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The Problem With the Billable Hour…Or the Problem With Lawyers?

by Carolyn Elefant on July 24, 2007 · 14 comments

in Business Models, Legal Profession Trends

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Novelist and lawyer Scott Turow takes aim at the billable hour in this provocative piece, The Billable Hour Must Die, featured as (of all places!) the cover story of this month’s ABA Journal (more on the redesign in another post). Turow acknowleges the usual litany of criticisms of the billable hour: the toll that the billable hour takes on our lives and the inefficiencies created. But he also goes a step further, and makes the case that the billable hour is downright unethical because it creates a conflict between the lawyer’s interest in earning more money and the client’s interest in a reasonable fee and quick resolution of a matter. And Turow offers good evidence to support his case, pointing out:

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?

While Turow’s view on the billable hour is accurate, his diagnosis makes me wonder whether any nilling system can ever align the lawyer’s interest and the clients if lawyers are most interested in maximizing profits rather than protecting their client’s financial interest. In my own case, I have billed by the hour and I have billed through use of flat fees and alternate billing. Yet even billing by the hour, I’ve never once recommended that a client undertake an unnecessary task or use a more complicated process when a simpler one was available just to increase my bill. If lawyers are driven by maximizing revenue, then any system – be it the billable hour or alternative fees won’t bring relief, because lawyers will simply find another way to squeeze more money out of clients.

Perhaps the better way to resolve the ethical problems that arise when lawyers bill clients is through reference to another ethical obligation that we lawyers have: our fiduciary duty to our clients. Basically, in a fiduciary relationship, our client’s interests come before our own. Until lawyers start realizing that we owe special duties to our clients because of our fiduciary relationship, not to mention our ethical responsibility, there isn’t a billing practice in the world that will produce reasonable and fair fees – and let us sleep guilt free at night.

  • anon

    The hatred of the billable hour is misplaced. All labor–worldwide–is compensated by time. The problem in the profession of law is inflated rates or hours on invoices.

  • anon

    The hatred of the billable hour is misplaced. All labor–worldwide–is compensated by time. The problem in the profession of law is inflated rates or hours on invoices.

  • Anon2

    If all labor is compensated by time, then surgeons and doctors that perform routine medical procedures must be making the effective rate of oh $5,000 to $10,000 per hour.
    For that matter real estate brokers could be making even more.

  • Anon2

    If all labor is compensated by time, then surgeons and doctors that perform routine medical procedures must be making the effective rate of oh $5,000 to $10,000 per hour.
    For that matter real estate brokers could be making even more.

  • elguapo

    I disagree that “all labor is compensated by time.”
    Some people are paid commissions; some people are paid piece meal; and some people are paid salaries.

  • elguapo

    I disagree that “all labor is compensated by time.”
    Some people are paid commissions; some people are paid piece meal; and some people are paid salaries.

  • anon3

    Nice insight Carolyn. I believe Turow is a smart guy, but eliminating hourly billing does not eliminate the conflict. Once you choose another billing method, the conflict arises in a different manner.
    Flat fee? The same conflict arises over scope & the quality of work.
    Contingent fee? Same.
    Why can’t PI plaintiffs get their lawyers to take their calls? Because the lawyer is paid nothing to do it.

  • anon3

    Nice insight Carolyn. I believe Turow is a smart guy, but eliminating hourly billing does not eliminate the conflict. Once you choose another billing method, the conflict arises in a different manner.
    Flat fee? The same conflict arises over scope & the quality of work.
    Contingent fee? Same.
    Why can’t PI plaintiffs get their lawyers to take their calls? Because the lawyer is paid nothing to do it.

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