Alternative Fee Arrangement (AFA) in the United States

Law Firms Alternative Fees

Alternative fee arrangements (alternative to the billable hour), which are applicable by some law firms, occur when payments to a law firm are based on a method other than billable hours.

In a recent Altman Weil survey of large and midsize law firms, 81 percent of the large firms reported an increase in alternative fee arrangements (AFAs). There are important obstacles to alternative fee arrangements faced by both corporate counsel and by law firms.

Applying Alternative Billing Arrangements, some law firms partner, in such mode, with Clients. In these arrangements, they share in both legal fee and outcome risk.

Law Firms Alternative Fee Arrengements in California

In California Lawyer’s annual survey of 2012, the California’s 50 largest law firms were asked for the first time about alternative fee arrangements. Forty-six firms reported that they offer non-hourly payment (1 does not, and 3 declined to answer). Here’s a breakdown of the 30 firms that disclosed how much of their business is paid through alternative fees:

Percentage of billing paid throw alternative fee arrengements:

• 14 Firms: 0-10%
• 10 Firms: 10-20%
• 5 Firms: 20-30%
• 1 Firm: 30-40%