24 Hours

Mike Skoler: The Billable Hour is a Disservice to Lawyers, Clients and Justice

Posted Oct 15, 2009 12:00 AM CDT
By Mike Skoler

Michael Skoler

To put this post together, I read some material, thought about my reaction to it, sat down and spent some time writing down my point of view. I edited it, and asked my assistant to proofread it for me, then I sent it out the door (or in this case, posted it).All told, that whole process took me about an hour plus maybe 15 minutes by my secretary for proofing and editing.

If I were a lawyer at a big firm, this blog post would have cost my client as much as $400. That’s a little crazy and I’m not the only one who thinks so.

Paul Lippe the founder of Legal OnRamp writing at LegalRebels.com and Am Law Daily enthusiastically endorses the death of the billable hour. Referencing a recent Wall Street Journal story (sub. req.) about the number of clients who are starting to demand fee for service contracts.

Lippe is a smart guy, and he offers a nice “on the one hand, on the other” analysis while ultimately deciding that the death of the billable hour will likely lead to an increase in value for the firm and the client.

I’m a little more harsh. I’ll say that the death of the billable hour for lawyers is long overdue and totally obvious. The billable hour is a disservice to lawyers, clients and the interest of justice.

If one of our excellent affiliate attorneys spends an hour proofreading a document, that hour costs the same as an hour spent researching a nuanced issue and developing a unique strategy that will help a client. Are those hours equally valuable? Of course not. Yet in too many of our law firms those hours get billed out at the same rate.

There is another model. For decades, plaintiff’s attorneys have taken cases on a contingency basis, receiving fees only when our clients are successful. In the legal world, that arrangement has made us the punchline of countless jokes.

Enter the economic downturn, the tumbling stock market, and widespread and unprecedented massive investor fraud. All of a sudden, companies are lining up for flat fee for service arrangements and starting to question the billable hour. But flat fees don’t necessary solve the problem either.

The problem with the billable hour is that the lawyers have no skin in the game. Whether drafting a contract, or litigating a case, lawyers and the law firms that employ them should be compensated based on the quality of their work and the outcomes for their clients.

That’s the problem with the billable hour. It rewards time spent, not value delivered.

As one legal commentator said: “Winning deserves an A.” When our clients are successful, we earn our fee, when they’re not, we join them in that risk. It’s a better model for our clients.

But it’s also a better model for our system of justice as well. One of the problems with our civil justice system is that it has become a cat-and-mouse game based on ability to pay lawyers and keep litigation going. Basically if you can afford to pay lawyers you can keep your case alive.

But what if you can’t pay, or you don’t know a lawyer? Contingent fee cases allow people with good claims to have their day in court, and they keep lawyers honest too by requiring them to really vet cases before they take them, instead of ringing up billable hours on a case they had no hope of winning.

Oh change is coming. At the moment it’s being driven by clients, but it will not be long before the revolution reaches the masses, and people start to demand that law firms and lawyers get paid for outcomes not hours.

Mike Skoler is CEO of Massachusetts-based Sokolove Law. A version of this essay originally appeared on his firm’s blog. Skoler is known for building Sokolove Law into the largest marketer of legal services in the United States.

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