Today's New York Times' front page has a front page article "Billable Hours Giving Ground at Law Firms." The premise of the story is that the practice of billing by the hour is coming into question. Not that client's should pay for the hours their lawyer works, but that the practice may encourage lawyers to do unnecessary work, or prolong a client's problem rather than resolving it.
Part of the problem is not that a lawyer is actually billed for his or her time, it's whether the time was actually spent and whether it was a productive use of the time. Historically, a lawyer was considered productive if he could bill clients for 25 hours a week - an associate without management and business generating responsibilities might bill closer to 35 to 40. These people were not working normal work weeks, often coming in early, staying late, working on weekends, and skipping lunch - but there are too many interruptions in the typical day to be able to bill all your time, education, business development, and administrative duties.
Things have changed as the law practice has gone from a profession to a business: Many now view their law licenses as an umbrella for managing "profit centers" from the copy machine through the receptionist, and on to every conceivable expense that used to be factored into the hourly rate. Somehow, the number of billable hours per week has climbed do to different billing methods.
As Family Law lawyers in California, we are in a unique position to know what our our opponents are charging their clients in our cases - we are usually required to file declarations setting out our hourly rates, amounts billed, and funds paid, any time one party requests that the other contribute to their fees. This gives us an unusual perspective into the problem.
Here are some of my observations over the years as the problem has worsened:
Recently a lawyer sent me a copy of his billings [not something normally done, as we normally redact most relevant information]. This was to support for a request for fees. I was stunned to see the lawyer had been billing the client $120 per hour for someone to type his dictation, after he'd charged a pretty penny to dictate in the first place. In another case the same month, I found a lawyer charged $90 for the same services [the relatively new lawyer in the same office was billed at $325 per hour, but that's a separate issue].
Now, am I missing something here? How much profit is there in that typist? I always thought that the hourly rate I charge [not miniscule, but not the highest] covered the typist, even if the typist is a certified paralegal - after all, the typing part doesn't take any legal skill. Same for the file clerk doing routine filing.
How about the receptionist who makes photocopies? Do they charge you $35 per hour for that person's time, and $.20 or more for copies on top of that? Sure, Kinko's can mass produce copies much cheaper than a lawyer, but can't the per copy charge include the cost of the machine, supplies, repairs, and the person standing there making them? At $.20, can't you at least break even, with the profit found in the lawyer's hourly rate?
[Don't get me started on the huge number of copies we must make - that's another problem with the paperless society. We now use an expensive, speedy scanner, but the only thing we save is the cost of paper. And the cost of storing all that paper? I'll save that for another day.]
There is a much bigger problem than paying for a typist: How do you, as a client, control the number of hours the lawyer's office decides to put into your case, and who does the work?
There is always something that can be done on a file: More research, more organization, more threatening letters, more dictation rehashing the same issues, setting hearings on things that might be worked out over the phone, and fighting over things you can't win [including continuing to fight over something you've lost]. How cost effective is the work? What about all the wasted effort being contentious? In California, with a fiduciary duty to disclose all material facts and information in divorce cases, is it ultimately profitable or productive to stall the production of information, including documents.
In better times, I used to talk about those few lawyers who felt their divorce clients could "afford the best", as though they were General Motors. Then, GM could send millions of dollars to lawyers, without regard to whether the money was well spent. Most family law clients are rarely in that position, so we have to decide whether it is cost effective to do something on their case. At some point, it's cheaper and easier for the parties to make a deal that isn't perfect rather than spending tens of thousands of dollars fighting over issues that will appear stupid 5 years from now - like who gets the new toaster or the leather couch.
A good indication is how many employees the lawyer has, and who they are. All those employees need to justify their positions, and some way or another they are rewarded for doing a lot of work. As a lawyer, it would be really easy to send a message to staff without actually saying the words "Go forth and fill those time sheets."
Decades ago I worked in a public agency law office where the quality of work was high, put someone in management decided we needed to fill out time sheets to show where the work time was going. Guess what? They proved the lawyers all at worked at least 40 hours a week. One lawyer was notorious among us for simply photocopying his time sheets week after week - he had such broad generalities listed [sitting in meetings, giving advice] that no one realized he didn't actually keep records. He was a good lawyer, he just understood that the purpose of the time sheet was to show that we could fill out the time sheet, and in government records were golden. In a private law firm geared toward billable hours, the records may change weekly, but the time may not be well or efficiently spent.
In a private office where cash flow is important, it is easy for the employee to understand that the purpose of the time sheet is to get cash in the door. Even if the employee isn't paid by hours billed, to stand out in the firm you bill more hours. In many offices, the employees are "expected" to bill a certain number of hours a week - here the problem is compounded as the employee understands why high amounts of time must be billed, both to get money in the door and make it clear he was actually working. Bigger firms generate more reports to point out the non-performing employees.
[From my standpoint, a time sheet shows whether the staff person was using time productively so I can redirect them if needed, or cut the bill, but that's me. From a paralegal's time sheet I can see that a client is calling and taking hours of time, when they really need a good therapist, or whether a associate lawyer is searching for legal authority far beyond the value of the issue involved.]
Clients tend to want their divorce lawyers to put on a show, or tell their story. Even if it is a losing story, client's often want it told. How much effort does the lawyer put into lowering expectations and managing the client's demands, and how much does he feed on the client's emotional problems by working hard, drafting court documents telling the story over and over again, and arguing positions without merit.
Are there large monthly charges in months when nothing is going on? If that happens month after month, it's time to inquire - not that there is anything wrong with what is happening, since you may not know what is going on in the background, but it's time to ask what's up.
If the lawyer turns over your case to a new lawyer, you can bet the newbie is a profit center, although sometimes it is hard for the busy lawyer to find time for things such as large research projects. The question for the client is whether the hourly rate is really consistent with the associate lawyer's skill level, or is it consistent with the senior partner's skills. If the latter, there is something wrong. Is the young lawyer expected to bill a certain number of hours a month? Is a paralegal required to fill a time sheet with a certain number of hours? Are you being charged dearly for services of people who are not well trained, or not providing professional services?
If I hire a paralegal just out of paralegal school, or a brand new lawyer, essentially I am putting a trainee on your case. Is that fair to you? It depends on how much I charge, whether I charge for all that person's time, and whether I adjust the bill to cover work for which I don't think the client should be charged. Did we spend too much time going down a hole looking for something that turned out to be totally unproductive? If so, are we willing to cut the charges to make the resulting bill fair to the lawyer AND the client by sharing the expense? After all, the attorney directing the work must make an educated guess about the expected results, and be willing to take some responsibility if he is wrong.
Now, more about that beginning lawyer billed at $325 per hours mentioned above: I'm sure the person tries hard and may some day be an expert, but is clearly not now operating at a level justifying fees charged by competent certified specialists. Is it interesting to you that even the owner of the firm isn't certified, and derives a high volume of cases by heavily advertising? Where is the expertise, and how does it percolate down from the top?
Ask what you are paying for, and consider whether you are getting value. If you want a show, buy a movie ticket - pay your lawyer for making sound decisions, settling what should be settling, and litigating only what is necessary.
Stay tuned, and I'll write about fees in divorce cases, and why the hourly rate is the only fair way of charging for most work, contrary to the theme of the original NYT story. Family Law cases aren't quite like representing corporations or handling civil litigation.
