Law Practice Management
Billable Hour Hullabaloo is ‘Overblown,’ Drinker Partner Says
Posted May 21, 2009 1:30 PM CST
By Rachel M. Zahorsky
The law firm paradigm is transforming. The billable hour is dead. The legal landscape as we know it will continue to shift in the coming months, consultants and industry experts say.
Or, maybe not.
Last week, we reported on a recent survey that said most law firm leaders aren’t quickly embracing drastic management overhauls. Other partners we spoke to say tried-and-true law firm models aren’t going down without a fight.
“The billable hour is an overblown issue,” said Drinker Biddle & Reath managing partner Ed Getz, in an interview with the ABA Journal. Getz, who is regional partner in charge of the firm’s Chicago office, said clients are more focused on capping total fees and increasing their input on attorney staffing than abandoning the rate-multiplied-by-time standard. “There’s not as much movement away as you would think.”
While demand for projected monthly rate totals on matters has increased due to tighter outside counsel budgets, the billable hour remains a familiar and comfortable billing mode for clients, he added.
Plus, Getz questioned whether firms that have made precipitous attorney and staff cuts might end up ill-equipped when the markets begin to recover. “If firms are too draconian in adjustments,” he warns, “they might not be prepared when the economy shifts.”
That's not to say that there's room for improvement.
“Is the economy a firm-model changing event?” asked Bryan Schwartz, a founding partner and chairman of Chicago-based Levenfeld Pearlstein, “I certainly hope so.”
However, Schwartz, who bills himself as a businessman who happens to be a lawyer, expressed frustration at getting clients, and some lawyers, on board with change. “Clients still can’t break away from hourly billing,” Schwartz said in a recent interview.
Instead of using knowledge and experience to determine what they should be paying for outside legal services, and bringing those estimates to the table, Schwartz said many in-house clients remain transfixed by asking for discounts on hourly rates.
“In-house lawyers should know what things cost,” Schwartz said. “The onus is on the clients and the law firms,” to ensure work is performed efficiently, he added.
Although Schwartz says the climate is right to streamline the entire legal industry, he also remains doubtful change will come easily. “The problems are so pervasive that, if made, the change required is phenomenal.”
Arthur Hahn, the national chair of Katten Muchin Rosenman’s financial services practice, said his firm will continue to increase associate training and invest in technology to increase value to clients. But, the democratic partnership structure at the core of the legal profession will survive.
Said Hahn, “The practice of law is a profession, not simply a bottom-line business."
Related ABAJournal.com posts:
BigLaw Aided ‘March of Dunces’ That Destroyed Economy, Yale Law Grad Says
Layoff ‘Herd Mentality’ Ignores Greater Savings of Pay Cuts, Prof Says
- How B of A’s GC Got Fired: Leave Now, and Leave Your BlackBerry Behind
- Schools Ranked by 'Super Lawyers' Produced
- Law Firm Price Wars Break Out as Some Try ‘Loss Leader’ Bids for Work
- Five Questions for Law Firms Abandoning Lockstep Compensation
- Judge Jails 2 Attorneys for Contempt in 4 Days
- Reed Smith Will Ask Nonequity Partners to Pony Up Possibly 15% of Pay
- Court Deputy Ordered to Apologize or Face Jail After Taking Lawyer's Paperwork
- Skadden Jumps on the Bonus Bandwagon
- ABA Executive Director Resigns
- Nasty Attitude to Co-Worker, Naughty Word in E-Mail Cost 2 Their Jobs
Should Supreme Court Justices Be Able to Review News Accounts Before Publication?
Comments
B. McLeod
May 21, 2009 1:49 PM CST
“Law firm leaders” are nearly as mobile and as flexible as glaciers.
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OhMy
May 21, 2009 3:12 PM CST
Is that Drinker Partner or Drinking Partner? Sounds like the latter.
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Cellman49
May 22, 2009 6:54 AM CST
What law firms seem to faill to realize is that the marketplace decides how they will get paid. The law firms are at the mercy of the free market place.
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Jeff
May 22, 2009 7:36 AM CST
The Drinker partner is right. The legal field will still be using billable hours when we retire. Of course, there are certain areas where billable hours are not the most popular billing form. But if the billable hour was not the best method to be used for most areas, the industry would have moved to another method decades ago, with or without a recession. To think otherwise presumes there was a conspiracy between 100,000 law firms and 100,000,000 clients to fight “the market”.
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kd
May 22, 2009 8:26 AM CST
For 15 years (as long as I’ve practiced law), there have been those routinely hounding about the inefficiencies and pitfalls of the billable hour. If your in-house, this is really code for, “How can I save money on these lawyers; I don’t like paying them to begin with.” If you are at a law firm, this is a business development tactic—that’s it—and some of these “alternative” arrangements are often a disguised way to actually earn more for the firm, not to save clients on the bottom line. The truth is that, as Jeff (above) points out, there is a very liquid and free market that sets the billable rate and the cost of a lawyer for any given area of the law, specialty or demand. Lawyers charge what the market will bear and charge in the manner demanded by the client. With some perhaps very rare exceptions, there is no firm or small group of firms in any area of law with any “power” to control prices or efficiencies. If you want something cheaper or more efficient, you have to change the legal system itself. That’s the fundamental problem. Why is there is such a high demand for lawyers to begin with, and why are laws and legal problems becoming ever more difficult to navigate that you need to shell out so much? Convince Congress and the state legislatures to eliminate the unnecessary, overlapping, wasteful or redundant laws for which lawyers are required so that their clients don’t end up fined, sued or in jail. Get judges, hearing officers, arbitrators, etc., to act more quickly and decisively, and to do so with less required paper and lawyer time.
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Kalifornia Arnold
May 22, 2009 9:27 AM CST
It would appear that billable hours aren’t the only thing the Drinker partner is trying to get down. Maybe, in his case, billable hours should be “happy hours” (something he could really make a case for)
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Stone
May 22, 2009 12:46 PM CST
The Billable Hr is dying, though it will never completely die off.
It is anything but surprising that the old guard is slow to see the light and embrace any change. These are, after all, attorneys.
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William A. Wheatley
May 23, 2009 10:18 AM CST
Working as an expert, I bill sometimes based on hours expended, and sometimes on a lump-sum-per-task basis. Using any means other than billable hours is risky for me, and I do it only when I can project accurately the number of hours that will be required for a specific task. I recently had two very similar cases. One took over 500 hours. The other took barely 50. Both went up to the moment of trial and then settled. Both initially had the same volume of documents to review before writing the expert report. It was the time after expert report and before trial that made the difference. Billable hours as a significant basis for billing will never go away.
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B. McLeod
May 26, 2009 8:18 AM CST
I think the “Drinker partner” is like a “sin-eater,” and would be the partner designated to take care of all the liquor that clients and other firms send as holiday gifts, so that the firm’s other lawyers can work without impairment. I have heard that some firms have also acquired “Hunton partners,” who look for mislaid files and other missing items so that the other attorneys won’t be distracted by that. Some have also hired “Baker partners,” who, I suppose, deliver cupcakes so the firm’s other attorneys don’t have to leave their offices to get them. I have not figured out yet what “Skadden partners” do, but a number of firms seem to want them.
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Philip
May 26, 2009 6:51 PM CST
as plaintiff’s lawyer: I can tell who among my opponents is billing by the hour, and who is paid a flat fee or an in-house atty working on salary.
Sometimes that’s good, or bad, depending. At the extremes, the billing firm will churn a file and settle at the end for 3x what the work should’ve cost their client; or, the flat-fee lawyer will fail to jump through all the hoops and I will get better results than I should’ve.
With good billing judgment on the part of lawyer and client, the billable hour is a good way for clients to get value.
If you want to get rid of it, though, that’ll be just fine by me.
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Grace
May 26, 2009 11:15 PM CST
The Drinker attorney isn’t promoting the billable hour—he’s just saying that it’s an overblown issue and that the billable hour system isn’t going to be going away any time soon. And I agree with him.
Billable hours are tough—not just on clients, but also on the lawyers serving them. Even before the economy tanked, it was tough to meet client demands. A flat fee or similar system would work, but only if it benefits both clients and outside counsel. Otherwise, there would be no motivation for outside counsel to work as hard as they do now (often giving up their nights and weekends and even their personal and family time to meet client demands). Under the alternative system, while clients would have to pay less than the amount corresponding to the time spent by outside counsel on some projects, clients would also have to be willing to pay more for other projects, in order to balance the interests of both parties. But, it seems unlikely that many (or likely most) clients would be willing to pay more. In sum, it’s not just up to outside counsel to change the billable hour system, but up to their clients as well. It’s simple supply and demand economics.
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