– originally posted at Crime & Federalism (Jan. 7, 2005) -
I’m not a psychologist, ethicist, nor economist, but I’ve often played one or more of these roles at my weblog, especially under the guise ofethicalEsq. So, between you and me, I think you should know:
- the legal profession is suffering from mass chronomentrophobia — “a persistent, abnormal, and irrational fear of clocks” — which is often accompanied by an unquenchable plutophilia (love of wealth).
- from the client’s perspective, there is nothing wrong with the billable hour fee system that cannot be cured by the lawyer merely doing what is required of him or her ethically and as a fiduciary: (a) following the standards embodied in Rule 1.5(a) of the Model Code — i.e., basing the hourly rate on the experience and capabilities of the lawyer, complexity of the matter, skill required, customary local charges, time limits imposed, etc.; (b) performing in an efficient and competent manner (with no charges for time spent inefficiently or used to learn the basics in a new area); and (c) keeping the client well-informed [see Intro to ABA Statement on Principles in Billing for Legal Services; fees and the lawyer-fiduciary; Model Rule 1.4(b); and Brickman].
- from the perspective of the overworked associate or partner, there is nothing wrong with the billable hour fee system that is not very likely to be carried over to any alternative billing arrangements, so long as the firm expects the shift to be made without reducing its income or profits, and the lawyer expects the same income. See “fee fie foe and fum”; MyShingle; “Prof. Schiltz’s Sermon as Required Reading;” “Money and Ethics: the Young Lawyer’s Conundrum,” Patrick J. Schiltz.
- Life will not get more balanced for associates, female or male, if the regime of billable hour quotas is discarded, unless it becomes perfectly acceptable for the young lawyer to generate less income without it affecting future partner status. Indeed, if not, and the firm management still expects each lawyer to produce the same amount of billed income, it might get even more stressful — the associate won’t know how to keep score; won’t know if he or she is keeping pace for the year. That might be especially true if fee contracts with clients are based on some post-completion assessment of the “value” or the performance to the client.
- clients expect “alternative fee arrangements” and “value billing” to result in lower overall fees, not higher, “premium” ones or similar fees for less work. [see value billing or venal bilking? and "Brand LEX"; also, "Value Pricing by lawyers raises ethical red flags," which lists aspects of Value Pricing and Value Billing, as used by some of its proponents, that call for ethics scrutiny and guidance.]
[Please excuse my citing to my own materials, but there sure isn't much out there on the blawgs that looks at these issues from a similar perspective -- it's all just complaining about hourly billing and cheerleading over value billing.]
As for ecomonics and the billable hour, I have to disagree with Bruce MacEwan’s assessment two days ago at Adam Smith, Esq (beyond the fact that he wants to avoid issues of ethics in discussing and setting lawyer fees). Bruce’s first complaint against the billable hour is that it is “based on ‘cost of production’ rather than ‘value to client’.” I didn’t go to the Stern School, but I would have sworn that the American economic system is premised on the fact that (workable) competition will yield prices that are based on the cost of production. The real Adam Smith warned us about guilds of sellers, but he surely would have expected a profession with over a million active practitioners to compete actively over price and service, with market forces bringing price down very near to cost.
Bruce says lawyers (and clients) should be able to value their services fairly and readily, giving as an example the ability to reach purchasing agreements on the value/price of a home, which has “almost too many factors” to consider. Of course, a home is a discrete item that already exists, whereas many legal problems are open-ended projects requiring unpredictable inputs and often ending in results that are difficult to evaluate. What Bruce also overlooks is that both buyer and seller have much information readily available — and professionals willing and eager to help — in the market for homes. Sophisticated law clients (who I bet will be trying to figure out the cost of production for a law firm when arriving at a fee) may have lots of information, experience and leverage when dealing with the “value” of legal services, but the average legal consumer does not. It is the inability to make informed pricing decisions that creates the lawyer’s fiduciary duty when setting fees.
As I’ve noted, famed chronomentrophobe Matt Homann suggests, instead of billing by the hour, that lawyers ask a client “What do you think X would be worth to you?” And remember, “X” is not a contract, will, or deed, but rather peace of mind, security, or some other intangible benefit tied to the specific legal service you’ll be providing.”
Homann’s Value Billing approach turns the fiduciary relationship into an auction, where the single potential buyer is unaware of the seller’s knockdown price and has no way to judge whether the object for sale is a valuable antique or a fake. No matter the soothing words and good-feely ambiance, it comes down to playing on the consumers fears and sentiments and then saying “make me an offer.”
In setting fees, the lawyer-fiduciary must act in a manner that puts the client’s interest first. Making sure the client is fully informed when entering into the fee arrangement is essential, taking into account the sophistication level and experience of the particular client. Of course, alternatives to the hourly fee can be ethical and beneficial to lawyer and client, and should be encouraged — because they are a spur to creating the efficiency, innovation, and competition that lead to better client service and lower fees, not in order to lull the client into paying higher fees. As Niki Kuckes describes in “The Hours“, the hourly fee was originally used as a tool for capturing a lawyer’s value, by measuring the use of his “only expendable resource.” There is no reason — other than the profession’s “plutophilia” (love of wealth) — that the fee based on an hourly rate should be feared by lawyers or clients. Let’s stop blaming the billable hour for the profession’s focus on profits over both professionalism and a healthy lifestyle.
p.s. (April 7, 2005) In their book The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professionals, Paul Dunn and Ronald J. Baker,” assert that the billable hour “is simply not an ethical or just method for pricing intellectual capital.” Their assertion is, simply, nonsense. Any lawyer or firm following the practical guidelines set forth in the Introduction to the “ABA Statement on Principles in Billing for Legal Services” can be assured that they are living up to their professional, ethical and fiduciary obligations, when charging an otherwise reasonable hourly fee. The same cannot be said for “alternative methods” of billing that are touted in books, weblogs and seminars as magical ways to achieve premium pricing and increased profits.
afterthought (May 15, 2005): I like The Greatest American Lawyer‘s approach to finding alternatives to the Billable Hour — and to using hourly billing in a more client-friendly and fair manner. Unlike those who pan the billable hour and then substitute higher overall fees through so-called “value pricing,” the anonymous GAL [who has uncloaked and revealed himself to be Enrico Schaefer] looks for ways to give the client better value for the fees charged, and to fit the fee to the difficulty of the task and how well it is accomplished. See his take on Tasked-Based Billing, his new advertising campaign, and this Missouri Bar article.
update & surprise re GAL: See my post “GAL’s Alternative Universe” (Feb. 5, 2009), which responds to Enrico Schaefer’s attacking and greatly distorting my position on the ethics of Value Billing (despite the kinds words I said about him above).
disclaimer: No regular reader of this weblog is likely to accuse the Editor of supporting the structural billable-hour abuses perpetrated by many law firms, through their explicit or implicit quotas of 2000+ hours per year. In case you are new to this weblog, however, or would prefer to merely brush off the above arguments on ethical billing as the ravings of a BigLaw Apologist, please browse our ethics resource pages on Fees, and Professionalism, and check out posts such as Sanction This (Firm)!, “Prof. Schiltz’s Sermon as Required Reading;” and even NYT scapegoats the billable hour (March 19, 2006).
updates: See our post “Presumed Ignorant: Scott Turow on the Billable Hour” (July 27, 2007). Also, see our round-up of ideas and links: “broadening the hourly-billing debate — consider yourself, your clients and your ethics” (Aug. 18, 2007).
- And, see our parting essay on fees “Understanding and reducing attorney fees” (Feb. 28, 20090.
in my thicket
they’re out of time…
people without hoes
the sake gone
time to buckle down
even my plum tree
in its own sweet time