There are three steps that usually lead to the formation of a good creative fee agreement. First, the client determines the objectives of the dispute, including a quantification of the importance of each target. In other words, the customer always decides what profit is and the value of profit. Second, for each identified objective, the lawyer must assess the costs, risks and duration of completion. As explained in more detail below, this step is the reason why many companies are unwilling or unable to enter into creative fee agreements. After analyzing the client`s objectives, the third and final step is the creative process of merging the client`s interests and the lawyer`s interests, so that both parties are favoured (or harmed) in the same way based on the outcome of the case – the client`s objectives being the criterion for measuring the «outcome». In addition to the potential benefits to client and attorney outcomes, the process of forming creative fee agreements often leads to increased client satisfaction with the litigation process. Finally, one of the first and arguably best contingency fee agreements entered into by the authors` society was an agreement in which the conditional interest of society depended on several problems – but above all on the speed of resolution of the case. The parties agreed that the client would pay a fixed monthly fee in exchange for a conditional interest on the company. However, the possible interest of the company has been reduced monthly by the amount of the lump sum commission paid by the customer.
The longer it took the company to resolve the case, the less money it could make as a success fee. This creative fee agreement was consistent with the client`s primary objective, the speed of resolution, the company`s goal of receiving a contingency fee when resolving the case. Creative fee agreements may also contain a conditional interest determined by the events of the dispute – not just by economic outcomes. For example, the client may have a primary purpose of dismissing an injunction application. The parties may agree that the Customer will receive a 25% discount on the Company`s standard hourly rates. The discounted money would then be placed in a bonus pool, with the company`s success fee based on the success or failure of certain events, with a multiplier applied to the amount of money contained in the bonus pool. As lawyers` hourly costs continue to rise, clients – even large institutional clients – are increasingly looking for ways to minimize costs and risks. Of course, companies that are able to offer creative fee agreements that align the cost and timing of litigation with client objectives will have a competitive advantage in attracting and retaining customers. If a company is good at analyzing the timing, costs, and likely outcomes of a dispute, creative fee agreements are well worth the risk. Given these benefits, most companies would likely want to take advantage of creative fee deals, but for the one thing most lawyers seem to be genetically programmed to avoid: risk.
Analyzing process costs and costs, the risks of success or failure, and the expected time frame to achieve goals requires not only experience, but also the company`s willingness to take risks. Many companies are risk-averse when it comes to putting their own skin on the line because they don`t have the experience to accurately estimate costs, risks, and timelines to achieve complex goals and cases. To the extent that practitioners can overcome their risk aversion and take steps to mitigate it through thorough analysis and preparation, a currently inaccessible world of work could become available. Creative fee agreements deviate from typical models every hour or every contingent. In the first case, the client usually bears the financial risk of a dispute, since the payment of the lawyer`s fees is not linked to the final outcome of the case. With the latter, the economic risk is largely transferred to the lawyer, since the payment of fees depends entirely on a positive result for the client. Creative fee agreements combine aspects of hourly and conditional models to redistribute litigation risk based on the client`s needs and objectives and the lawyer`s risk tolerance. .