AFAs are Trending

Last updated on October 6, 2020

The Corporate Counsel Business Journal (CCBJ) features an interesting interview with Kris Satkunas, director of strategic consulting at LexisNexis CounselLink, to discusses the major takeaways from the 2020 CounselLink Enterprise Legal Management Trends Report.

One of the more interesting trends revealed in the report is the upward trend of law firm matters being billed under alternative fee arrangements in the U.S (which is the only jurisdiction covered by the CounselLink report).

“Every year as I do the analysis for the report, I look for the few things that really stand out the most to me. I try to find the things that I think are going to be of the most value to our industry. This year, one relates to alternative fee arrangements (AFAs). And the key finding this year is actually something that we initially reported on last year. But let me back up for a moment and give a bit of context first. Historically, we’ve been producing the trends report since 2013. For the first five years, what we saw was that alternative fee arrangement usage hovered around 10 percent. In other words, 10 percent of matters had some sort of non-hourly billing arrangement. But last year when we did the analysis, we found that the number of AFAs had gone up to just over 12 percent. On the surface, that might not seem like a very big increase, but actually, to go from 10 percent to 12 percent after not really moving at all for years, we felt like that was significant – but I also thought that perhaps last year was just a one-time blip.

This year, looking at the data from 2019, we saw that, once again, just over 12 percent of matters were being billed under some sort of AFA. So it feels like a trend has really begun, that finally, after years of talk about increasing the use of alternative fee arrangements, it really is happening. I think it’s exciting to see that the dial finally has moved. From our point of view, it’s a move in the right direction. There are so many benefits to AFAs, and corporate legal departments are starting to realize it as they start using more and more of them. They get much better predictability as far as what their expenses are going to be. And there is accountability because they’ve often already agreed on the pricing with their law firms. It helps them manage their spend. These advantages have always been there, and now we’re starting to see them pay off more.”

While Canada typically lags the U.S. in legal trends, it is probable that AFAs are seeing similar increases.

Go here to read the full interview with Kris Satkunas.

Go here to obtain a copy of the 2020 CounselLink Enterprise Legal Management Trends Report.