Comments on: Valuable Debate on the Ethics of Value Billing http://blogs.law.harvard.edu/ethicalesq/2004/01/31/valuable-debate-on-the-ethics-of-value-billing/ breathless punditry and one-breath poetry with David Giacalone Wed, 08 Oct 2008 09:35:11 +0000 http://wordpress.org/?v=2.5.1 By: Dave http://blogs.law.harvard.edu/ethicalesq/2004/01/31/valuable-debate-on-the-ethics-of-value-billing/#comment-5185 Dave Mon, 02 Feb 2004 19:23:39 +0000 http://blogs.law.harvard.edu/formerlyknownas/2004/01/31/valuable-debate-on-the-ethics#comment-5185 <a></a> David, Thank you for the thoughtful response. However, I think that your response still assumes that the billable hour is a fair method of charging a client for a lawyer's services. I think the debate might really hinge on the following question: What is a lawyer's product? If your answer is "time," then I would be forced to agree that the billable hour is the fairest (and possibly the only fair) way of determining an attorney's compensation. But what if the answer is "advice" or "consultation" or "a will" or "a home sale"? Why is the billable hour the fairest method of determining the value of those products? Why can't I charge a client $1500 for an LLC and see if the market will bear that price? If I charge all of my clients $1500 for an LLC, how is that price discrimination? I look forward to hearing your thoughts on this issue. Cheers, Dave

David,

Thank you for the thoughtful response. However, I think that your response still assumes that the billable hour is a fair method of charging a client for a lawyer’s services. I think the debate might really hinge on the following question: What is a lawyer’s product?

If your answer is “time,” then I would be forced to agree that the billable hour is the fairest (and possibly the only fair) way of determining an attorney’s compensation.

But what if the answer is “advice” or “consultation” or “a will” or “a home sale”? Why is the billable hour the fairest method of determining the value of those products? Why can’t I charge a client $1500 for an LLC and see if the market will bear that price? If I charge all of my clients $1500 for an LLC, how is that price discrimination?

I look forward to hearing your thoughts on this issue.

Cheers, Dave

]]> By: Stuart Levine http://blogs.law.harvard.edu/ethicalesq/2004/01/31/valuable-debate-on-the-ethics-of-value-billing/#comment-5176 Stuart Levine Sun, 01 Feb 2004 03:34:08 +0000 http://blogs.law.harvard.edu/formerlyknownas/2004/01/31/valuable-debate-on-the-ethics#comment-5176 <a></a> David (yes I'm back)--I think that value billing is as problematical as time billing. Let me give some examples: 1. I have spent a good deal of time putting various forms in HotDoc templates. It seems to me that my time in creating these templates is best viewed as invested capital that I deserve a return on when I make a "sale." 2. The problem with saying that time is time is time is that when I perform a service using my HD templates I justifiably deserve compensation not only for my time spent in using the template, but also compensation representing a return on my invested capital. (BTW, since all legal forms have a limited useful life, this return is not only interest, but some form of amortization of the "principal" cost. And I don't see why I can't demand a profit. Certainly, if I created a work of artistic merit that I could copyright I would be entitled to charge for the product each time I "sold" it.) 3. On the other hand, what is a "reasonable return?" My guess is that a reasonable price on a flat fee project is much easier for the client to gauge than hourly billing. After all, to some extent the lawyer is taking a downside risk that the job will not become an excessive time drain. Because the price is fixed, the client can weigh whether going forward makes sense in the context of his or her risk/reward calculus. If I could, I would flat bill everything. (One of the problems with flat billing is that the clients pick up on it fairly quickly and take advantage of the situation, chewing up time since there is no marginal cost.) However, certain things cannot be flat billed. What does it cost to do an LLC operating agreement for instance. Well, a single member LLC operating agreement is simple. After that, the cost is somewhat open-ended since the bells and whistles that clients want/demand are almost unlimited. In any event, just some thoughts.

David (yes I’m back)–I think that value billing is as problematical as time billing. Let me give some examples:
1. I have spent a good deal of time putting various forms in HotDoc templates. It seems to me that my time in creating these templates is best viewed as invested capital that I deserve a return on when I make a “sale.”

2. The problem with saying that time is time is time is that when I perform a service using my HD templates I justifiably deserve compensation not only for my time spent in using the template, but also compensation representing a return on my invested capital. (BTW, since all legal forms have a limited useful life, this return is not only interest, but some form of amortization of the “principal” cost. And I don’t see why I can’t demand a profit. Certainly, if I created a work of artistic merit that I could copyright I would be entitled to charge for the product each time I “sold” it.)

3. On the other hand, what is a “reasonable return?” My guess is that a reasonable price on a flat fee project is much easier for the client to gauge than hourly billing. After all, to some extent the lawyer is taking a downside risk that the job will not become an excessive time drain. Because the price is fixed, the client can weigh whether going forward makes sense in the context of his or her risk/reward calculus.

If I could, I would flat bill everything. (One of the problems with flat billing is that the clients pick up on it fairly quickly and take advantage of the situation, chewing up time since there is no marginal cost.) However, certain things cannot be flat billed. What does it cost to do an LLC operating agreement for instance. Well, a single member LLC operating agreement is simple. After that, the cost is somewhat open-ended since the bells and whistles that clients want/demand are almost unlimited.

In any event, just some thoughts.

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