How to Choose the Right Alternative Fee Arrangement for Your Matter

Should you use a matter-level fixed fee? Fixed fee by phase? Capped fee? What about an activity collar?

It’s easy to get overwhelmed by the different types of AFAs — and there are dozens of them.

In the seven years we’ve been working with in-house teams as they engage outside counsel, we’ve seen thousands of AFAs.

My team at PERSUIT has developed a process we use when working with clients who are negotiating AFAs, something that’s very common on PERSUIT. (In-house teams used some type of AFA for 73% of matters on the PERSUIT platform in 2022 and have chosen an AFA on 69% of matters so far in 2023.)

What follows is the decision tree we walk through with clients as they consider AFA types for their matters.

Note: PERSUIT makes it easy to scope your matters and negotiate alternative fee arrangements. Learn more about PERSUIT.

AFA Types for Litigation 

AFA Types Litigation 3

Here are some suggestions for different types of AFAs for litigation matters.

You can also read more about each of these types in this article: Legal Pricing Best Practices: Fee Arrangement Types and their Pros and Cons.

1. Are you the plaintiff?

If you are the plaintiff, we like to consider a contingency fee or a hybrid phased fixed fee with contingency. 

2. Are you engaging in an AFA for trial only?

When you’re the defendant and using an AFA for trial only, fee per trial day is often the best option. This type of AFA can also be combined with a success bonus for successful verdicts.

3. Is it a single-plaintiff matter?

If you’re the defendant and using an AFA for more than the trial, phased fixed fee with activity collars is a strong option.

4. Is it a class action?

Phased fixed fee with activity collars also makes sense for class action lawsuits in a single district.

5. Is it a multidistrict class action?

In a multidistrict class action, a matter flat fee is a good choice if the matters are relatively small, predictable, and repeatable.

In more complex matters, a phased capped fee can be used for national coordinating counsel while a task-based fixed fee can be used for discovery work performed by local counsel.

AFA Types for Any Practice Area

AFA Types Any Matter Type v2

For legal advice projects in any practice area, here are our AFA type suggestions for various situations: 

1. Is there a single defined scope of work for the project?

If so, consider a phased fixed fee for straightforward matters or a total matter fixed fee for situations where you expect phases in the project, some of which may or may not happen.

2. Are these ad hoc advice matters that may occur infrequently?

If so, good options include an annual collared fee for situations where you know your annual fees for these services for the last 2 to 3 years.

If these are new services, a blended rate is also a good option.

3. Are these well-defined, low-spend, high-volume matters?

For regular matters that are well defined, low spend, and high volume, a matter flat fee is a strong choice.

Note: In-house teams using PERSUIT use some type of AFA for almost 70% of their matters. Learn more about PERSUIT.

Laura Spalding

Director, Legal Advisory at PERSUIT