Alternative Fee and Billing Arrangements – Wachtell Edition

This is why they’re Wachtell, and you’re not.

NYTimes DealBook posted the engagement letter from famed corporate law firm Wachtell, Lipton, Rosen & Katz to CVR Energy, Inc. They were engaged to help CVR defend against a takeover from Carl Icahn. They lost.

What is most interesting about the letter is the fee structure. Most attorneys bill per hour. Some litigators bill on a contingency basis and take a percentage of the judgement, if any.

Wachtell takes an initial up front fee (not a retainer). For CVR, it was $200,000. They also estimate, but do not charge (they say), fees that are typically 1% or more on smaller matters ($250 million and less) and .10 of 1% or less on matters over $25 billion. They may also get expense reimbursements.

Per the dreams of other lawyers, they do not provide long-form descriptions of services or detail hours.

When I went solo, part of the reason was to reduce my hourly rate. In addition, I was also offered the opportunity to take equity in some cases, and in some cases I would accept. Wachtell shows that you can creatively structure fees apart from the per hour norm.

In their case, the percentage structure also deals with one problem corporate lawyers have always faced: Investment Banker Envy.