Category Archives: Miscellaneous
Video post: Coming to you tonight in HD!
Let me know what you all think about the new Logitech HD Pro Webcam and the Samson Go Mic Portable Condenser microphone … and the video in the comments below! Cheers!
Introducing dangoldesq 2.0 …
Hello, world! I’m proud to unveil dangoldesq 2.0 – my new Tumblr blog that services as the perfect extension of this site designed to capture all those moments worth sharing! Let me know what you think – and enjoy!
dangoldesq 2.0
The Billable Hour: Is it Time for an Extreme Makeover?
The debate over the billable hour is nothing new. However, the economic downturn has forced the issue to the forefront of many conversations in conference rooms and client dinners alike. The recession has evoked a renewed enthusiasm in determining how lawyers are paid for their services, and whether alternative billing arrangements should take hold over the traditional and sometimes misinterpreted billable hour.
To put this in better perspective, a brief review of the billable hour can help focus the argument. Robin Muir, Esq., of the Law People; Better Law Practice Through Better People Management blog, writes in her post, A Short History of the Billable Hour and the Consequences of Its Tyranny:
“During the 1800s, US legal fees were capped “per service” by state law, and litigation fees were usually paid by the losing party. Some lawyers were able to collect “bonuses” or charge retainers to circumvent the limitations of capped fees. In 1908, the ABA declared contingency fees to be ethical, which opened a new source of revenue at least for litigation matters … the ABA Model Code, which stayed in effect until 1969, declared it unethical to ‘undervalue services’ … in 1938 of the Federal (and many states) Rules of Civil Procedure, which made litigation potentially more complicated and therefore also less amenable to flat fees … A 1958 ABA pamphlet contended that lawyers were bad businessmen in comparison to other professionals, the remedy being to better track time and to keep more detailed records. That pamphlet also suggested that lawyers work 1300 hours a year– or 5-6 hours @ day, five days @ week in a 48-week year … In 1975, the Supreme Court, outlawing both the capped 1800s practice and the base system from the 40s, held that set fees for legal services constituted price-fixing, and was a violation of the antitrust laws. In response, by the late 1970s, most lawyers charged for their services based purely on hourly billing.”
Understanding the complexity of the billable hour also requires us to understand that billing on an hourly basis for work performed by a lawyer in her office is far different than the mechanic at the dealership. In the dealership, you can at least see what they’re doing and have the ability to objectively understand how long it is taking to perform the job from start to finish. In a law firm, the lawyer works from an office far from the eyes of corporate counsel.
In a Wall Street Journal article three years ago, William Ross, a professor at Samford University’s Cumberland School of Law in Birmingham, Ala. said that “Bill-padding is the perfect crime … [because there is no really way for corporate counsel to know whether] an attorney really spent three hours doing research instead of five hours.” Case in point: take a look at the letter by former Holland & Knight attorney, Matthew Farmer, who accused the firm of bill padding. For that matter, you may be interested in reading colorful commentary by Matthew Richardson’s post: Padding Hours: If I Did It. or Cameron Stracher’s New York Times article, HOW TO; Bill 25 Hours in One Day.
Are cases of bill padding — and worse yet, getting disbarred over billing, all a result of the inherent evils in the billable hour? This argument is doubtful, at best. Are stories like these the norm, rather than the exception to an honorable practice? Absolutely not. However, as an unintended side effect, the news over what to do about the billable hour leaves some outside the legal community with “an extremely negative view of attorneys.”
Evan R. Chesler, Presiding Partner at Cravath, Swaine & Moore LLP, wrote an article in Forbes Magazine where I believe he nailed the argument in his piece called, “Kill the Billable Hour; Lawyers should bill the way Joe the Contractor does.” Mr. Chesler states that: “Clients have long hated the billable hour, and I understand why. The hours seem to pile up to fill the available space. The clients feel they have no control, that there is no correlation between cost and quality.” To put it plainly, he says: “The billable hour makes no sense, not even for lawyers. If you are successful and win a case early on, you put yourself out of work.” He believes, as many do, that the bill for corporate counsel should not be a surprise.
Essentially, the question becomes whether the billable hour has placed the incentive on billing — not the quality of legal work. In order to put the incentive in the right place, Mr. Chesler’s idea is to have objective and reasonable metrics in place throughout the life of a case. As an example, he says, for “reasonable periods of time during the life of a lawsuit, say three months at a time … identify the client’s objectives, measure, calculate, build in a contingency and come back with a price. Once the price has been agreed upon, the billable hour should be irrelevant. The client will no longer be surprised by a whopper bill and met by the standard (albeit true) explanation that “litigation is unpredictable.”
Fred H. Bartlit, Jr., of Bartlit Beck, quoted on Patrick J. Lamb’s site takes an approach that doesn’t necessarily do away with the billable hour, but rather, re-focuses the firm’s business model:
18 years ago it finally dawned on me that, for example, 3 highly experienced partners will always do a much higher quality job than 20 associates, 4 junior partners, chief trial lawyer, etc WHY? Because it makes no sense to have people preparing a case for trial who have never seen a trial. Such novices will always waste huge $$$ doing “projects” that will never see light of day at trial or change anything. Likewise, a 3 person team of great trial experience means that knowledge is concentrated, not fragmented. It does no good if someone in the back of the courtroom knows the answer; the person on her feet must know it. So, my ideal law firm is 55 partners, maybe 2-3 associate novices in training/mentoring. And, many of our biggest cases (we do almost nothing under $100 million at risk) are handled by 3 lawyers, all of whom have lst chair jury experience, and NO associates.
Press Millen, of Womble Carlyle in Winston-Salem, NC, wrote a great piece for the National Law Journal entitled: In Defense of the Billable Hour: Bad, or Just Misunderstood? Millen does a wonderful job of articulating five reasons why the billable hour is a trap: it ignores arithmetic; it ignores knowledge; it ignores experience; it ignores “magic”; and it ignores wisdom. Mr. Millen queries how “one measure the value of a lawyer’s time? And how does one measure the value of something bad that doesn’t happen? It’s a stark example of why clients shouldn’t fall into the “hourly rate trap,” i.e. allowing retention decisions to be guided principally by hourly rates.” Notably, Mr. Millen argues, similar to Mr. Bartlit, that the “experienced lawyer understands the client’s business objective and knows how to accomplish it with the appropriate legal resources. He makes sure he knows when his client’s objectives change.”
Some firms have taken a novel approach and to this issue and have abandoned first year associates’ billable hour requirement. That’s exactly what Ford & Harrison in Atlanta, has done. In what has been seen as an absolutely fabulous move, the Law.com post illustrates how the firm’s managing partner, Lash Harrison, said the program aims to “close the practical-skills gap of law school education and increase value to clients. The firm also hopes it will enable associates to handle meatier matters more quickly.” Mr. Harrison pointed out that everyone “sits around and complains about the problems … I figured, what the heck, maybe we can try something.” Frank Burch, joint chief executive officer of 3,333-attorney DLA Piper says that “It’s an interesting approach, and perhaps we’ll all learn something from it.”
The question though goes back to Mr. Chesler’s point: where should the incentive be for the lawyer? Mr. Lamb in his recent post, Defender of Billable Hour Emerges, says: “By refusing to see the client’s real concern, law firms are missing an incredible opportunity to rebuild themselves and seize market share.” That makes sense given General Motors chief legal officer, Debra Ellington’s recent statement about the news that allegedly the Billable Hour is dead: “I guess you could say it’s sad to see tradition fade away, but I’m thrilled that law firms are soon going to have to listen to their in-house counterparts’ perpetual suggestion that they adopt the Burger King model of fees. After all, without the Billable Hour, we’ll finally be able to have it our way, right away.”
Altman Weil, a management consultant to legal organizations, quotes one general counsel as saying, “If lawyers can’t offer us alternative fees, we’ll go find alternative lawyers.” And that is exactly what Susan Flook, General Counsel at The Body Shop International in London, said recently in Canada’s Financial Post: “In my view, outside counsel have got to substantially change the way they charge for and deliver legal services. It is my opinion that the basic fee-earning structure in law firms is wrong. The whole thing needs a sea change.” General Counsel for Del Monte Foods in San Francisco, James Potter, in the same article, compared the legal industry to that of traditional consumer shopping: “Comparison shopping is one hallmark of a knowledgeable consumer, and in the engagement of legal services, we must become better and more effective consumers.” In the UK, ITV’s legal chief Andrew Garard, said “he wanted ITV to become the first major U.K. company to abandon this form of billing, and he initiated a review of the company’s outside legal providers.” After completing his review of all the law firm vendors, he successfully pointed out that: “None of the firms will bill us with reference to a measure of time on any matters.”
Perhaps, all of this just takes us back to Business 101: what is my client looking to accomplish, what are the most important business objectives for my client, and how can I help my client achieve those objectives? With this basic understanding in mind, perhaps we can all come to a middle ground — one in which takes into account an incentive that is firmly grounded in the quality of work, success in the outcome, and balances the wisdom of the experienced attorney who can answer a question of law that’ll cost her client 74 cents as opposed to $150. The Association of Corporate Counsel’s Value Challenge encourages firms and corporate counsel to take this challenge on together: “Firms can greatly improve the value of what they do, reduce their costs to clients and still maintain strong profitability.” Writing about this argument surrounding the billable hour, I am reminded of a mantra Keith Hawk and Michael Boland wrote in their book, Get-Real Selling: “My success can only follow the success of my customer!”
The Importance of Powerful Tools & Relevant Content
All too often, I’ve heard from litigators the desire to be more efficient and more effective.
There’s a need and a desire in this economy to streamlines processes, apply best practices that advance their most important business objectives, and find innovative ways to leverage technology to save money.
What’s more — even as recent as today as I meet with clients — there is a desire to have more accountability both in-house and from outside counsel, as well as transparency from the evolution of a case to its dissolution. There are several ways to do this, and some law firms are hiring consultant companies that work directly with CFO’s to see what online content can be cut in order to set budgets in other areas of investment and growth for the firm. Some consulting firms generally make their money based on a percentage of how much they cut from the firm’s budget.
Other firms and corporate legal counsel see the wisdom and benefit of making investments now — even in this economy — that will help further long-term growth and have their legal team at the top of their game – both now and when the economy is restored. Investments that mirror the litigation workflow and seamless integrated are of the most value. As an example: tools that act as a central repository to capture work product, thinking & expertise and integrate with document management tools, transcript management tools, as well as due diligence research have proven to provide firms and in-house counsel with a greater return on investment in time and money spent on a case, allows for better budgetary estimates, and manage litigation risk and reserve requirements.
Making these investments today allow for a more prosperous tomorrow!
dan gold, esq. 