Cisco GC Demands Alternative Fee Agreements

Law.com recently posted an article about Cisco Systems' General Counsel Mark Chandler and his insistence on using fixed fees for a lot of his company's outside legal work.

According to the managing partner of one of the large law firms that Cisco has used for years, Chandler "has pronounced the death of the billable hour model." When this large law firm offered -- generously, it thought -- to keep its fixed fee fixed at the same figure for a second year, Chandler reacted by demanding that they lower the fee for the succeeding year.

Chandler has also compared the billable hours mentality to a "medieval guild system" that is leading to "unhappy lawyers and unhappy clients."

As this article makes clear, the positive thing about clients such as Cisco's Chandler is that they are forcing change in the legal profession, particularly at big law firms. Case in point -- Chandler uses a different large law firm for Cisco's commercial litigation. When he required that law firm to go to a fixed fee, what happened is that suddenly, that law firm's major objective for Cisco was to avoid litigation. Why? Because with the fixed fee arrangement, that firm now makes more money by resolving Cisco's business disputes early on. The law firm loses money on the Cisco engagement when protracted litigation ensues.

Isn't that what lawyers are supposed to do, resolve disputes favorably for the client at the earliest practicable opportunity? It's amazing how simply changing the fee arrangement suddenly changes the law firm's focus.

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