There has been much talk in recent times about how, as a consequence of the GFC, law firms will be required to change the way they operate to adapt to the needs of clients.
Clients, it is said, are sick of incurring extravagant legal costs when, for a fraction of the price, they can employ their own legal teams for a great deal of the day-to-day work they require. The in-house lawyers, for their own part, tend to be remunerated much more favourably than their junior private brethren, while the clients themselves drastically reduce legal bills.
By way of adaption, clients have been calling on firms to consider alternative fee arrangements, including fixed-fee arrangements, as we emerge from the GFC. In this regard, mid-tier firm Gilbert + Tobin has been cavalier. Danny Boy Gilbert went to Telstra, one of Mallesons major clients, and offered it a limitless amount of legal work for a fixed fee (rumoured to be one million).
In a reprise what may well be regarded (if true) as something of a bellwether, we received the following comments from an anonymous Mallesons spy last night:
Mallesons has agreed to a fixed price for legal services to Telstra for the remainder of the financial year. Subject to involvement in a major transaction not contemplated by the agreement, Telstra will be able to use as much, or as little, of Mallesons services for a set fee under the arrangement. Many figures have been thrown around, and it sounds to me like a lot. How this situation will pan out for cowering junior Mallesons lawyers remains so be seen.
Will this mean overworked, underpaid Mallesons lawyers have to work harder? Will Mallesons partners, now guaranteed a fixed fee, consider purchasing more real estate?
More importantly for the industry, will the rumoured arrangement between the biggest Australian firm by revenue and the company with the largest legal spend be a harbinger of things to come?
Will you miss billable units?
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$1 million to G+T for all that work? Try $10 million. Interesting way to win work.
I heard the deal that G&T did with Telstra was $12m – ie they bill Telstra $1m a month. I thought MSJ was billing Telstra about $30-40m a year…. + Freehills and Blakes do Telstra work too…. Plenty of budget to go around if those figures are accurate?
True, but if they are getting an all you can eat deal with G+T it seems likely that they will load them up and the pie will shrink. Structural separation will shake loose some more work from MSJ.
Hey – audit firms have had fixed fees with clients for years so it is about time that legal firms have their billing ability restricted. Do they want some help in managing this??