The legal blogosphere (and its old-fashioned equivalent, the classic Letter to the Editor in actual newsprint) has been aflutter over the past few weeks following a fun story and subsequent op ed in the New York Times that highlighted the most recent example of big law firms over-billing their clients. Predictably, reactions to the story have included attacks on the billable hour as a method of billing, defenses of billable hours, and attacks on big firms’ culture of greed (and probably defenses of that too, but I haven’t come across any).
A blogger’s goldmine, right?
Should I jump on the bandwagon attacking the big firms and their culture of greed? That blog post would write itself — I used to practice at a big firm, now I’m a solo practitioner. I could write about the obscene greed that I observed back when I was an associate, how it really opened my eyes, how it is killing the profession, etc. etc. Trouble is, that’s not really what I observed. Are there big firm attorneys who are greedy to the point that it affects their billing practices? Probably. But I don’t think a majority of them are like that, and I certainly don’t know any myself. So while that post would be easy (a little too easy, really — I mean, who is going to challenge a viewpoint that claims that lawyers are greedy?), that’s not today’s topic.
Do I join the crowd calling for the End of the Billable Hour? Nope. It’s not at all clear to me that the billing method itself is responsible for its abuses. This argument reminds me of people who say they hate PowerPoint, but when you ask them why, they say presentations are boring and ineffective when someone puts a bunch of text-filled slides up on a screen and proceeds to read all the bullet points out loud. Oh, I get it — you hate PowerPoint when it’s used very badly. I feel the same way about the billable hour.
So do I plan to defend billable hours? Maybe some other day. There are a variety of ways in which attorneys bill for their services, and probably some more that we haven’t thought of yet (but should). Each approach has pros and cons, and there is no one-size-fits-all billing solution that would be appropriate for each representation. Different situations call for different incentive structures (both for attorneys and the clients paying them), and all of them are susceptible to abuses. The bottom line is that clients need to prepare themselves to be better consumers of legal services, so that they can identify lousy billing practices as soon as possible, confront their counsel about them, and take their business elsewhere if the situation does not improve.
In pursuit of this goal, clients can convert Billable Hours from a dreaded nemesis to a valuable ally. Invoices reflecting hourly time are an important source of information about what attorneys are doing on their clients’ behalf. Mining that data should provide clients with some clear insights that would be invisible in a flat-fee or contingency billing arrangement. So if the billable hour remains a reality (for now … in many cases … until something better comes along), the least clients can do is to make it work for them.
That brings me to today’s post — a few tips on how to read your bill. But first, let’s talk movies for a quick second.
“What’s your favorite movie?”
I find that question impossible to answer. Too hard to commit to just one. Comedy, drama, or action? Depends on my mood. Best “film” or best “movie”? (You get the idea.)
I usually try to bargain for a different question, one that’s much easier to answer: What movie do I think is “underrated” — i.e., you really should see this, and you probably haven’t. My answer to that one for the past few years has been Brick (2005), which is the source of the quotes that I’m using as titles for this list. And, just like the answer to the favorite movie question, this isn’t necessarily a list of my “favorite” practices when reviewing an attorney’s invoice (though all of these would be in contention), but more like a few tricks that may be underrated.
“Keep Your Specs On.”
Tip #1 is not to behave like the startled businessman in the stock photo at the top of this post. In conformity with the rules of the Stock Photo Universe, he has elected to show his astonishment at the size of his bill by taking off his glasses, presumably because a clear-eyed reading of the invoice would send him into Stock Photo Cardiac Arrest (in which case, no doubt, he would clutch his chest dramatically). Instead, you should be equipping yourself for a detailed review of your legal invoice. And step #1 on that path is make sure that you have a detailed invoice to review. If you are paying your attorneys on an hourly basis, your fee agreement should specify that you will receive detailed invoices, usually on a monthly basis, that include specific time entries reflecting each attorney’s work. If you don’t have that, it’s hard to do anything else on this list.
“So what’s first?”
“Show of hands.”
Let’s start with who is on the bill. If you don’t recognize all the names, you should be asking the billing partner (or whoever it is that you talk to about the invoice) who these people are, why they are working on your case, and what their role will be going forward. Just because there are a lot of names on your invoice doesn’t necessarily mean that anything nefarious is going on. Big firms are big for a reason — they have a lot of attorneys at various levels of seniority (and some who can only be described as having various levels of juniority). Each level has its own billing rate. In a case that is being managed effectively, work should be “pushed down” to the least expensive (and therefore least senior) attorney who can do it well (and efficiently).
Where this approach can start to create problems is when too may people are assigned to work on the same case, which may mean that nobody really knows what any of them is doing and they are just spinning their very expensive wheels. Another problem arises if it seems like the personnel are going through a revolving door, as associates make cameo appearances for a discrete assignment and then fade into obscurity, replaced by another associate. There is always a learning curve associated with starting work on a complex matter — at the very least, a new attorney needs to have a basic grasp of the facts. The time spent for each person to get up to speed may be a waste of resources if the firm could simply use the same associate on a repeat basis.
Similarly, you should look at how many people are assigned to the same task. It is normal for a partner to be overseeing the work of an associate on a project. But if there are a dozen associates doing research, there’s a good chance that none of them is doing it very efficiently.
“What are your services, exactly — so I can be specific on the invoice.”
An invoice for billable time will probably be organized either by date or attorney. Usually they are not organized by task, or project, unless a client has made a specific request at the outset of the representation. Large clients, particularly repeat litigators, may have their own set of task codes that they require their counsel to adopt for billing purposes. But even without those codes, it should be easy enough to isolate all of the entries associated with a particular project (a summary judgment memo, for example), add them up, and then have a reality check about the cost of the project compared with its value. This is not necessarily the time to revisit prior strategy decisions (which hopefully were made with client input); hindsight is an unfairly accurate science. But it may be useful to test the cost of a project against an estimate, or to have a more informed discussion at the next decision point about the cost-benefit of a certain approach. Maybe, for example, the price tag for that research project makes the client re-asses the “Leave no stone un-turned!” instruction. Next time around, the client may ask counsel just to use their best judgment, or may ask for a cap on legal research. It’s important to keep in mind that attorneys often have a better sense than the client of what approach will deliver the best value; the key to a successful relationship is to generate open dialogue and trust so that the incentives are in place for the attorney to do their best (and most efficient) work.
The bottom line is that clients should use the information that may be gleaned from an invoice to test the value of the services being delivered, and to use that information in future discussions with their counsel about how the case is being staffed and pursued.
“So now we’ve shaken the tree. Let’s wait and see what falls on our heads.”
My dad was a big firm litigator in the Bad Old Days (the 70’s and 80’s). One of the partners he worked with (and for) had a saying: “Every client has the right to dispute a bill — the last one.” These days, the competitive legal market has hopefully created an environment in which constructive dialogue about billing practices and individual invoices is possible. It remains the client’s prerogative to take their business elsewhere, just as a firm can decide not to accept future work from a client. But attorneys and clients should be able to work together to establish (and refine) an approach to litigation that minimizes sticker shock while providing quality representation. A healthy dialogue about how the case is being run might prompt the client to request (or permit) the firm to use more less senior attorneys for some tasks, or not to pursue certain available avenues for discovery. Another possible outcome of this discussion may be a realization that the firm’s rates are simply too high for the particular matter, and the client would be better served by a less expensive attorney.
Of course, much of this discussion should take place at the outset of litigation, when the client and attorney discuss how the case will be managed, staffed, and billed. But if that dialogue was a bit incomplete (as it almost always is), then a careful review of an actual invoice should provide a good starting point for a further discussion. In this respect, hourly billing can provide a more accurate glimpse into how attorneys are managing litigation. Whether that makes up for their unsavory reputation in the hands of a few greedy big firm partners, I will leave to the rest of the blogosphere.