Lawyers must take heed on fat-cat fees

Mr Justice Floyd said there was a "quite staggering disparity" between Allen & Overy's estimated fees of nearly £5.2 million for a five-day patents case and the £1 million run up by its City opponents, Taylor Wessing.

It was all the more astonishing, said the judge, because Allen & Overy's client, the BlackBerry manufacturer, Research in Motion, was seeking to protect a computer programme that it did not even regard as commercially important. He made it clear RIM would not be able to recover its full costs from Visto, a US-based wireless technology company.

Other City lawyers must have enjoyed the judge's strictures. David Gray, chief executive of Eversheds, mentioned the case prominently in a newspaper article last week.

His firm has just announced the renewal of its contract to provide legal services across 30 jurisdictions for Tyco, an international company specialising in security and industrial products. It's a good example of keeping costs under control.

Unlike RIM, which paid Allen & Overy to leave "no reasonable stone unturned" in the patents case, Tyco has agreed to pay Eversheds a six-figure bonus if it can reduce by at least 15% this year the number of cases brought or defended by the manufacturer.

That should make up for the solicitors' loss of work. And Eversheds will receive a 25% bonus for every successful case it runs - though there will be a 10% penalty when it doesn't succeed.

Fees will be charged on a "blended" hourly rate, effectively an average of the rates charged by senior and junior fee-earners. Tyco must therefore trust its lawyers to ensure that work is handled at the appropriate level within the firm - although the company has full electronic access to its solicitors' files for every case.

Eversheds also has an incentive in ensuring that the work is done properly: it will receive a six-figure bonus if it achieves a 35% improvement in client satisfaction.

A similar bonus will be paid if it meets diversity targets specified by Tyco. These include recruiting at least 10% of trainees from ethnic minorities and giving a third of its new partnerships to women.

Cornelius Medvei, the senior partner at Eversheds' newly-built London office, explains that the firm can achieve much greater efficiency by allowing staff to work flexibly. He shows me round open-plan offices suffused with "pink noise", a specially generated hum that stops voices echoing round the floor.

But you don't need innovative clients to keep the fees down. Medvei tells me his sister-in-law, Lucy Scott-Moncrieff, runs a two-partner legal aid practice from serviced offices in Kentish Town, specialising in mental health, personal injury and employment cases.

Even though its base is smaller than the Eversheds staff restaurant, the firm of Scott-Moncrieff, Harbour & Sinclair has 50 or 60 feeearners - almost all of them self-employed contractors who work their own hours from their own homes or offices.

"Most of our clients are locked up in prisons and psychiatric hospitals," says Scott-Moncrieff. "Others are vulnerable children who need to be visited at home." So no need for large interview rooms.

"There's a tranche of lawyers who don't want to be partners, supervisors or wage-slaves," she adds.

The firm provides them with support staff, insurance, book-keeping and all the other administrative chores that they would have to do if they were partners or sole practitioners - in exchange for 30% of the fees they earn.

It won't be £5 million for a five-day case, but it still allows them to make a living out of legal aid.

Email joshua@rozenberg.net