Does Alternative Billing Mean Lawyers Can Tear Up the Time Sheet?
This past week, both Philadelphia-based Saul Ewing and Chicago-based Kirkland & Ellis announced alternative fee arrangements (described here and here) for their respective clients. So does that mean that lawyers at those firms can toss their time sheets out the window, or clear those electronic billing programs off their hard drive? Maybe not. As discussed below, while proponents of alternative fees contend that they make time sheets irrelevant, others believe that firms still need to keep track of hours spent either to ascertain profitability or justify bills to clients.
Back in February 2008, Tom Kane endorsed alternative billing at Legal Marketing Blog, (specifically, the Jay Shepherd approach), but remarked that it seems foolhardy not to keep time records, if only to evaluate profitability of fees and levels of costs. Ron Baker, alternative-fee guru and founder of Verasage Institute heartily disagreed, asserting that many firms that employ alternative fees operate without time sheets. Miller explains that these firms know their costs up front, so they don't need to review them after the fact by looking over a time sheet. Instead of time sheets, Baker endorses fixed-price agreements and change orders, chief value offers and price-lead costing.
But what if clients don't go for that approach -- and insist on viewing a law firm's time sheets? That's the concern that Rees Morrison raises today at the Law Firm Department Management Blog. Morrison believes that corporate counsel has the right to request timekeeping records even where a firm works on a pre-agreed, set fee arrangement. Morrison addresses both sides of the records issue from the client's perspective.
If the law department decides that a fee for a service is acceptable, why should the law department be entitled to know how the sausage was made? If a law firm manages to make a big profit on the representation, having taken a risk on a set fee, that’s no client's concern. Also, part of the trade-off by a law firm for agreeing to a fixed fee is to be able to eliminate the hassle of detailed bills.
Still, if I were a general counsel, I would not want a firm to beseech me for additional money if a matter demands more work than they thought when they agreed to the fee if that firm has squirreled away some of my payments on very profitable matters. That situation assumes a portfolio of matters being handled by the firm. Additionally, I would want to know the economics of the services provided so that I can use that information if I need to find a replacement firm.
I understand Baker's point that timesheets are necessary or particularly meaningful for analyzing profitability. But if clients want to see a time sheet, are we, as attorneys obligated to provide one if a fee has been agreed to in advance? What's your view?
Posted by Carolyn Elefant on June 18, 2009 at 04:13 PM | Permalink
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