Friday, March 29, 2013

Inflated Billing Practices, Part II

To pick up where RAB left off on March 27, 2013, I myself am looking forward to the demise of the hourly billing model.  Because, to be frank, it’s a scam - and people have known it for years.

I used to work as an engineer, and I tend to compare what I do now as an attorney in a “JD-Advantage” (I still can’t type that without chuckling grimly) position to what I did prior.  As an engineer, I had to charge my time to various contract jobs that went through the factory, just as attorneys in private practice bill their clientele for individual cases.

My beef with the hourly billing model is that it is hardly an exact science to begin with, and is fraught with potential for abuse (“shocker!”).  I review attorney bills all the time, and laugh at what is charged to me for essentially “churning the file” in many, many cases.  Even when dealing with people who do try to bill accurately and ethically, one runs into what I call the “Airplane” dilemma.

The dilemma is as follows: I’m on an airplane for (client/contract X) business travel, and I have three hours to kill.  I am billing (client/contract X) for my travel time and expenses.  Fair enough.  Now, I can kick back and do nothing, or I can work on another (client/contract Y) file for those three hours.

If I work on another file, the engineer in me says “I’m not creating time ex nihilo here; there are only three hours at play.  If I work on “Y” on the plane, then I am not simultaneously going to bill “X” for those same three hours.  I’m not two people doing two jobs at once – that’s why they are called “man-hours.”  Frankly, it’s also ethical to not charge “X” more than my travel expenses while I am doing actual file-work for “Y” on the plane.”

If I work on another file, the lawyer in me says “Woo-hoo!  Double time!  I’m traveling for X for three hours!  Charge ‘em!  I’m working on Y’s file!  Charge ‘em!”

The difference here is that as an engineer I was salaried, while as a lawyer, it’s eat what you kill.  If both “X” and “Y” were going through the same factory and I worked on both projects in an engineering capacity, it was considered a courtesy to split my time appropriately between projects.  Both projects benefitted from my presence (i.e. troubleshooting), “X” and “Y” both had product roll off the line at the end of the day, and I get paid either way.  It would be unfair for me to tag “X” with all my hours and not tag “Y” for any, as that would be a free ride for Y.  It would be equally unfair to charge “X” and “Y” the exact same time apiece, because I am splitting my time between both jobs, not working both jobs simultaneously.  Both “X” and “Y” had given “retainers” to the factory, and I needed to charge those retainers appropriately.

I remember trying to explain this to law professors (in an ethics class, no less), law students, and practitioners alike.  They all looked at me with furrowed brows and said “you bill X and Y for the same time” as if I was a dolt and there was no dilemma at all.

It was then that I realized the scammy nature of law practice and billing.  I viewed the world in terms of “man-hours”, but lawyers viewed the world in terms of “billables.”  The fact that a human being cannot be two places at once, nor actually work on two jobs simultaneously, leads to situations where one person can charge more than 24 “hours” a day.  And the increase from the ABA recommended 1,300 billable hours a year in the 1950s to 2,200+ billable "hours" a year, todayAnd this does not take into account actively “churning the file”, as shown in the case of DLA Piper.

I remember meeting a 25-year-old attorney at a interviewing function back when I was in law school.  She was nice, intelligent, and freely admitted that “look, I’m brand new, and I don’t know what I’m doing.”  I appreciated her candor.  But I also knew she was earning $160k back in the hey-day of legal practice and that, in principle, was ridiculous.  But it was a “big name” firm, so whatevs.  Boomer partners gotta get that PPP.

Again, no offense to her.  But $160k at 25, in 2003?  I knew of engineering managers with 20-30 years experience that didn’t earn that.  The simple fact that the billable model was unsustainable and is now crashing is a long overdue correction, not unlike all the other bubbles that our economy is apparently predicated upon.


  1. This is off topic, but Professor Deborah J. Merritt still does have her blog or rather site going just in case anyone has forgotten:

    1. Much like LST, it's milquetoast activism. Frightfully boring and, if anything, counter-revolutionary. "We have this problem, but let's calmly approach it using the current system's channels and methods."

      I've never read more than a paragraph of DJM's stuff at a time. I really can't take much more than that without my head becoming physically numb.

    2. Since you brought it up yourself, Deborah, I'll bite.

      Nobody visits your site because it is useless. Nobody needs a law professor writing about these problems and coming up with solutions that seem to benefit the way things are right now. It's like you're a ringer. We don't need more of your bullshit "it's not that bad and professors still need time for writing scholarship and we could maybe think about lowering the optional student fee from $250 to $200 per semester and we could encourage practitioners to devote their time and volunteer to help teach practice skills classes and blah blah blah."

      What you need to be doing is picking up from where Campos left off. Grow some fucking balls and deal with the problems. Why are the faculty at your school getting paid so much? They should be paid half, and grateful for that! Why do you only teach one or two classes per semester? You should be teaching twice that. Why do you have such professional status and consider yourself to teach law when you have so few skills? Why are half the law schools still open? Why do you not call for your law school to cut its class size and tuition in half? I'm sure you would all find a way to make do. The list of major problems goes on and on and on and you continually avoid dealing with these issues and focus on bullshit little things that really make no difference at all. (And don't tell me that the big issues are clear and need no further debate).

      So shut that dogturd of a site down, and go back to sucking the dean's cock for a payraise, professor whore. I fucking hate you for what you are. I am not the only one. Either act like Campos and make a change, or fuck off and stop pretending that you're on our side.


    3. @9:59AM

      That's a terrible thing to write.

    4. I made the very first comment on this post by dupednontraditional @7:33AM

      Also I was the one that commented @9:28 and also @10:35AM

      I am not DJM and frankly I feel ashamed by now at visiting a blog that will allow unmoderated comments like the one @9:59AM and @ 11:07AM

      I have also expressed, in the past, about how I do not approve of the Brian Leiter personal attacks, and I have not commented at all on last Wednesdays post.

      I might be a crackpot or a kook, but even I have my limitations.

      And to completely discount the efforts of DJM, who was brave and honest enough to shove an oar in the waters with Campos is just not right.

      If you are looking for perfect people and motives you will search for a lifetime and never find them.


    5. Dear Joseph W. Cotchett:

      Here is what Antonio who is one of your young clerks is posting on the internet @ 1:18PM

      My guess is that he has a major substance abuse problem and is an embarrassment to his family.

      If you want to sign off on him and recommend him to the California Bar and Character and Fitness Committee then that is the way it is going to be.

    6. "The Rape of the Fool"

      By Maurice Leiter

      Papa! Please! Papa!
      Pleading. Praying. Pointless.
      Papa playtime.
      Parent’s penis plumps, prepuce peels.
      Pushes. Pressure. Penetrates.
      Pumps, pumps, pumps. Powerful pumps!
      Please! Please! Prohibited!
      Painter prostate pain, papa pubic pleasure.
      Poopy penis.
      Poopy perfume.
      Penis pulsates, pulsates, pumping
      Perverted pleasure pearls poopward.
      Pleure pas, Painter. Pleure pas. Papa penitent.

  2. The really surprising thing to me is that the 160k salaries ever came to exist in the first place. Clients follow partners, not associates, so it's not like F500 companies are going to jump firms because a firm hired on Hofstra graduates at 70k to work like dogs instead of paying NYU graduates 160k. 98% of the work done by a BigLaw associate could be done by a generic member of the bar. Were firms scared that if they hired on associates at less that the clients would realize the work isn't that special? Was it purely about PpP, and if it was, why didn't competition for business drive hourly rates down faster? Was the whole Cravath model simply built on abuse of a monopoly? Lack of consumer knowledge?

    In any event, it's clear the rules of capitalism are finally starting to work their magic on BigLaw. I would not expect 1st-year associate salaries to substantially rise for a long, long time. Clients are finally starting to figure out how the DLA Pipers of the world operate and I suspect we'll see massive shifts to mid-law and even small-law for all but the most complicated/high-end matters. There is enough of an oversupply of lawyers that there will be plenty of alternatives when in-house counsel (many of whom formerly billed excessively) who know the game start shopping around for more cost-effective legal services.

  3. Everything about the billable hour screams "SCAM!!!!"

    I don't know why anybody puts up with it. I really don't. If (and when?) I need a lawyer, here's my plan:

    I'll go in there and say, look dude, I know I need X and Y done. I'll give you $1,000 to do it, and if it takes longer or there are any unforseen issues, I'll give you $25 per hour on top of that.

    I think that miraculously (1) he would accept my offer, (2) there would be no additional issues, and (3) the work would be done very quickly.

    The billable hour is BS. It's a rip off. Most lawyers should realistically charge between $50 and $100 per hour at most, and most should be at the lower end of the scale. There is no excuse for not having flat fees with a top-up provision.

    It amazes me how much lawyers resist changing this scammy billing system and insist on billable hours. Is their reputation not shitty enough? Or do they just not care at that point?

  4. 1st year associate salaries didn't hit $160K until 2007 (and its prevalence is eroding today). In 2003 it was ~$125K.

    If I ever hire biglaw, I'll demand 10% off whatever they quote me, then 10% off of that if the deal doesn't get done.

    1. You could get 50% off whatever the quote you, then 50% off that for their bullshit churning and padding.

      I've done biglaw before - four years. Partners are hurtin real bad these days. 10% is a scratch on the surface of what discounts you could get.

      Not that you actually ever *need* biglaw. Medium sized firms and some specialize boutiques can do the same work just as well, at a fraction of the cost.

  5. Sigh... I feel terrible and yet at the same time not terrible at all about admitting this (as I definitely feel sympathetic to the young attorneys with dire and still diminishing job prospects) but when a law firm quotes me a price, I tell them to halve it at least, and possibly quarter it. I feel bad because I know that's putting another attorney out of work in the long term, but then, I'm not the one that created this system where value produced was so disconnected from the price paid for it (and then promoted that model as a justification for insane tuition prices as a gatekeeper to getting into that ridiculously overpriced profession).

    A month ago, I fired our company's law firm because they were charging us $550 an hour. They are order of the coif types from top ten law schools with 20+ years of experience, and I fired them because I found another OOTCTFTTLSW20+YOE for $250 an hour, and I still negotiated him on that even further. So... If that sounds like an industry you want to join, GO TO LAW SCHOOL!