Central Pa. firms aim to seize on cry for more AFAs

Firms in lower-rate markets, such as those in central Pennsylvania, have long touted the cost savings they can offer clients. But with the growing demand for alternative fee arrangements, they've found another attraction to draw clients away from the big city.

Leaders of several firms based in or with a major presence in central Pennsylvania said they're already working on an alternative fee basis in various practice areas. But they want to do more.

“I don't think you can see the landscape changing yet, but you're going to,” Barley Snyder managing partner Jeffrey Lobach said.

Mr. Lobach said his central Pennsylvania-based firm has a task force examining alternative fee arrangements, in anticipation of that change.

Currently, he said, a lot of clients ultimately choose the billable hour model. But in their requests for proposals, they ask firms to provide a “menu” of alternative fee arrangements, he said. Such arrangements are more common in tax appeals, guardianship appointments and the real estate practice, he said, and immigration cases are almost all flat-fee.

David Kleppinger, chairman of McNees, Wallace & Nurick, said his Harrisburg-based firm is taking steps to provide more alternative fee arrangements by hiring a legal project manager coordinator. Between 20 to 25 percent of the firm's work is done on that basis, he said, including nearly all public finance work and more than half of the patent practice.

Burns White managing partner David B. White said his firm does 25 to 35 percent of its work on an alternative fee basis, and he expects that to grow over the next year. Burns White has offices in Harrisburg and WilkesBarre, as well as Pittsburgh; Philadelphia; Cleveland; Wilmington, Delaware; Wheeling, West Virginia; and Cherry Hill, New Jersey.

“We promote it, actually,“he said. ”I'm a strong believer in the fact that the days of sending out a bill with whatever time it took to do it, and expecting clients to pay it, those days are

eroding and probably eroding quickly."

Two other firms were recently founded in the Harrisburg area, with an eye on being more nimble when it comes to pricing. Pillar + Aught and Penwell Bowman + Curran both launched this year, founded by former members of Harrisburg-based Rhoads & Sinon.

“I started to watch my clients be subjected to my old firm's rate pressure … it's not just my old firm, it's every firm,” said Todd Shill, one of Pillar + Aught's founders.

Still, Rhoads & Sinon managing partner Drake Nicholas said his firm offers alternative fee arrangements “all the time,” particularly in municipal finance and certain transactional work.

“The clients [in small markets] might tend to be more interested, because they cannot absorb rates of $300 or $400 an hour,” Mr. White, of Burns White, said.

Firms have to get more flexible if they're going to be working with sophisticated clients, Mr. Kleppinger said. That creates a market opening for midmarket firms in smaller cities, he said, where overhead costs are lower.

“Clients are saying, 'How can anyone be worth $1,000 an hour?'” Mr. Kleppinger said.