Lawyers love to hate hourly billing. Sonnedix, a solar-power company, actually did something about it.
Since 2018, the company has cut its use of traditional pay-by-the-hour arrangements from about 85% to just 7% of its outside legal spending, according to Heather Torres, an in-house lawyer for Sonnedix. She said the company has faced fewer surprise invoices since overhauling its policies and using a legal-tech product called Brightflag to keep spending in check.
"No matter how nice a lawyer is to you, they're not free," Torres said. "Even if they answer your emails at all times of day, they're charging for it. … It is a taxi meter that is just constantly ticking."
Torres said the company's push to so-called alternative-fee arrangements began in 2018, as it was on the cusp of major growth. The company's general counsel, Marissa Corda, warned her team to get ready for a "tsunami of work," Torres said.
As the company has amped up its mergers and acquisitions to grow in Chile and across Europe, its internal legal team grew from about six to some 30 people to deal with the workload, Torres said. During that time, its outside spending grew from just 5-7 million euros (about $5.8-8.1 million) to between 10 and 11 million euros (about $11.6 to $12.7 million) per year, Torres said.
Over that same period, Sonndix has cut the number of law firms it works with roughly in half. It has gotten 15% discounts off firms' listed fees and implemented fee caps, "abort fees" and "success fees," Torres said, and begun checking in with its outside lawyers on their work and spending in the middle of each month, rather than at the end of a long transaction or dispute process, which has a tendency to lead to nasty surprises.
Torres said Brightflag was "instrumental" in catching problems early, like law firms exceeding budgets or billing things they shouldn't. Brightflag says its AI technology can learn to decipher lawyers' time records, categorize their work, and enforce a client's rules, such as refusing to pay for the work of first-year associates or for internal communications among a law firm's lawyers.
While some of the legal industry's biggest vendors, like LexisNexis and Thomson Reuters, have products to track and analyze legal spending, new companies like Brightflag and SimpleLegal, which is owned by the enterprise-software company Onit, say their use of artificial intelligence improves the process.
"As terrible as lawyers are with numbers, lawyers will never argue with black-and-white data," Torres said. By using tech to spot issues early instead of arguing about them after the fact, she said, her team is able to have more productive and less emotional discussions with outside counsel.
