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Time Again for More Criticism of the Billable Hour

It's one thing for lawyers to criticize the billable hour amongst themselves, as Scott Turow did with the publication of his essay, "The Billable Hour Must Die," in the ABA Journal.  But now, the debate over the billable hour has spilled over from lawyer publications into the mainstream press, with articles such as "The Scourge of the Billable Hour: Could Law-Firm Clients Finally Kill it Off?," that appeared online at Slate.com on January 2, 2008. 

The Slate piece makes an important, albeit obvious point: Despite persistent criticism of the billable hour by academics, lawyers and bloggers, the system won't change until clients demand a change. And according to the article, that's what clients are doing now.

As the article describes, clients' desires have always driven law firm billing practices. Hourly billing gained traction in the 1950s, partly to cater to clients who wanted more transparency. But law firms also realized that they could earn more money by billing more hours -- and thus, began increasing billable hour requirements and finding ways to encourage redundancy rather than efficiency. But now, tired of subsidizing law firm gravy trains, large corporate clients are forcing firms to offer alternative billing arrangements, such as flat fees, volume discounts and banning new associates from working on matters.

From the article, here's how the legal world might look if the trend away from the billable hour continues:

The top end of the spectrum will remain largely unchanged. Companies will still pay hourly rates to hire white-shoe law firms for specialized, bet-your-company kinds of work. On the opposite end, however, clients will stop taking their rote legal work to law firms altogether. Companies already outsource relatively simple matters like document review to consulting services. And as technology improves, more programs will let companies handle their own contracts online. In the murky middle between one-of-a-kind advice and dime-a-dozen contracts, the push for alternative arrangements will prevail.

In some ways, the legal world is changing already, and moving in this direction. As we described here, one Boston law firm has banned the billable hour entirely.  And as Indiana family law attorney Sam Hasler describes in this comprehensive post, many family law attorneys have adopted flat fee structures, finding that clients prefer these arrangements because they result in more predictable legal fees. 

At the same time, for every step forward, there are forces that hold the profession back. Old habits die hard, suggests Stephanie West Allen at Idealawg.  The lawyer brain, accustomed to grueling schedules and prone to workaholism, may resist the killing of the billable hour. Meanwhile, Barry Barnett at Blawgletter suggests that firms that can't handle this kind of complex litigation without a staff of 59 lawyers won't be offering alternative billing plans (like a contingency fee) anytime soon. 

So, is 2008 the year that we'll really see client pressure on firms to offer alternative billing, as Wired GC predicts?  Or, like the billable hour, is all of the continued talk of getting rid of it, simply redundant?

Posted by Carolyn Elefant on January 3, 2008 at 03:26 PM | Permalink | Comments (4)

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