This speech presented at the 2nd annual Dan K. Moore program on ethics at the University of North Carolina Chapel Hill examines the obsession of the legal profession and corporate America with billing for legal services almost solely on the basis of hours worked.
HOW WE GOT HERE
Most younger lawyers probably assume that hourly billing has always been with us. Time based billing--the practice of recording hours--began less than 40 years ago. Prior to that time, most billing was done on a flat fee basis--so much for a particular piece of legal work (frequently set by bar associations); or as a lump sum billing for the entire matter in the form of an advance retainer or a billing at the end of the year or the end of the case. One of the worst aspects of all this is the unrelenting pressure it places on ethical standards, leading to improper conduct and outright dishonest.
WHAT HAVE WE COME TO?
Conscientious keeping of time records take a great deal of guesswork out of billing. No one wants their lawyer to "guesstimate" what was done and how much was spent when billing time rolls around.
Time entries create a valuable side benefit. They provide a record of exactly what was done or not done at every stage in the case or transaction.
Criticism leveled at the hourly billing formula is the disparity between rates of an inexperienced lawyer and an experienced lawyer.
Also, excessive abuse such as padding time records, over-staffing cases, excessive research, excessive document review, excessive depositions, excessive motion practice and procedural desputes, excessive billing for summer clerks, minimum time units, travel time, and minimum billable hour requirements for associates.
Only a better understanding of the advantages, fallacies, and potential abuses of hourly billing should help illuminate the path to improvements. What needs to happen is the correction of the more serious abuses caused by the obsession with time-based billing; untilization of the other traditional factors, including the amount invoiced, results accomplished, complexity, urgency, and liability risk--with appropriate billing adjustments to reflect these factors, greater use of value billing, fixed fees, and other approaches.
Some of the billing methods discussed are value billing, fixed fee, premium billing, discounted billing, contingency arrangements, and adjustments to hourly billing.
References given to Cumberland Law School Professor William G. Ross' book entitled "The Ethics of Hourly Billing by Attorneys", the ABA Special Task Force of the Economics of Law Practice's book "Beyond the Billable Hour: An Anthology of Alternative Billing Methods", and the ABA follow-up book published by the Section of Law Practice Management entitled "Win-Win Billing Strategies:Alternatives That Satisfy Your Client and You".