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Why the Billable Hour Is Here to Stay

For all the talk about alternatives to the billable hour, this recent article entitled "Eight law firms to share $30 million in Delta bankruptcy legal fees" demonstrates why that's never going to happen.  The article reports that U.S. Banktrupcty Court Judge Adlai Hardin recently  approved in full a request by Delta's attorneys for $30 million in legal fees for work performed over a four month period between September 2005 and January 2006. The paydays are staggering:  Davis Polk took home $10.3 million in fees, parsing through Delta's airport leases and financial contracts (hey, aren't most of those agreements fairly standard these days?).   And David Polk partners conveniently decided to raise their rates between 2005 and 2006, thus enabling them to charge as much as $865 per hour for work done in 2006.  One Davis Polk partner billed 1155 hours for the four and a half month period, generating $755,000 in fees (and you wonder why partners hoard work!), working an average of 8.6 hours a day including weekends.  And two recently admitted Davis Polk associates charged at the rate of $420 an hour.

It's cases like these, where the client is captive and using other people's money, i.e., its creditors that drive rates up and perpetuate the billable hour.  Even as corporate clients grow more savvy and look for deals, cases like these bankruptcies come along that allow other lawyers to argue that "Hey, if Huebler's charging $865 an hour for bankruptcy, you ought to be paying me $1000 an hour to ensure that your company never gets into bankruptcy to begin with!"

And all the while, no one -- not the company, not its creditors or even the judge -- think to ask why?  Why is an $865 an hour partner spending 1155 hours over a four month period to review contracts that he's probably seen before in other bankruptcy cases?  Why is a firm charging $420 an hour for kids just out of law school?   And why doesn't anyone realize how much these mega-awards in bankruptcy are driving up rates, not just for BigLaw clients but for legal services generally?  When will the madness end?

Posted by Carolyn Elefant on June 7, 2006 at 06:54 PM | Permalink | Comments (1)


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