Pressure to Bill Leads to Questionable Billing Practices

Actually, this isn't really news to me. But a recent Chicago Tribune article about bill padding quotes Texas Tech University law professor, Susan Saab Fortney, as saying, "I think there is a connection between the pressure to bill and people engaging in questionable practices."

Where law firms used to require 1600 or 1800 billable hours per year, firms have been increasing their yearly 'billable hour' requirements to 2000, 2100 and in some cases 2200 billable hours and beyond. This increased pressure is bound to increase billing irregularities. As the article notes, "[a]t some firms bonuses and promotions are tied to the number of hours attorneys bill, with a minimum of 2,000 at most practices." In my experience, in almost every single firm that bills by the hour, bonuses and raises are almost exclusively tied to billable hours. Other factors may have some bearing on raises, bonuses and promotions (particularly to partnership), but by far the largest factor is billable hours.

Increased competition in the legal marketplace, as a result of an increased number of lawyers entering the workplace every year and the proliferation of non-lawyer legal services, puts additional pressure on lawyers. Since there are only so many hours in a day and only so much lawyers can charge per hour, lawyers that work in a billable hour environment have few options.

The Tribune article mentions such tactics as senior lawyers inflating hours billed by junior lawyers, billing large sums for travel expenses, and overstaffing files. The article also cites failing to do work in a timely manner or performing extra or unnecessary work on a particular matter as bad or unethical billing practices. Lawyers may counter that some work may appear unnecessary, but is really required to do an adequate legal job.

In one case mentioned in the article, 21 attorneys from different firms were assigned to the case. The judge refused to approve a fee that had been previously recommended by a mediator, saying that there was duplication of work due to the number of firms involved. The lawyers argued that they had appropriately staffed the project, which involved a shareholder litigation with giant Boeing Co., which was demonstrated by the result achieved in the case. Attorneys claimed to have reviewed tens of thousands of pages of documents, while the court focused on the relatively small number of motions and briefs filed in the case.

This story highlights the vast differences in perspective between those 'inside' a case and those 'outside' of it. Often, the work required to competently represent a client is 'invisible' or difficult to understand from the outside - whether the 'outside' is a judge reviewing the case later on, or whether it's the client reviewing the bill and determining that something 'shouldn't have' taken the number of hours that were billed, or the number of attorneys that were involved.

The story also highlights all of the problems with the hourly billing system. What will make a real difference - both to attorneys and to clients and avoid the temptation to 'pad' billing, the conflict between lawyers and clients, the necessity for clients to micromanage their attorneys? What if the answer is not to place attorneys and clients in a more adversarial relationship with one another, but to discuss, up front, the expectations of the client, the parameters within which the client expects the attorney to operate, the acceptable outcomes, and to bill based upon those factors, rather than how much time it takes to complete the matter?

As the article indicates, in-house corporate counsel are keeping tighter tabs on lawyers, noting that, "some companies require outside lawyers to provide budgets and to inform them when there is a change in projected spending or staffing."

If corporate in-house counsel are already requesting that their lawyers provide them with information up front and advise of changes as they go along, why are lawyers resisting? Why not take it one step further and approach in-house counsel and other clients about working on fixed fee agreements and using change orders change orders? That way, lawyers could staff matters in the way they saw fit, and wouldn't need to worry about padding hours, or even be concerned about hours at all. Isn't it worth a try, considering the ills of hourly billing - for both lawyers and clients?