.
However, when a personal plight client is seeking a significant
non-financial remedy, contingency billing loses most of its appeal.
In such cases, there is no "pot of gold" at the end of the litigation
rainbow from which the firm can reliably collect its fee. Moreover,
the alignment of incentives between client and firm — which is
one of the contingency fee's chief attractions — breaks down if
the client needs the firm to pursue non-financial objectives, for
which the firm will not be compensated. Thus, for matters such
as criminal defence, family cases involving children and contested
refugee matters, personal plight firms must seek other alternatives
if they wish to move beyond pre-paid time-based billing.
Price certainty through flatter fees
To varying degrees, different fee models can also provide
something that all consumers want: price certainty. Completely
open-ended time-based retainers provide no price certainty
whatsoever. At the other end of the spectrum, completely flat,
advertised fees (e.g. "we will handle any Human Rights Tribu-
nal case for $4,000") offer complete price certainty to clients.
In general, the more price certainty a fee model offers the
client, the more labour requirement risk it imposes on the firm.
However, in research for my new book, I found firms using
innovative models that offer clients significant price certainty
without creating intolerable labour requirement risk.
A model that works for many firms is the "milestone fee." A
client will be quoted a flat fee to take a matter to a certain litiga-
tion stage, such as discovery or a preliminary hearing. Further
stages are quoted and billed if necessary.
An innovative monthly billing plan was described to me by
Toronto employment law sole practitioner "YY." At the outset
of a case, YY estimates how many months and how many of
his hours would likely be required to take it through adjudica-
tion. He divides his projected total fee for the case (based on
his hourly rate) by the estimated duration. The result is the
amount that the client will pay each month. If and when the
matter settles, the client pays nothing further. YY's clients enjoy
reasonable price certainty and deferred payment, and YY limits
both labour requirement and non-payment risk.
Legal expense insurance
Best of all would be a personal plight fee model that offers
certainty and deferred payment to the client, while freeing
the firm of labour requirement and non-payment risk. The
good news is that legal expense insurance is such a fee model;
the bad news is that personal plight law firms cannot adopt it
unilaterally.
A legal expense insurance, or LEI, policy is paid for by the
client or the client's employer with a price-certain monthly
premium. If a personal plight legal need arises, the insurer will
reliably pay the bill, so the firm experiences very little risk.
The Unifor Legal Services Plan may be Canada's most com-
prehensive legal expense insurance plan for personal plight
legal services.
Unfortunately, few Canadians have access to union- or
employer-sponsored benefit plans as generous as Unifor's.
Meanwhile, LEI plans available for individual purchase typi-
cally offer little or no coverage for dispute-related legal needs.
This leads some to argue that a state entity such as Legal Aid
Ontario might have a role to play in scaling up LEI coverage.
Conclusion
Pre-paid and open-ended time-based billing is a natural
response by personal plight law firms to the labour require-
ment risk and non-payment risk that are inherent in their
work. However, moving past it can make a law practice more
successful as well as more accessible. Canadian personal
plight firms have a variety of options, both new and old, for
doing so.
Noel Semple is a faculty member at Windsor Law. His new book is
entitled Accessibility, Quality And Profitability For Personal Plight
Law Firms: Hitting The Sweet Spot. It is available free online from
the Canadian Bar Association Futures Initiative.
What do your clients need?
The means to move on.
Guaranteed
™
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Kyla A. Baxter, CSSC
PRESIDENT, BAXTER STRUCTURES
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