The Alternative Billing Practices of the Esteemed Mr. Lipton

You will recall that a few weeks ago, the Wall Street Journal Law Blog reported that a number of "high powered" New York City attorneys--including Simpson Thacher partner and insurance industry lackey Barry Ostrager, among others--will be increasing their rates to more than $1000 per hour. In the weeks since this article ran, without a doubt, the number one query we've received over here at the Poison Pill has been: "hey, why wasn't Marty Lipton included on that list," or some similar such derivation. Well, we'll tell you!

Legal legend has it that for some time now, Marty Lipton has eschewed "traditional billing mechanisms," instead, attempting to arrive at newer and more streamlined ways to bill his clients. Sure, when he started practicing back in the 1960's, he charged an hourly fee (a whopping $75 per), but with the onset of M&A fever back in the early 80's (a fever which coincided with the breakup of Lipton's barbershop quartet, which begs the question--which came first, the quartet or the corporate takeover?), Lipton quickly discovered that there were more effective ways to make money as a high-powered corporate lawyer than by using the usual "hourly rate."

In 1982, Lipton and a corporate client agreed that instead of using typical, by-the-hour legal fees, WLRK would be remunerated with a percentage of stock in the transaction WLRK had been structuring. At the end of the day, when the deal closed, WLRK, as a result of Marty Lipton's sheer genius, walked away from the deal with over $20 million dollars in stock (as opposed to the measly few hundred grand they would've billed in hourly legal fees), which it then liquidated, at a substantial profit. It was no wonder then, a few weeks later, when WLRK's second largest conference room was morphed into a video arcade, complete with a brand new Galaga machine, Frogger, Ms. Pac Man, Donkey Kong, and a Pool table that can also be used for ping-pong when covered with a large piece of plywood (also generously included as a result of Mr. Lipton's windfall).

In the years that followed, it is said that Mr. Lipton eschewed the billable hour billing model in his corporate practice altogether, instead opting only to take on deals in which he and his firm could "share in the action." From 1982-1990, Lipton supposedly earned well North of $450 million dollars in fees for the firm as a result of such "alternative" billing arrangements. This, of course, goes to explain the brand new "Scotch Guard" carpeting that was installed throughout WLRK's office hallways back in 1988.

It was also during the late 80's that other attorneys began to take notice of WLRK's good fortune (it was really really nice carpet), and opted to follow Lipton's lead and structure alternative billing arrangements of their own. It should be noted, however, that Lipton's partner Herb Wachtell--head of WLRK's esteemed "lemon law practice group" (now suing any Richmond County auto dealership!)--is rumoured to have disagreed with Lipton's innovative billing techniques, and as such was never one of those other attorneys. Indeed, we have it on information and belief that the venerable Wachtell, unlike his esteemed partner, has always charged an hourly rate (or a full day "per diem" rate for EBT's in any of the 5 boroughs).

But as we know all too well, capital markets worldwide took a downturn in the early 1990's, drying up the M&A transaction well, and forcing many a good corporate attorney who had copied Marty Lipton's groundbreaking alternative billing mechanisms, to move back to the traditional hourly-billing model. As we've explained before, it was during this period that Marty Lipton found some downtime, which he used to focus on some unexplored hobbies--including taxidermy, salsa dancing, and Mexican style cooking. But what most folks don't know, however, is that while other attorneys were returning, with their tails between their legs, back to the billable hour, Marty Lipton was stretching the bounds of the attorney-client billing model like it had never been stretched before. Having netted well over $4 billion dollars from sale of the stock WLRK had earned as compensation as lead attorney on a number of lucrative securities transactions in the late 80's, Lipton found himself less interested in money, and more interested in other types of opportunities. It was during this time that Lipton began to accept "interesting barters" rather than "money," as payment for his services. It is said that in exchange for services rendered under his "barter" system, Lipton received, among other things, a signed, autographed Dale Earnhardt racing helmet, the original ruby slippers from the movie the Wizard of Oz, and a lifetime supply of Orville Reddenbacher's "southern style" popping corn.

But it wasn't until 1993 when Lipton wowed the entire legal community when he opted to test the bounds of the legal concept of "consideration" by accepting nothing but a peppercorn in return for his services defending a large auto parts conglomerate from a potential greenmailer! That's right, you heard us, a single peppercorn as payment for over 200 hours of legal services performed! In the months that followed, Lipton went on to accept only a "hawk" for structuring a large securities deal, and a "robe" for defending a small boutique investment bank from an LBO takeover attempt, not only to further test the concept of consideration, but as one has pundit noted, "just because [he] could."

The nature of Lipton's billing practices of late are highly confidential, and as such, unknown to our myriad sources in the legal community. But if there is one thing we do know, it is that Marty Lipton is always one step ahead of everyone else--which means that he is, as we speak, no doubt employing newer and even more inovative billing methods than have ever been conceived by the human mind; further proof that Mr. Lipton may indeed, be superhuman.