Abstract

The complexity and heterogeneity of today's world have resulted in an increasingly litigious society which finds a growing need for more lawyers. In the midst of such growth, many law firms are challenged by their clients over their legal bills. Problematic billing practices are not a secret in the law practitioners' circle [4][7][10][16]. The amount of legal fees paid to a lawyer is typically determined by such factors as the lawyer's specialty, education, experience, title, and reputation. Although clients would hire a law firm that would charge less, the cost alone is not a deciding factor when selecting attorneys, which implies that a low price or a good pricing strategy may not be a core competence [11][12] for a law firm. Nevertheless, a good pricing strategy coupled with reliable analytical techniques remains an important business factor. Take legal fee disputes for instance. As the demographics of clients shift from individuals to corporations, more clients can afford the financial and human resources to fight their legal bills [1][2][5][7][10][22]. This trend calls for a serious reconsideration on how to structure and determine legal fees, not simply because of disputes and nuisance but because the billing process must be approached from a strategic point of view so that legal bills may make sense for both the law firms and the clients. In the law practitioner's community, numerous forums are being reported surrounding the issue of how to structure legal fees [13][17][18][24]. This phenomenon clearly indicates two facts: (i) there is no consensus among law practitioners on how legal fees should be determined, and (ii) a 'system' or a rational model of fee determination is acutely in need. While various methods are currently employed by law practitioners for different types of services, they can be categorized into a few groups. The most popular billing method is called 'hourly billing.' Legal fees are calculated by multiplying a predetermined hourly rate by the number of hours the lawyer spends on the case. While law firms find it inadequate to set fees arbitrarily (which they do), surveys confirm that this billing method is predominant [8][24]. As this approach was found inappropriate in some special cases, several alternative billing methods were introduced. Such alternative methods are often referred to as 'value billing.' Three commonly used value billingapproaches are: fixed fees, unconventional time-based billing, and result-based billing

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