Plenty’s been written about the evils of the billable hour; how the billable system measures time rather than value and in so doing contributes to inefficiencies and bill padding. But criticism of value billing is harder to come by, and with the exception of David Giacalone’s writings, you don’t find much negative commentary about value billing in the blogosphere.
But just as the billable hour is not perfect, neither is value billing. Consider this recent case involving Greenwich lawyer Gary Cohen. According to this article, Cohen’s former client has filed an a grievance against Cohen for allegedly forcing him to pay a $300,000 bonus for successfully mediating a dispute. The bonus bumped Cohen’s $450/hr rate up to $1500/hr. The article also says that Cohen demanded payment of the bonus in the middle of the mediation, and that Cohen threatened to walk if he didn’t receive it. Cohen denies that he ever threatened to abandon the client.
But Cohen has not reduced his fee requests. Rather, Cohen and his attorneys defend the fee on “value billing grounds.” From the article:
Cohen says he was worth every penny in a complicated case involving more than $100 million and a very needy client. He says he accomplished Zimmerman’s top goal, which was complete control of his company.
Katherine Callahan, Cohen’s attorney, said the additional fee was justified because the mediation was extremely time consuming and avoided a trial that could have resulted in a loss of millions of dollars in assets for Zimmerman. She objected to the state’s calculation of $1,500 per hour. “That is really an inappropriate way of looking at attorney fees,” Callahan said. “Disciplinary counsel is dumbing down the argument to convince the panel something inappropriate occurred here.”
Apparently, a jury did not buy the value billing argument. As reported here, it found against Cohen and ordered return of the bonus.
Having repaid the money, Cohen shouldn’t be subject to
disciplinary action as well. To me, that’s just an added penalty. But the Cohen case highlights some of the soft spots of value billing, particularly that it can be a hard sell for clients. For example, despite what
the value billing experts say, many clients and laypeople feel that
when you pay a lawyer $450 an hour, you ought to expect a job well done
and that you shouldn’t have to pay $300,000 extra to get more value.
And while value billing advocates would argue that Cohen’s error wasn’t to make clear that he’d take a bonus up front, my guess is that if he had, his client would have simply found another lawyer to handle the
The bottom line here, I guess, is that if you do decide to value bill, make sure that your client buys into your value proposition. If not, you may find yourself in Cohen’s position.