Handling Law Firms’ Pushback to Rate Negotiations By Onit August 10, 2020 Legal Operations 5 Minute Read As companies continue to grapple with the economic distress presented by COVID and think more strategically about their operations, many are turning to their outside counsel for rate relief. If you’ve taken the step to negotiate discounts or rate freezes with your law firms, it’s likely you’ve been met with some pushback leaving you to ask – now what? Negotiations can be prolonged and intimidating conversations if you’re not prepared. Wouldn’t it be helpful to know what’s going on behind the scenes at the other end of the negotiation table? Well, you’re in luck! The Council of Luminaries, a group of law firm pricing thought leaders, offered its law firm pricing representatives the following commentary and guidance on dodging client discount requests: “Clients have begun to talk about legal services as if it’s health care, where there’s some moral obligation toward affordability. But we are under no obligation to provide services at any price we did not set.” “The Luminaries expressed dismay that the client perspective seems to be that firms should have to pay a penance for prospering in good financial times, that they ‘make too much money.’” “Clients that prioritize diversity should realize that unilateral demands for low rates can negatively impact it, because it can inhibit promotion of diverse attorneys, or incentivize firms to staff them on other matters where the financial impact to the firm and professional development opportunities for the lawyers will be more advantageous.” “Conversations around value are better if the GC is at the table and can talk about what’s really going on with the company and the firm’s work for it; we can negotiate a give-and-take more effectively in that context.” “It seems most GCs are more concerned about selecting the best firm for each job than they are about the costs associated with it. There’s not much actual incentive to choose a lower tier firm. It fails a risk vs. reward analysis. The trick is making the optimal selection of those providers within the constraints of the allocated budget.” “It remains critical to protect premium brands and offerings as reducing price on best-in-class services, particularly ones that are experiencing demand and deliver high value to the client, can have a lasting negative effect on firm brand positioning.” When initiating rate discount conversations with your law firms, it’s critical to keep this in mind in order to yield the best results for your company. To help you further navigate your negotiations and conversations with your law firms, Bodhala has compiled a set of common law firm objections and suggested responses that will assist you in asserting a value-driven conversation that leads to positive results for your business. Law Firm Objection/Assertion #1: Since the start of the pandemic, we’ve had our top tier partners and associates handling your urgent legal matters. We’ve provided you with our best minds and have proven our sincere commitment to your business during these challenging times. Client Response #1: While we appreciate your commitment and your top attorneys, we are under significant pressure to contain costs and cannot justify paying these premium rates during such economic turmoil. We are expecting all of our business partners to share in the economic burden Covid has presented. Law Firm Objection/Assertion #2: If our rates were truly too high, we’d be receiving discount requests from far more clients. Our clients have realized that they need our help more than ever during these difficult times. Because of this, they have accepted the rates we have charged – in fact, those rates are higher than yours. Client Response #2: Certain clients may be willing to pay above-market rates, but we cannot do so as we look to contain costs during this economic crisis. Each business is different and how some clients handle the burden Covid has presented is not a catch-all solution for the rest of your clients. Law Firm Objection/Assertion #3: Your business is already getting a good deal on your rates as our realization rate with you is low versus our other clients. We understand the economic stress Covid has presented, but we simply cannot justify reducing your rates even further. It would be detrimental for us to do so. Client Response #3: Your firm has been a critical partner for our business for several years and we value the relationship, but how you handle the relationship during our most significant time of need also matters to us. If our CFO and GC thought our business was truly getting a good deal, we would not be asking this of you. We agreed to pay the rates you are referencing during a time of economic stability, but due to Covid, that is no longer the case and we are asking you to realize that. Law Firm Objection/Assertion #4: Our law firm has struggled throughout the pandemic as well as we’ve had to deal with the challenges of remote work, furloughs, court closures, and more. The rates we are charging your business are within the market. Client Response #4: We understand that Covid has presented challenges for all businesses, but we are also aware that in past crises, law firms have remained stable, even experiencing profits while other industries struggle. We are asking you to share in our economic pain as there is no reason for above-inflation rate increases – especially during this period of distress. We are aware of similar clients in the market that have been granted rate freezes and discounts by their law firms. As a valued business partner of ours, we are expecting the same from your firm. 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