The Billable Hour Must Die … or Clients Are Going to Kill It Anyway?

That rather hyperbolic title of the cover story last August in the ABA Journal was The Billable Hour Must Die ,authored by novelist and essayist Scott Turow. The problem with the billable hour, Turow argued, is that “when you are selling your time, there are only three ways to make more money—higher rates, longer hours and more leverage. As the years have gone on, the push has continued on all three fronts.” With some firms setting billable hours requirements for their lawyers at close to, even above, 2,000 hour a year,” we are getting close to the absolute limit of how far this system can take us economically,” he says. He also argues that the hourly billing arrangement sets up an adversarial relationship between lawyer and client from the get-go, and notes that he has “never been at ease with the ethical dilemmas that the dollars-times-hours regime poses, especially for litigators.”

Of course, since we've just published our first survey of billing rates and practices--with responses from more than 5,000 lawyers from small and midsize firms and solo practices--we've been very interested in stories about billables and alternative billing practices here at ALM Research.

Legal Blog Watch [ ] editor Carolyn Elefant references Turow’s article in her own commentary Time Again for More Criticism of the Billable Hour, but points towards another article, one which appeared on  Slate.com called The Scourge of the Billable Hour: Could law-firm clients finally kill it off? As Elefant argues, the article “makes an important, albeit obvious point: Despite persistent criticism of the billable hour by academics, lawyers and bloggers, the system won't change until clients demand a change. And according to the article, that's what clients are doing now.”

This month (January 2008), the ABA Journal Weekly News carried a short follow-up to this with a post called Clients May Help End Billing by the Hour. Among the companies pushing for alternative billing arrangements, the Weekly reported, are Cisco, Pitney Bowes and Caterpillar, companies that “favor flat fees and discounts for volume legal work in an effort to control their bills and predict expenses.” Cisco’s general counsel Mark Chandler was quoted as calling the billable-hours approach "the last vestige of the medieval guild system to survive into the 21st century."

And now it’s become news, or even PR. A January 14 story in the National Law Journal about a new Chicago firm called Valorem – which is Latin for “value”-- that plans to meet the increasing demand for alternative fee arrangements that lower legal costs by working with clients to agree on fixed rates, contingency fees, monthly retainers or other arrangements. The firm will focus on high-end commercial civil litigation.