Blame it on this nearly week-long flu virus of mine, if you must. While the blawg world is abuzz with discussion of Sunday’s Boston Globe article “Beat the clock: A Boston law firm says no to billing by the hour, and its clients say they are pleased” (October 8, 2007), I’d really rather be thinking about pumpkin haiku than hourly billing. (In truth, a nice long nap or two would be my preferred activity this afternoon).
pumpkin patch –
this one is big enough
for my son………………… by Yu Chang, from Upstate Dim Sum (2005/1)
The Globe article focused on the Shepherd Law Group, as did a swarm of posting that is collected by Jay Shepherd himself at his Gruntled Employees weblog (via LegalBlog Watch; ABA Journal news). Jay says “Our up-front pricing places our interests squarely aligned with our clients’ interests, which makes them happy and forces us to be more efficient.” And the “Amen, Hourly Billing is the Devil’s Spawn” chorus is at it again. Thankfully, Carolyn Elefant again tries to focus on the most important issue: What do clients want and how do we best serve their interests? After noting that even value-billing guru Ron Baker stresses that “It’s up to law firms, not their customers, to make this change. It simply won’t happen any other way,” Carolyn asks:
“If value billing benefits clients, then why do we lawyers need to sell them on it? Have clients become so entrenched in the billable-hour concept that they don’t realize that there’s a better way? Or is value billing another way for firms to charge more for the kind of value that as lawyers we’re obligated to provide anyway?”
I’m going to Plead the Fifth (day with the flu), and refuse to deal at length with this topic at this point in time. [For some depth, and lots of links, on the issue of hourly billing — and the ethics and practicalities of alternatives (and even what makes Ron Baker tick) — see my August 18th post on broadening the hourly billing debate.] Instead, I will point out a few important ideas for the law firm or law client to keep in mind, when thinking about the pros and cons of hourly billing and alternatives such as flat fee or value billing:
- Billing by the hour does raise the issue of law firms doing too much (being inefficient) because they earn more by doing more, but pricing in advance through a flat fee inherently creates the potential of doing too little for the client, since more effort won’t earn more money and less effort won’t (immediately, at least) reduce the size of a bill.
- A too-busy lawyer or law firm (and the best almost always are too busy) has no particular incentive to do unnecessary work for a client when billing by the hour; but, a too busy lawyer has plenty of incentive to do less for a client when a fee is fixed in advance.
- When an hourly-billing lawyer does extra (“too much” or perhaps “unnecessary”) work for a client, the result is often a better-written pleading or contract, or a better understanding of precedent; when a flat-fee-billing lawyer does “too little” (cutting corners or eliminating tasks), the result is very likely to be lower quality work product and possible injury to the client’s interests.
- As always, it is important to distinguish condemnation of high billable hour quotas for each attorney, which are set by law firms, and which raise many ethical red flags, from billing by the hour, which is not inherently unethical. And,
- What might be good or fair for savvy clients, who have lots of experience with lawyers and legal problems and offer the potential for significant repeat business, may not be automatically fair for clients who have little relevant experience and, therefore, may have no real idea how much work is required, what a reasonable fee would be, how difficult or unusual their situation is, nor how qualified a law firm is to handle the matter. In many situations, they also won’t be better able to judge the quality or value of the services even when they are completed.
a giggling coven–
stunted pumpkins
left in the patch
………………………………… paul m. (3rd place, Shiki Kukai, Nov. 1997)
Before jumping with both feet on the Flat Fee (or Flat Earth) Bandwagon, clients and lawyers need to remember the roots of the practice of hourly billing — which grew out of discontent with a system largely built upon flat fees and “eyeballed” billing [see, e.g., The Hours, Niki Kuckes, Legal Affairs, Sept-Oct. 2002]. Also, remember that most lawyers will construct a flat fee by estimating how many hours of attorney time a client or a project is likely to require — and making sure the law firm is not being shortchanged by the guestimate. (Thus, Jay Shepard says “his fees for unlimited legal advice range from $1,000 to $30,000 a year, depending on a client’s legal needs.”) It comes down to trust between the client and the lawyer — and, most clients will want to be able to “trust but verify.” How will you verify that you are getting your money’s worth?
One tip: If a flat-fee or value-billing lawyer, who wants to be hired by you, is only telling you the good things about alternatives to hourly billing, and only the bad things about paying by the hour, you should think long and hard about whether you are dealing with a trustworthy lawyer who puts your interests first. If he or she won’t give you an estimate of how much actual lawyer time will be put into your matter, run.
One more tip: If you want to see more pumpkin haiku, click here.
afterthought (10 PM, Oct. 10): I’ve often thought that the Amen Chorus Against the Billable Hour is a great example of a few people with a financial incentive artfully stoking an inbred dislike for a particular topic or phenomenon into a wrongheaded Any-Change-Must-Be-Good movement. That notion kept poking its way into my psyche the past two days, after seeing John Tierney’s Findings article yesterday, in the New York Times, “Diet and Fat: A Severe Case of Mistaken Consensus” (New York Times, October 9, 2007). Tierney raises the important concept of the Informational or Reputational Cascade, and just how easily “large groups of people can reach a ‘consensus’ without most of them really understanding the issue: Once a critical mass of people starts a trend, the rest make the rational decision to go along because they figure the trend-setters can’t all be wrong.” The primary culprit is turning acceptance of a notion into a binary choice — for it or against it — with no room for nuanced partial acceptance.
See his follow-up Tierney Lab weblog posts on the Low-Fat Diet Cascade (Oct. 9, 2007); and on Schopenhauer on Cascades (Oct. 10, 2007). And, for more information, go to Informational Cascades and Rational Herding: An Annotated Bibliography and Resource Reference (by Sushil Bikhchandani, David Hirshleifer, Ivo Welch, who wrote the seminal paper on informational cascades).
The economics, ethics and practicalities of billing for lawyer services should never be seen as yes-or-no propositions. Far too much depends on the factual circumstances and on the traits of the people involved (lawyer and client). By constantly attacking and deriding anyone who points out that there are pros and cons to every billing method, those with a stake in killing the billable hour are trying to create a forced binary choice — one that is likely to hurt those with the least power in the marketplace for legal services: the unsophisticated (or un-wealthy) client and the inexperienced and easily-replaced young attorney.
pumpkins rumble
in a passing pick-up…
october sunset
……………
pumpkin field
i look back on the face
of a summer love
………………………… .by ed markowski