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  1. #1
    Join Date
    Feb 2007
    Location
    Seattle, WA

    End to Billable Hours?

    http://www.slate.com/id/2180420/?GT1=10837

    ...the companies that pay millions in hourly rates are striking back, forcing their law firms to cut some tough, nonhourly fee deals. If anyone can tame the billable beast, it's the clients who feed it.

    <snip>
    And so Cisco, Pitney Bowes, Caterpillar, and several other large corporations have begun to force their law firms into alternative billing arrangements. The companies push flat fees and volume-based discounts, and ban young associates from working on their business, hoping to avoid paying through the nose for work that could be done more cheaply by paralegals or temp lawyers. They say that by eradicating or at least limiting hourly rates, they avoid cost creep, cut their bills, and better predict their expenses.

  2. #2
    I wish! (It's after midnight on Friday night and I'm still at the office).

    In all seriousness, this sort of thing has been kicked around multiple times in the past by various corporate clients, firms and acadmics and it never really goes anywhere. Heck, when Scott Turow wrote an article for the ABA Journal last year titled "The Billable Hour Must Die" even he was forced to admit its not going anywhere.

  3. #3
    Join Date
    Feb 2007
    Location
    Austin, TX
    HOT BUTTON ISSUE!! As a "big firm" attorney who actually likes my job for the most part, I can tell you that the current "BIGLAW" law firm business model isn't long for this world.

    Associates don't really yearn to be partners anymore. It used to be that partnership was tenure, but now there are "income partners" who are really just high-salaried associates, and equity partners getting de-equitized all over the country. Add to that the fact that senior partners that firms can't afford to de-equitize still get a disproportionate amount of points compared to the work that actually they bring in each year and what's the draw of being a partner?

    On the filp side, you have kids right out of law school with a sense of entitlement that cost more than $2000 a day for 8 hours of work, and they are incentivized to bill as much as possible. If I was in house (and I will likely be soon) I would scour my bills for junior associate BS billing and make my outside counsel eat those costs. Not enough companies do it. More should. I like my salary, and I think I earn it, but I make sure I bill what I actually do. I'm not sure a lot of junior to mid level associates across the country can say the same thing.

    Long story short -- it's a business first and then a service now for BIGLAW and that's wrong. Competition for talent increases salaries, which decreases profits for partner (THE MOST IMPOTANT NUMBER TO A LAW FIRM), so to level that back out, they increase rates AND increase "minimum" hours to get bonuses for associates, which encourages unsound billing practices by associates which, in turn, POs clients.

    Australia's gone to publicly traded lawfirms and England is following closely behind. Fortune 500 is going to figure this out at some point (like the Company's mentioned in the article). I'm very interested to see how professional responsibility rules in the US will react to all of this over the next decade.

  4. #4
    Join Date
    Feb 2007
    Location
    Ashburn, VA
    Quote Originally Posted by DevilAlumna View Post
    Hmmm, interesting. My company is doing this and I was unaware. Oops.

  5. #5
    Join Date
    Feb 2007
    Location
    Close to the Gothic Playground!
    DA (scuba chick),

    ok.

    so, we chose to use a lawyer familiar with our family (a dubious association, actually...he wasn't too popular) to do some work on my mother's estate when she died. he had known my mother for many years and apparently, had represented her in a number of cases (she was very eccentric). the dude took his sweet time in working up the documents and by the time he submitted his 'bill' for services rendered, HE GOT MORE OUT OF THE ESTATE THAN ANYONE ELSE DID, by two decimal places. He knew the balance of my mother's estate, and his fee, when he rendered it, took the balance of the estate down to $8.20. In fact, he earned many thousands of dollars in 'hours' and me, my brother and my sister got $332.00 apiece. And, the three heirs (me, bro, sis) got THAT because I had a yard sale, made about a grand and split it three ways.

    while i was a total gentleman to him and the departure was professional, i still have a very bad taste in my mouth about his charges, his attitude in 'the hours' spent just writing up the documents (it wasn't complex at all but he took months to finish it up), and the last straw was the realization that in order for me and my siblings to realize some meager sum from this whole deal, I'd have to have a yard sale.

    thank you for allowing me to share that story.

    dth.

  6. #6
    Quote Originally Posted by dukestheheat View Post
    DA (scuba chick),

    ok.

    so, we chose to use a lawyer familiar with our family (a dubious association, actually...he wasn't too popular) to do some work on my mother's estate when she died. he had known my mother for many years and apparently, had represented her in a number of cases (she was very eccentric). the dude took his sweet time in working up the documents and by the time he submitted his 'bill' for services rendered, HE GOT MORE OUT OF THE ESTATE THAN ANYONE ELSE DID, by two decimal places. He knew the balance of my mother's estate, and his fee, when he rendered it, took the balance of the estate down to $8.20. In fact, he earned many thousands of dollars in 'hours' and me, my brother and my sister got $332.00 apiece. And, the three heirs (me, bro, sis) got THAT because I had a yard sale, made about a grand and split it three ways.

    while i was a total gentleman to him and the departure was professional, i still have a very bad taste in my mouth about his charges, his attitude in 'the hours' spent just writing up the documents (it wasn't complex at all but he took months to finish it up), and the last straw was the realization that in order for me and my siblings to realize some meager sum from this whole deal, I'd have to have a yard sale.

    thank you for allowing me to share that story.

    dth.
    If you have any desire to try and get your money back from this guy I would recomend requesting his schedule of what he worked on and when for your mother's estate. I believe he is required to keep that information. You can then take it to any other attorney, or even a family friend, and ask them to review it. I hate when an attorney "hoses" a client.

    As for law firms - I am currently getting my LLM in tax at NYU, and finding work is hard. Apparently this is going to be one of the toughest hiring years for big firms in the last 20 years.

  7. #7
    Join Date
    Feb 2007
    Location
    Durham, NC
    Some interesting points here:

    The article points out to a tri-furcation of the business of law - top-tier not changing, bottom tier where lawyers aren't even used, and a middle ground. that sounds more likely than an all-out elimination of billable hours. Good firms should still be able to get their hours payed for.

    The entitled JR associates sounds like a common Gen-Y phenomenon. I heard Gen-Y'ers in Durham complain about making just shy of $50k/yr out of college. Living in Durham. At 23. It irked me, as I have family in New England with 3 kids and they would be pleased to be making $50k/yr. Apparently, many Gen-Yers have a skewed view of how much they should get paid and how much they should work.

    Snip from article:

    Cisco, for example, already pays a fixed fee to law firms for filing patents at the Patent and Trademark Office. The firm's total charge must decrease by at least 5 percent each year, as a firm becomes more efficient; if not, it is replaced with a smaller one willing to take the work.

    At a former employe, a big company tried to pull this "5% cheaper each year" BS with us (training and development company). It baffled me, as the client did not reduce the price they charged clients each year. This idea of 'I'm a big company and your service is a commodity' baffled us, because our profession requires knowledge of the industry and client. Sure, we became more efficient each year, but our perspective was that efficiency was a value-add, not a reason to reduce costs.

    Exiled

  8. #8
    Join Date
    Apr 2007
    Location
    St. Louis, MO
    Quote Originally Posted by dukestheheat View Post
    DA (scuba chick),

    ok.

    so, we chose to use a lawyer familiar with our family (a dubious association, actually...he wasn't too popular) to do some work on my mother's estate when she died. he had known my mother for many years and apparently, had represented her in a number of cases (she was very eccentric). the dude took his sweet time in working up the documents and by the time he submitted his 'bill' for services rendered, HE GOT MORE OUT OF THE ESTATE THAN ANYONE ELSE DID, by two decimal places. He knew the balance of my mother's estate, and his fee, when he rendered it, took the balance of the estate down to $8.20. In fact, he earned many thousands of dollars in 'hours' and me, my brother and my sister got $332.00 apiece. And, the three heirs (me, bro, sis) got THAT because I had a yard sale, made about a grand and split it three ways.

    while i was a total gentleman to him and the departure was professional, i still have a very bad taste in my mouth about his charges, his attitude in 'the hours' spent just writing up the documents (it wasn't complex at all but he took months to finish it up), and the last straw was the realization that in order for me and my siblings to realize some meager sum from this whole deal, I'd have to have a yard sale.

    thank you for allowing me to share that story.

    dth.
    DTH:

    I'm sorry for your loss and imagine that dealing with this type of situation, on top of losing your mother, made things worse. Lawyers of this type give the profession a bad name and are the reason there are so many lawyer jokes out there. Here's a joke that could be about your lawyer:

    Q: What's the difference between a lawyer and a catfish?
    A: One's a scum-sucking bottom feeder and the other is a fish.

  9. #9
    This isn't really new. My firm has been taking cases based on various flat fee arrangements for quite some time. They're not an inherently bad thing, so long as it's a reasonable flat fee for the complexity of the case etc. In some ways it's freeing because we don't have to submit itemized bills to clients detailing each entry with specificity. Makes timekeeping a lot easier.

    Of course you end up getting hosed on some files that mushroom into more time-consuming affairs than anticipated, but on others you end up with a higher effective rate. If you've set the fee appropriately and handled the work efficiently, it all evens out.

  10. #10
    Quote Originally Posted by Matches View Post
    This isn't really new. My firm has been taking cases based on various flat fee arrangements for quite some time. They're not an inherently bad thing, so long as it's a reasonable flat fee for the complexity of the case etc. In some ways it's freeing because we don't have to submit itemized bills to clients detailing each entry with specificity. Makes timekeeping a lot easier.

    Of course you end up getting hosed on some files that mushroom into more time-consuming affairs than anticipated, but on others you end up with a higher effective rate. If you've set the fee appropriately and handled the work efficiently, it all evens out.
    I wonder if/when this debate will surface in public accounting, consulting, etc.

    I work for a Big 4 firm and I think some our larger clients are basically on a flat fee arrangement with the expectation that if there are any client-driven overages they will be charged for them.

  11. #11
    Join Date
    Sep 2007
    Location
    Undisclosed
    Great. This thread is 0.3 hours I'll never recover.

  12. #12
    Join Date
    Feb 2007
    Location
    Washington, DC
    Quote Originally Posted by OldPhiKap View Post
    Great. This thread is 0.3 hours I'll never recover.
    I'm billing this thread to DBR
    Check out the Duke Basketball Roundup!

    2003-2004 HLM
    Duke | Mirecourt | Detroit| The U | USA

  13. #13
    Join Date
    Sep 2007
    Location
    Undisclosed
    Quote Originally Posted by blazindw View Post
    I'm billing this thread to DBR

    I've got this one on a contingency. I'm just not sure upon what it is contingent.

  14. #14
    Just don't go revealing how much that .3 hours would cost. We're unpopular enough already!

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