The Financial Structure of an Of Counsel Relationship

Q: I worked as a litigator for 11 years before moving into legal education about five years ago. I'd now like to leave the education field and become of counsel to a very small firm, handling their research, motions, appeals, and other overflow work. Both the firm and I are struggling to structure such an arrangement. I don't have a clue as to how or how much to charge. What can you suggest?

A: There are no firm rules when it comes to the financial structure of an of counsel relationship. The "right" answer should fairly compensate you for your time and the value of your experience while maintaining profitability for the firm and covering the expenses for all involved. Some lawyers receive full-time salaries with a bonus for work they bring to the firm. For someone with your experience, the salary tends to fall between that of a senior associate and junior partner in a comparable law firm. The bonus may range from 10 percent to half the revenue received by the firm on your cases, depending upon who worked on the matter.

Other of counsel arrangements split the revenue generated by the of counsel lawyer. I've seen agreements ranging from 50 percent to the of counsel lawyer (very generous) to 75 percent to the firm (more typical). The firm's take is intended to cover overhead costs, as well as to provide some profit to the firm. These arrangements can generate many problems and disagreements. The of counsel lawyer must rely on the firm to provide enough collectable work to generate a decent living. In turn, the firm must rely on the of counsel to work hard and smart enough to cover overhead costs.

Then again, many of counsel lawyers work on a straight hourly basis, much like the typical contract lawyer. How much you charge the firm depends on your expertise and whether the firm has other lawyers who do the same or similar work. For example, if the firm you are joining has no other litigators, you can command a higher hourly rate than if you are acting in a back-up role. In other words, the more your work resembles that of a partner, the higher the pay; the more it resembles an associate, the lower the hourly rate.

Ultimately there is no single answer that can be given to the question of how much should be charged, or which kind of billing arrangement is best. An inquiry into the current practices and rates within your metropolitan area and area of legal practice can help provide some more concrete guidance. I suggest you investigate hourly rates for someone with your experience charged by the temporary attorney placement companies in your area. Also, ask for input on rate setting and compensation from other contract and of counsel lawyers in your area who work for comparably-sized law firms. You can also find helpful guidance on rate-setting in my book, The Complete Guide to Contract Lawyering (Niche Press 2nd ed. 1999).