Flat as a PancakeGoing flat

In the last post, I reviewed the plusses and minuses of the hourly fee, which I said still strides the world of high-stakes litigation like a Colossus.

But a distinctive trait of the hourly fee — its extreme concentration of risk on the client — limits its appeal and threatens its longevity. Almost all of the downside — including the potential for spiraling hourly charges — rests on the client.

I promised to talk this time about a better option — one that shifts a modest amount of the risk to the lawyer: flat fees. And so I will.

What does flat mean?

Let’s start with a definition of flat fee.

My firm spends between 15 and 20 percent of our hours on what we call “flat fee” matters, all of which involve high-stakes business disputes. And most of the biggest law departments in the U.S. say they pay “flat fees” to outside counsel for “entire matters”.

What makes a fee for big and risky matters a “flat” one?

A flat fee in that context generally means a specific dollar amount payable each month or quarter. As the trial or final hearing approaches and our efforts greatly intensify, the figure usually increases (doubles). Although I’ll talk about caps and other variations under the head of “hybrid” arrangements, for now let’s stick with the base case: a periodic payment that varies only between the pre-trial and trial phases of a lawsuit or arbitration. Again, we’ll speak in terms of control, downside risk, and upside and how those they differ in a flat fee deal versus an hourly one.

Plusses and minuses — client perspective

A flat fee tends to give the client a bit less control over the lawyers than an hourly arrangement does. Unlike their hourly brethren, flat-fee lawyers do not provide the monthly invoices that detail what they have done to earn the fee. That limits the client’s ability to fly spec the lawyers’ work. It also gives the lawyers more freedom. The challenge for the client may consist largely in assuring that the lawyers devote appropriate resources — personnel and hours — to the matter. As with the hourly fee, the fact that the client does not owe a bonus for good results makes replacing the lawyers less problematic and keeps the disengagement arrow handier in the client’s quiver.

The benefit to the client from ceding some control comes in the form of risk-sharing. In return for more liberty in deciding how to staff a case and implement strategy, the lawyers assume procedural risk — the danger that the litigation process will consume more resources than the lawyers expected.  While an adverse result bad outcome on the merits does not cut the flat fee, the additional hours and overhead that result from surprising difficulties in motion practice, discovery, trial preparation, and trial come partly out of the lawyers’ paycheck.

Some of the upside also moves the lawyers’ way. A case that proves far easier to handle than the client and lawyers expected may result in a premium on the lawyers’ time. Sharing risk produces an opportunity to earn a premium over the less risky hourly fee.

Plusses and minuses — lawyer’s view

A lawyer on a flat fee not only retains professional independence but also gains a measure of control. No longer must the lawyers report their hours to the client. The client may now welcome an aggressive strategy that she would have declined to pay an hourly lawyer for. The partial alignment of interests makes for a more trusting relationship.

The risk of outlandish demands on the lawyers’ resources now falls largely on the lawyers. The client pays a flat fee regardless of hours. The danger of a negative premium — a loss on the nominal value of the lawyers’ hours — may hover in the lawyers’ consciousness. Reputational and collection risks remain present but no greater than in an hourly scenario.

A flat fee also matches the lawyers’ upside to their somewhat higher risk. They now may earn more than the equivalent of their hourly fees by doing things efficiently, avoiding unnecessary fights, focusing on the essentials.

The case for going flat

The flat fee alternative reallocates procedural risk from clients to lawyers. It empowers the lawyers to use their experience and skills to manage the process in ways that avoid waste. The client benefits from the lawyers’ more efficient efforts. The ability to predict legal expenses provides an additional bonus to the client. And the lawyers capture some of the upside by putting themselves in a position to earn a premium by doing the necessary work with fewer resources.

What sorts of cases justify flat fee treatment? In general, they involve recurring situations that have produced enough data to allow reasonable predictions about cost. Some kinds of patent-infringement cases have produced enough cost information to permit reasonable estimates of how much an hourly engagement would run. Instances of bringing in counsel to replace existing law firms also present circumstances that allow comparisons. Both plaintiff-side and defense-side cases are suitable for flat-fee engagements.

Next time

I favor the flat fee over the hourly any day. The trade-off of risk amply justifies the prospect of a premium for the lawyers, in my view. And clients should welcome the opportunity to give their lawyers incentives to become more efficient.

I will wait to write about contingent fees until Thursday, July 2. The next post will focus on a new U.S. Supreme Court ruling — Kimble v. Marvel Entertainment, LLC, No. 13-720 (U.S. June 22, 2015) — that affects the value of patents, patent portfolios, and patent-infringement claims.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.