It’s nice to know that at a time when law firms are feeling financially squeezed, and hiring has been greatly reduced, one firm still seems to be able to write its own ticket.  That firm would be Wachtell Lipton, whose M&A billing practices were exposed in a lawsuit by Carl Icahn alleging that Wachtell committed malpractice in the course of its representation of a target company that – unsuccessfully – sought to fend off Icahn’s takeover bid.

As the American Lawyer reports, Wachtell does not charge hourly rates to its M&A clients, nor does it provide a breakdown of “services or details as to particular lawyers and hours.”  Instead – according to its fee agreement – it apparently selects a fee based on its own internal calculations of the value of what it has accomplished, taking into account “the intensity of the firm’s efforts, the responsibility assumed, the complexity of the matter and the result achieved.”  Though it claims not to base fees on deal size, it informs clients that fees tend to be approximately 1% or more of deal size for matters under $250 million, and 0.1% or less on matters over $25 billion.

The interesting thing about Wachtell’s fee practices is that they are, in fact, old school – as James B. Stewart recounts, back in the day, this is precisely how Cravath used to bill its clients.  And if the clients wanted more detail as to how the fee was generated, well, according to one Cravath partner, “That’s not the kind of client we’d want to have.”

Still, in today’s world, Wachtell’s practices are very unusual.  One M&A partner at a rival firm told American Lawyer that “The rest of us are enduring increased scrutiny and fly specking [from clients].  It’s not that the rest of us are suffering, but these guys are getting away with something that no one else gets away with.  They operate in a different world altogether.”

That said, Icahn's lawsuit is certainly unusual – and Wachtell claims that it's intended to intimidate the firm with respect to future deals.  After all, it would be a helluva deterrent against vigorous representation of takeover targets if, after a failed defense, the acquiring firm – now in control of the target – refused to pay its legal bills.