What About Clients?™

JD's friend reflects, "When I’m being held accountable for adhering to my budget, anything that is not predictable is bad."

Which points out the flaw in having budgets for legal services.

Beyond, that, Dan, what this historical note points out is that markets determine legal fees, how they are set and when, if ever, they are paid, not lawyers.

The ability of "insurance companies, by insisting" shows that there is absolutely nothing that lawyers can do about the situation.

I go back to my comments from Drucker--the only thing that a law firm can do that is subject to competitive forces is work on its own internal costs.

The other solution, throwing off the yoke of all the rules of practice and permitting new business models (fee for service is not a business model), was tried and rejected, at the end of the MDP debate.

As a former litigator, I recognize the difficulty in creating a budget for legal services. I was involved early on in one major corporation's move to flat fee billing, and saw first hand how difficult that was to make workable from the law firm's perspective.

From the client's perspective, however, budgets are essential in all aspects of the business, and are equally important in the legal area. My role as GC makes me a businessman as well as an attorney, and my operating unit has to function as efficiently as every other unit in the company. Telling the CEO at year end that legal costs were out of control only gets me so far. To put a point on it, I largely have to ignore the concerns of outide counsel regarding what they feel to be a fair method of determining fees. My loyalty and duty go first to my employer, not to those outside lawyers I employ, and I can't serve both masters equally.

This really illustrates my point: there is an inherent conflict between the interests of the client and the interests of outside counsel, particularly when it comes to paying for services. I simply wish that I was wise enough to find the magic solution that would eliminate this conflict once and for all.

Maybe I don't do it correctly or maybe I work for the wrong clients but it seems to me that if a firm is engaged in a "scorched earth" game, you should:
1. fire the firm.
2. Refuse to pay the bill until it is adjusted.
3. Negotiate for what you want.

A Corporation w/ General Counsel, has the ability to track what is going on, day to day, (especially if the firm they are using has an extranet.) It can also hold the outside attorney harmless from failing to do certain things General counsel thinks will be unsucessful.

On the rare occasions we represent Corporations, we give them the best hourly rate we can, based on the amount of work they send us. We submit monthly pre-bills and wait 48 hours for a response. We also send letters that explain why we think certain behavior may be more costly than sucessful. We then ask for prompt reply that will enable us to determine whether the client wants us to proceed anyway.

Most general counsel bring the hourly bill mess on themselves with their C/Y/A additude. Stop bringing everything to the biggest, baddest, firm and start looking to smaller and better run firms that will appreciate your work. Look for firms where the Partners and senior attorneys actually work on your case rather than review the work of others (or more precisely their billing sheets.) Stop thinking that the only lawyers you can entrust your affairs to, have 100 years combined experience. Stop Using Litigators and start finding Trial Lawyers.

Want to cut costs? Give bonuses to firms that come under your budget (note I said yours not theirs) If they want your work in the future, they won't sacrifice your case for the bonus. On the other hand they will have an idea of what you think the case is worth. Stop looking for attorneys based on RFP and start looking at the bar journals, the seminars, and the court house scuttlebutt. (In other words get out of your chair and get to work looking.) A small or medium sized firms do not spend time doing an RFP's. It:
a)doesn't have the time;
b)doesn't know how to do them; and
c) doesn't believe it is going to get the chance for the work much less the work anyway. (We figure you're just using us to chop up the other guys figure.)

Further, set a reasonable time period for the case to come to trial. It is unlikely that a case that is around 9-12 months will get billed as many hours as opposed to one that is around 18-24 months.

Demand a discovery PLAN that you must approve (not the same as a discovery schedule.) Find out how and what counsel is going after and see that they stick to the plan or change it with your permission only. Demand to do some of the work in house.

The billable hour is unfortunately the best way a Trial law firm can be sure it will be around next year. Trial work has too many variables to predict
how much a case will cost.
It is a fallacy, at least on the small/medium firm level to believe that the firm is seeking to churn its hours. There are a lot of clients to keep happy. Without the guarantee that a client will pay for work year after year, the firm cannot afford to neglect one client for another. Hence billable hours will have to be reasonable by virtue of the 24 hour day. (I know that there is some urban legend about a bill for a 25 hour day when the clock changed but let's be real.) Negotiated rates, oversight, realistic budget goals, deadlines, and discovery plans, along with an open mind to new and different types of trial counsel, can cut litigation costs and provide success in the litigation. More work for General counsel? Maybe. Worth the extra effort? Only General Counsel's year end bonus will tell.

Let's start off by noting that my original comments are my observations made over years of practice, not what is currently the case. I don't accept "scorched earth" letters that exhaustively detail every nuance, but I know that they exist and have written a few in my days in private practice.

I think you are also missing my entire point: hourly bills don't help me (the client) run my business! Whether I've negotiated the rate, get a chance to see a pre-bill, or create a discovery plan does not give me any cost certainty, or even cost predictability. Are you, as outside counsel, willing to live and die by the discovery budget I set? If you are, you are a rarity. Spending less on attorneys fees, while certainly a worthwhile goal, does nothing to move me towards that level of predictibility I need to effectively run a business.

A comment earlier suggested this hourly billing conundrum was an "economic law." That's absurd; hourly billing is merely a revenue model that fails nearly all involved. It fails the client, by destroying any cost certainty. It also fails the lawyer, by making them slaves to the clock. Time billing was and is one of the single greatest sources of dissatisfaction among attorneys. It would be interesting to see what might transpire if as much effort being expended profession-wide to defend hourly billing was spent trying to meet client and attorney desires and interests, by coming up with a new economic model that works. I think a return to flat-fee billing (for certain matters) might be it.

For the record, I do look to small and medium firms for virtually all of my outside legal work, for many of the reasons you cite. The size of the firm, however, does nothing to eliminate the fundamental conflict of interest between lawyer and client when rates are billed on an hourly basis.

Q.

JTH writes, "Hourly billing does nothing to move me towards that level of predictibility I need to effectively run a business."

Moe ask, "How much more are your willing to pay for predictibility?"

a) Nothing

b) 5%

c) 10%

d) 15%

e) 25%

f) 50%

g) 100%

h) more than 100%

If you are not willing to pay more, then H/M is the cheapest way for you to buy legal services. :<)

In point of fact, the cheapest way for me to buy legal services is to set the price I'm willing to pay for the work I need, and find a competent attorney who will do it for that price. Hourly billing doesn't enter into it at all.

My observation is that ELP seems to have figured out a way to do it (take work on a flat-fee basis), and if push comes to shove, I'll be darkening their door with my business and avoiding those who insist on sticking to the status quo.