Cover Story

The Billable Hour Must Die

It rewards inefficiency. It makes clients suspicious. And it may be unethical.

Posted Aug 1, 2007 3:54 AM CDT
By Scott Turow

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Illustration by Jeff Dionise

SIDEBAR: New Routes into the Corporate Door

Three summers ago, my wife and I were driving my two older kids to the airport. The academic year was about to resume. The younger child, my son, was returning to college; the older, my daughter, to law school.

“Say,” I heard my son ask his sister in the backseat, “what do you think you’ll do when you get done with law school?” My daughter expressed some uncertainty but ended up answering, “I think I’ll become a litigator.”

I nearly hit the brakes.

“Oh,” I heard myself moan, “don’t be a litigator.”

My advice to my daughter had the usual effect—another demonstration of Newton’s third law, the one about equal and opposite reactions, a rule that also applies to parental advice. Before the academic year was over, my daughter had enrolled in a legal clinic and tried her first and second lawsuits. It was those experiences, rather than anything she heard from me, that led her away from the courtroom.

But, candidly, I was shocked by my own reaction. Because for the last 20 years I have chosen to continue my occasional role as a litigator, despite having the option not to do so thanks to my literary career. I have always believed that I’ve had a charmed life as a courtroom lawyer. When I left law school, I could not imagine becoming anything other than a litigator. The courtroom was where the law was made, where the fundamental struggle to fit the law to facts took place.

The people writing contracts were, in my youthful view, not much different from consultants. Although I have learned to love and appreciate hundreds of transactional lawyers in the years since, I notice, in looking over my novels, that I have not yet had a hero who is any other kind of a lawyer but a litigator. My protagonists have been prosecutors, criminal defense lawyers, a judge, a tort lawyer, a commercial litigator—even journalists. But no deal guys or gals. In the restricted zone of my imagination, it’s the litigators who are the real thing.

So why is it—given the satisfaction I’ve taken from being a litigator—that some piece of my heart shrieked out in opposition to the idea of my child doing the same?

CONTEMPORARY WOES

I believe what motivated my outcry, in a few words, is that I think it would be hard for someone starting today to have it as good as I have had it. The ratio of pain to pride has grown too high. And the contemporary environment has become much less congenial to aspects of the lawyering craft that deeply pleased me. We all hear the complaints from our colleagues, especially those in my age range who’ve been doing this now for decades. For too many litigators, our life increasingly is a highly paid serfdom—a cage of relentless hours, ruthless opponents, constant deadlines and merciless inefficiencies.

By now it’s obvious that the U.S. Supreme Court’s 1977 decision in Bates v. Arizona, which invalidated on First Amendment grounds the longtime bar on lawyer advertising, was the opening cannon shot that essentially set off the competitive war in our profession. In doing so, it did no favor to lawyers’ lifestyles. The free flow of information about who is making what that soon followed—courtesy of The American Lawyer—ushered in the big-firm star system, in which rainmakers rule. Be­cause they are the lawyers who can most easily set up shop elsewhere, the threat posed by that mobility in turn has cued the struggle in every firm to ensure that incomes remain high, especially at the top of the pyramid.

Not that we, in the bar, have any right to complain. The fierce competition that now characterizes the business of being a lawyer is exactly what the market requires. No matter how much we’d like it to be otherwise, lawyers can’t claim any privilege to live by different rules from everybody else in our economy.

But I still believe that lawyers in general, and litigators in particular, are yet to confront the realistic limits of that competitive environment. And in this regard there is no more vicious culprit than the practice of basing our fees solely on the time spent on a matter.

Dollars times hours sounds like a formula for fairness. What could be more equitable than basing a fee on how long and hard a litigator worked to resolve a matter? But as a system, it’s a prison. When you are selling your time, there are only three ways to make more money—higher rates, longer hours and more leverage. As the years have gone on, the push has continued on all three fronts.

HOURS AMOK

Let me be clear: i don’t think there is anything wrong with lawyers making money. There is a unique satisfaction in representing somebody well and being rewarded for it in a manner commensurate with the effort and skill required. I am not engaged here in a jeremiad aimed at getting litigators to join in vows of pov­erty, or even to agree to make less. I believe enough in the free market to know that if what we ask our cli­ents to pay us wasn’t worth it to them, they wouldn’t continue to do it. My concern is with the external effects of the system we are now following.

Consider, for example, the consequences of dollars times hours for those entering the profession. When I left the government for private practice in 1986, the hours expectation for young lawyers was 1,750-1,800 hours a year in the large Chicago firms. Today it’s 2,000-2,100—even 2,200 hours. And the only real outer boundary is that there are 24 hours in a day—and 168 in a week. Increasingly, if we allow time for trivialities like eating, sleeping and loving other people, it is clear, as a simple matter of arithmetic, that we are getting close to the absolute limit of how far this system can take us economically.

DIMINISHING RETURNS

More tellingly, the prospects for success for lawyers have markedly diminished over the years. Vir­tually all firms today make fewer partners and take a longer time to do it. And the smaller you make the eye of the needle, the more young lawyers arrive on the job as uncommitted nomads: at best, acquiring skills they’ll take elsewhere; at worst, cynically trying to pile up money before the ax falls. But both states of mind alienate them somewhat from the workplace, the colleagues they work with and the clients they serve.

Worst of all, however, is that when somebody is working 2,200 hours a year, he or she has less chance to pursue the professional experiences that nourish a lawyer’s soul. Lawyers of all stripes can and should offer their services for free to the needy, but I find it hard to imagine more satisfying work than pro bono litigation. That is because when you give the poor and powerless access to a just forum, there is a triumph—no matter what the outcome in a case. And the lawyer who is involved in doing that learns an invaluable lesson about the power and goodness that is inherent in being a lawyer.

I don’t know many young lawyers who leave law school without dreams of becoming pro bono princes and prin­cesses; nor is there a dream of youth that seems to die faster. In my own firm, we give young lawyers some billable credit for pro bono time and also have a full-time pro bono partner who works hard to engage the firm’s lawyers in these projects.

And we are hardly alone in the profession; many other firms make similar efforts. These are noble gestures—and ones fully worth undertaking. But it’s still a little like King Canute ordering the sea to roll backward. As long as it’s dollars times hours times partners, we know that the tide will always rise.

Let me again make it clear that I am not calling for lawyers to band together to abandon hourly billing. The antitrust division of the Justice Department would be likely to have something to say about that, and well it should. But I am hoping that lawyers, especially litigators, will more often be bold enough to consider offering clients alternative billing arrangements. And I hope clients will be bold enough to accept them.

Many years ago now, I went shopping for a lawyer in Hollywood to represent me in the dealings I have been fortunate to have with movie and tele­vision producers in connection with my books. Naturally, I asked each of the lawyers I spoke to about his or her hourly rate. One attorney answered, “We don’t bill hourly. We use the fair fee method.”

Then I asked, “Pray tell, what is that?”

“Well,” he said, “we do the work, and at the end we get together and agree about what’s a fair fee.” This sounded to me like an invitation to jump without knowing whether there was water in the pool. “Trust me” is not a persuasive motto. A solid economic relationship ought to start out with both sides understanding the scope of the engagement.

One reason that dollars times hours continues to prevail is because it’s hard to devise a fair alternative. Columbus setting out from Spain, destined, in some minds, to sail off the end of the Earth, probably had a better idea what he was headed for than either a lawyer or a client at the inception of a piece of litigation.

Whatever alternative arrangements are made have to be flexible enough to adapt to changing knowledge and the unexpected. It will take some education and experimentation on both sides. But I think we have reached the point where that is virtually required.

The widespread practice of billing by the hours exists almost in defiance of the principles that are supposed to guide our profession. Of the eight guide­lines mentioned in Rule 1.5 (Fees) of the ABA Model Rules of Professional Conduct, only one speaks directly to the time spent on the legal task. Yet, despite the fact that our profession’s guiding ethical rule encourages lawyers to look to other factors, dollars times hours remains the near universal standard of commercial litigation.

A SORRY SYSTEM

But at the end of the day, my greatest concern is not merely that dollars times hours is bad for the lives of lawyers—even though it demonstrably is—but that it’s worse for clients, bad for the attorney-client relationship, and bad for the image of our profession. Simply put, I have never been at ease with the ethical dilemmas that the dollars-times-hours regime poses, especially for litigators. And in this regard, I think my views depart from what is commonly acknowledged (including, I hasten to add, by disciplinary authorities, who of course have not disallowed the current system).

But from the time I entered private practice to today, I have been unable to figure out how our accepted concepts of conflict of interest can possibly accommodate a system in which the lawyer’s economic interests and the client’s are so diametrically opposed.

Looking again to the Model Rules, Rule 1.7 provides in part that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest,” which the rule defines as occurring when “there is a significant risk that the representation of one or more clients will be materially limited by ... a personal interest of the lawyer.”

I ask you to ponder for just a few minutes whether that rule can really be fulfilled by hourly based fees.

It is fair to assume, of course, that sophisticated cli­ents are fully aware of the hazards of being billed by the hour. But we all know that conflict waivers require more than fair assumptions.

When was the last time any of us actually and explicitly set forth the problems of this system for a client, the way we do with other conflicts? Who ever says to a client that my billing system on its face rewards me at your expense for slow problem-solving, duplication of effort, featherbedding the workforce and compulsiveness—not to mention fuzzy math. Does anybody ever tell a client what the rule seemingly requires?

“I want you to understand that I’m going to bill you on a basis in which the frank economic incentives favor prolonging rather than shortening the litigation for which you’ve hired me.” The truth is that even to imagine that conversation would almost necessarily require the lawyer to be prepared to offer the client an alternative.

I understand some of the counterweights to what I’ve just said. There is more than a little merit to the idea that the market will reward efficient lawyers who labor to hold down their fees in the recognition that this will lead to further engagements. And of course, just like the vast, vast majority of self-respecting practitioners, I can say with conviction that I have never consciously ordered work or labored longer for the sake of increasing my bills. I think that litigators who send out bills are generally as stunned as their clients by the way time piles up.

But let’s not assume this is proof the lawyer reasonably believes the representation will not be materially affected. How many times have you heard a lawyer speak mournfully of the case that settled rather than going to trial, with the resulting detrimental impact on that lawyer’s economic fortunes?

More tellingly, who among us can say he or she has never accused the lawyer on the other side of “running the meter”—of doing unnecessary discovery, filing frivolous motions or foot-dragging before engaging in meaningful settlement talks—all to pad the fee. And that’s not just to make excuses to the client. When we say it, we mean it.

Looking at the lawyer on the other side of the v., we can see clearly how the temptation to earn more might impact a representation. If we can see the effects of the dollars-times-hours system so clearly when we look across the courtroom, how can we be so fully confident about ourselves?

Personally, I doubt that greed is the principal motivation for the overwhelming majority in our profession, including my opponents. First and foremost, lawyers want to believe they have done their utmost for their clients—and it would be a rare attorney indeed who took much satisfaction out of thinking of himself as well-paid but incompetent or undedicated.

Like every other conflict issue, the problem is one of appearances and temptations. But how can anyone ever know exactly why certain marginal tasks were undertaken? Anybody who has ever investigated a case or prepared to try one knows there is no limit to the potential issues, avenues for investigations, questions to be researched, or variable scenarios that the courtroom might offer. Dollars times hours subtly influences lawyers not to ask themselves what’s most probable. It offers scant rewards for discipline.

The more often lawyers find themselves engaged in wheel-spinning, in running out ground balls rather than focusing on the strike zone, the more isolated they feel from the principal goals of the profession, which will always be doing justice. But again, it’s the effect on the lawyer-client relationship that is the principal problem.

FEE FIASCO

As a result of hourly billing, the fee collecting process has grown far more fractious. There are now law firms that specialize in disputing other firms’ bills—and in-house nudniks who demand copious details and then flyspeck them.

Other clients search for means, whether it’s strict litigation budgeting or task-value billing, to put a finger in the dike.

But what does it do to the en­vironment of our profession, to our perception of ourselves and our clients’ perceptions of us, that we are locked into a system in which clients are saying from the start of the relationship: I can’t really trust you to be fair to me. If there is even a grain of truth to that characterization, how reasonable is it to believe that our representations have not been materially affected?

America is ambivalent about lawyers. People are impressed with our knowledge and the power that knowledge gives us, and jealous of it as well. They see us as too often self-seeking, manipulative and greedy. We all know that this is not a balanced picture. Every time I hear about a DNA exoneration on radio or TV, I wait vainly to hear what I know is the rest of the story—about the lawyers, usually an army of them, who worked for years, generally for free, to give that prisoner back his liberty. The story of the lawyer doing good because he or she is committed to doing good is not one of the narrative themes American media are fond of presenting because it’s not something the public wants to hear.

But recognizing how far behind the eight ball we remain in the eyes of the public, should we really continue to engage in billing practices that even our clients, who know us best, have been telling us inspire distrust?

If I had only one wish for our profession from the proverbial genie, I would want us to move toward something better than dollars times hours. We have created a zero-sum game in which we are selling our lives, not just our time. We are fostering an environment that doesn’t provide the right incentives for young lawyers to live out the ideals of the profession. And we are feeding misperceptions of our intentions as lawyers that disrupt our relationships with our clients. Somehow, peo­ple as smart and dedicated as we are can do better.

Sidebar

Read a related story this month, New Routes into the Corporate Door.

Scott Turow, the author of Presumed Innocent and seven other novels, is a partner in the Chicago office of the law firm Sonnenschein Nath & Rosenthal. This article is excerpted from Raising the Bar, a collection of essays by a variety of authors about the modern practice of law, which will be published this month by First Chair Press. For more information, go to the ABA Web store.

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