Bal­ance client cost pre­dictabil­ity with law firm prof­itabil­ity for long-term success


AFA Strategy1Web

For Law Departments

The gen­eral goal of an AFA is to increase the pre­dictabil­ity of total legal costs (the sum of attor­ney fees, third party costs and settlements/judgments paid) in a way that is eco­nom­i­cally viable to the firm on a long-term basis, with­out com­pro­mis­ing the ethics of rig­or­ous and high-quality legal rep­re­sen­ta­tion.  This objec­tive should be tai­lored to suit your needs.

For Law Firms

Alter­na­tive fee arrange­ments deliver the cost pre­dictabil­ity your clients demand, but shift the risk to you.  More­over, clients want to be sure their firms can be con­sis­tently prof­itable under AFAs. This requires a new approach to how you do busi­ness.  LegalEye’s® AFA Advi­sory ser­vices focus on increas­ing uti­liza­tion through con­tin­u­ous process improve­ment, mea­sur­ing and man­ag­ing prof­itabil­ity through action­able finan­cial and oper­a­tional report­ing and analy­sis, and bench­mark­ing firm per­for­mance against peer groups.

Our Phi­los­o­phy

Any suc­cess­ful AFA must be a col­lab­o­ra­tion between the client and the firm.  In order to bal­ance client cost pre­dictabil­ity with law firm prof­itabil­ity, our approach empha­sizes the fol­low­ing elements:

Clear and Achiev­able Win Definitions

Based on the nature, vari­abil­ity and level of total lit­i­ga­tion costs, we will work with you to develop ini­tial win def­i­n­i­tions for each applic­a­ble docket seg­ment. Win def­i­n­i­tions should incor­po­rate dura­tion, set­tle­ment amounts, out­side legal and third-party costs.  They should also empha­size early case assess­ment and bud­get per­for­mance.  Of course, these win def­i­n­i­tions will need fur­ther refine­ment when engag­ing out­side coun­sel in AFA discussions.

In addi­tion, how a goal is achieved can be just as impor­tant as the result itself.  That is why win def­i­n­i­tions should con­sider the amount of time spent in early case assess­ment rel­a­tive to other tasks and phases like depo­si­tions and other dis­cov­ery.  Reduc­ing set­tle­ment amounts may be pos­si­ble if the firm were to spend pro­por­tion­ally more time in ECA and develop more effec­tive strate­gies for increased set­tle­ment lever­age.  This should also improve bud­get per­for­mance, so that client expec­ta­tions are met over the life of the matter(s).


No plan is per­fect, and there will be instances in which mat­ters that ini­tially present as being within a defined AFA seg­ment become out­liers as more infor­ma­tion is avail­able, despite the best efforts dur­ing early case assess­ment.  Pro­vi­sions should be made for such “safety valves”, at which point out­side coun­sel would revert to hourly billing.


Con­trac­tual and oper­a­tional fidelity is para­mount in AFAs.  Some AFA pro­vi­sions may sound great in the­ory, but are dif­fi­cult if not impos­si­ble to mea­sure in prac­tice.  To the extent pos­si­ble, our rec­om­men­da­tions will reflect your cur­rent sys­tems, processes and capa­bil­i­ties, and will fur­ther pro­vide RFP require­ments for out­side counsel.


Trans­parency is closely related to mea­sur­a­bil­ity.  Any AFA man­age­ment process and its per­for­mance met­rics must be clear to all stake­hold­ers.   No mea­sures should be com­ing out of “black boxes”, and results and the cost thereof should be peri­od­i­cally com­mu­ni­cated, based on the nature of the matter(s) in question.