Are You On Your Client’s Side?

In case you haven’t noticed, I have beef with the whole billable hours thing. I have heard all the arguments in favor of billing by the hour, and I have heard all the arguments against it, and at the end of the day it comes down to this: whose side are we on anyway? Under the Rules of Professional Conduct, we are to zealously represent our clients’ best interests at all times. How can racking up higher and higher fees, with no end in sight, be in the clients’ best interests?

At Big Law, my value was calculated in six-minute increments. The more .1′s and .2′s I put on my time sheet, racking up higher bills for my clients, the more valuable I was to the firm. Well duh! You HAVE to be a profit center in order to be a valuable employee to any business, much less a law firm. And if the law firm’s model is billing by the hour, you are only as valuable as the number of hours you bill. There was not much incentive to be efficient, to do excellent work or provide value for each second that you billed. At the end of the day, no matter how good a lawyer I was, if my production of billable hours was not so good, I was considered not as good a lawyer as a coworker who did sloppy work but racked up the billable hours. That’s the game.

I began to resent my time sheet and what it represented. My clients were almost uniformly unhappy with their bills. Some accused the firm of gouging them. Others fired the firm and went elsewhere. Some stayed with us, but were very guarded about how we billed our time. I watched others go out of business as they struggled to keep up with the mounting legal costs.

That’s how I learned that the billable hour was the enemy of the lawyer who truly has the client’s – rather than her own – best interests at heart. It was not in my clients’ best interests to agree on an hourly fee with no idea of how much time it would take to do the work.Hourly billing is, by its very nature, open-ended and skewed in favor of the lawyer. The client never knows exactly what the bill will be until he gets it at the end of the month. The lawyer has a strong incentive to bill more hours to the client, not to get the work done quickly.

All of which is why I ditched the billable hour when I went out on my own. Never mind the freedom from having to track every second of my day. The true beauty of my billing method is that it is always an arms’ length negotiation. I tell the client what I am willing to do for what fee, and if the client disagrees with the fee they have a choice: go elsewhere or negotiate a lower fee for less service. This negotiation is up front, before services begin.

Once the client and I have reached an agreement, our interests are aligned. I collect from the client up front and put the money in my IOLTA trust account. It stays there until I have completed the work, at which point the fee is earned. So the client has some skin in the game because they have paid in advance. I am not paid anything until the work is complete, so I’ve got some skin in the game as well. It is in both the client’s and my own best interests for me to do the work well and as quickly as possible. I find that this method works well for everything from forming a new corporation to drafting a will to litigation.

Yes, I said litigation. While I do not consider myself a litigator, I do sometimes go to court on behalf of my clients. When I do, I do not bill by the hour. Instead, I negotiate a fee for each phase of representation and we go from there.

When I was in a partnership (between Big Law and Solo), my partner was a litigator who insisted that flat fee representation would not work for litigation because, “You have no idea how much time it will take or how much work will be involved.” I don’t dispute that you do not know how much time will be involved with a litigation. I do dispute that you don’t know how much work will be involved. I charge a fee to send a demand letter. Another to file a complaint and serve summonses. Another to file a motion. Another to appear in court or attend a deposition or mediation. I break it down sufficiently so that my client isn’t blind-sided by my bill. They know in advance what the fees and costs will be to handle each phase of representation when we get there. And if something truly unexpected comes along, we will negotiate a fee for handling that as well.

The funny thing is, I’m not cheap. I probably charge something comparable to most of the Big Law firms for similar services. But that’s not the point. The point is that my clients know what the fee will be up front, before the work gets started. My interests are aligned with my client’s interests. And I am free to zealously represent them without my invoice getting in the way.

Have you given up the billable hour? Do you do unbundled representation? How have you handled litigation which lawyers say ‘can’t be unbundled’?

All opinions, advice, and experiences of guest bloggers/columnists are those of the author and do not necessarily reflect the opinions, practices or experiences of Solo Practice University®.

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13 comments on “Are You On Your Client’s Side?

  • Susanne, great article. As a partner in a small firm, I share your same sense of “service” and the necessity to add value to clients on each and every engagement. I also am comfortable taking on some risk regarding flat fees, I do it for many items in my practice. But I struggle with how to price matters I have never worked on before. Do you know of any guideline, book, survey, etc. that gives ranges and/or actual numbers for various engagements. We do mostly transactional work, but have recently ran into some litigation opportunities and I would love to know what others charge for a demand letter, lawsuit, deposition, filing of a simple motion, etc. I would be willing to join a “knowledge sharing group” and post my flat fees if others would do the same. I am sure if enough people posted their numbers we could indivildually make informed decisions regarding our geography, own experience, etc. in coming up with fair fees for our clients.
    Tom Spadea, Esq.

    • I don’t, but it probably would not be of much use. You have to charge what is reasonable in your geographical area, and there are no set formulas. You can ask around for attorneys you know. For example, here in the Orlando area, it is pretty typical for a breach of contract litigation to cost $15,000 or so in attorneys fees to get through pleadings, initial motions, initial discovery and pre-trial settlement. I know that because I asked around with some of the litigators I know. I took that into consideration when I calculated my fee schedule. I charge less than that if the matter is pretty straightforward with little to do by way of discovery, and I refer out anything more complex than a simple breach of contract or collections matter.

  • Great post. I’m about to leave the military to open my own law office. I would like to have a billing practice that is alternative to the billable hour, and I like your approach. Can you provide a list of your unbundled services (e.g. cost for a demand letter, cost for a motion, etc.) that I, and others, could use as a model? Thanks.

    • Thanks Alan. I do not publish my fee schedule because it is just a starting point. I tailor the fee to the client and their case. I did send you an example of my fee schedule in a private message, though, so you can get a sense of how I calculate my fees.

  • I both understand and see your point about fixed-base billing. I just do not understand the hyperbole. I am not one that believes it is a good thing to compete on fees, and the fixed-fee argument too often turns out to be a substitute for this type of practice. But, to ask and state … “whose side are we on anyway? Under the Rules of Professional Conduct, we are to zealously represent our clients’ best interests at all times”. It suggests that those that charge hourly fees, like some have to do statutorily, are in some way not on the side of their clients or do not zealously represent their clients. It is not a worthy statement and it is intended to be offensive. To suggest that a lawyer that charges hourly has to be a profit center, while a fixed fee lawyer does not is silly. It denies reality to suggest that lawyers do not have to be a profit center for the firm regardless of billing practices. So, you wish to present it as a moral imperative. Lawyers who might not completely agree, or who might be bound in practice areas that must bill hourly, are the enemy in the practice of law? I appreciate your ideas, but I am so tired of those in the practice of law, as well as the public at large, continuing to frame every issue as a fight against evil without little regard for who they are calling evil. And, then in the next breath, brag about how much money you make, with less time invested in the case as opposed to the hourly fee lawyers? According to the standards profess in your post you, this does not reflect having the clients’ best interest at heart. There is not much to recommend to a client that finds himself or herself involved in protracted litigation when being billed on an hourly basis. However, there is little to recommend to a client who just got billed $15,000.00 for litigation that did not turn out to have incurred that much attorney time. From the little I have seen, fixed fees probably tend to bring a larger percentage of ethical grievances than hourly fees. Fixed fees might, in some circumstances, lead to pressure by the attorney to settle. Alternatively, if not properly structured, it could lead to financial hardship for a solo. One of your readers asked how to know how much to charge. Well, that would involve keeping time so you can figure out what tends to be profitable. Your suggestion is to arrive this figure from community standards. In short, take the median of what hourly-fee attorneys have determined is correct. For me, personally, I never appreciated the contingency contracts lawyers entered into. The entire purpose of these is to charge a winning client with the losses of the losing client of the firm. Fixed fees can have some of those same attributes. So, I understand you want to be a cheer leader for fixed fee representation. It has apparently served you well. I think there are a lot of positive benefits that can speak for a fixed fee practice. I am happy that you highlight those. Somebody has to make the argument. My only advice is to motivate with facts that are actually beneficial to lawyers. Leave the ad hominem comments out.

    • I think you misunderstand what I’m saying, Chuck. I do not think that flat fee billing is the only way to be ethical about it. I DO think that most of the firms that practice hourly billing do not consider the impact of hourly billing on their clients. By asking whose side are we on, my intent is to do just that: charge my fellow lawyers to take a look at their billing practices and make sure that the way they go about it is in line with our mission to serve our clients’ best interests.

      I’m also not suggesting that flat fee billing is a moral imperative. I am saying that an arms’ length negotiation where the client knows what to expect is a better way to go about things.

      None of what I have said is intended to be an ad hominem. I’m not arguing that lawyers bill by the hour because they are unethical. Quite the opposite – genuinely ethical lawyers bill by the hour without questioning their practices. That blind faith is a serious problem with the way most law firms handle hourly billing.

      And I am definitely saying that, for ME, fixed fee billing works much better. My column is, by and large, me discussing my experiences and my choices. As always, your mileage may vary.

      • Yes, Suzanne, but having enrolled in the SPU courses on Marketing and heard Jay Shepherd (no longer in Boston private practice since he prepared his course materials) and Ron Baker talk, the emphasis should not be on what the community rates are, but really, on what value is being provided, and to offer the client the benefit of “controlled” costs, which in civil litigation, is a balm for a client. We all know how much time a civil litigator wastes sitting in a crowded courtroom on “motion day” waiting for their motion to be called and perhaps argued for a few minutes…all the while billlng for their time. The SPU faculty emphasize that the focus for lawyers should be on the value that is provided to the client, and that cost/pricing should emanate from that value…not community pricing standards. Your thoughts?

        • I consider what is generally reasonable in my area as a factor in determining my fees. It’s just one factor, however it is an important one and something that you can’t just ignore when making value billing determinations.

          Florida Rule of Professional Conduct 4-1.5 lists the following factors to be considered for determining whether your fee is reasonable, and I factor in all of them:

          (A) the time and labor required, the novelty, complexity, and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

          (B) the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer;

          (C) the fee, or rate of fee, customarily charged in the locality for legal services of a comparable or similar nature;

          (D) the significance of, or amount involved in, the subject matter of the representation, the responsibility involved in the representation, and the results obtained;

          (E) the time limitations imposed by the client or by the circumstances and, as between attorney and client, any additional or special time demands or requests of the attorney by the client;

          (F) the nature and length of the professional relationship with the client;

          (G) the experience, reputation, diligence, and ability of the lawyer or lawyers performing the service and the skill, expertise, or efficiency of effort reflected in the actual providing of such services; and

          (H) whether the fee is fixed or contingent, and, if fixed as to amount or rate, then whether the client’s ability to pay rested to any significant degree on the outcome of the representation.

          I also consider the client’s needs, such as the need to do something in a rush, or the need to handle a project over time in order to make it affordable.

          So no, no one pays me $15,000 to send a demand letter. But when I look at all the tasks associated with a litigation and add up my separate fees for each task, I know that “the fee, or rate of fee, customarily charged in the locality for legal services of a comparable or similar nature” is in the $15,000 ball park. But that’s just one consideration in determining whether the fee charged in reasonable.

    • Chuck,
      I can feel the frustration in your comment. I feel the same way. Ironically, the billable hour was initially developed in reaction to flat fess – lawyers sending bills for $5000 with little explanation of the work performed. Of course, the billable hour lead to abuses of its own. Just like guns don’t kill people, neither flat fees nor billable hour fees necessarily cheat clients. Lawyers do.

    • Chuck, I have a simple question for you: if you were not restricted based upon your practice area would you find yourself going for a flat fee arrangement in lieu of your current billing practices?

      • Susan, I do not think I would use a flat-fee structure in my work if I were allowed to. (I am not allowed to).

        I am not saying that it does not suit certain practice areas. It does. And, it suits some practices areas very well.

        Contrary to what is presented, I tend to think most lawyers bill on some sort of flat-fee basis. I tend to think we are often not self-aware enough to understand that what is being hawked as alternative billing or fixed fees is nothing new or widely employed. It has been in most types of consumer work, anyway, since before I started practicing law in 1986.

        For me, however, I engage in what is increasingly complicated, single-shot litigation. It is just as likely that we incur $2,000.00 in attorneys’ fees and costs as $20,000.00. It is impossible to predict until you know or understand the position of the parties and the lawyer on the other side. For example, I filed two similar cases a few months ago, in the same Court, against different defendants. One settled almost immediately, and we were paid $2,500.00 in attorneys fees and costs. In the other the Defendant did not file an answer. It filed an extensive Motion to Dismiss based upon some tricky jurisdictional issues. We responded to that brief. Then it filed a reply brief, which the Court determined was in fact an amended brief that had little connection to the first. We were instructed again to respond to those issues. We had 4 separate hearings and 50 pages of brief on our side before we got to the answer stage.

        Now, one could say to employ some sort of unit billing, which is contracted beforehand. But, it is hard to see how that is equitable to either me or the client. We would be trying to create a one-size-fits-all billing system to what is a volatile situation. The client on the case that turned out to be easier would ultimately get charged for the fees or costs of the client’s case that was harder and much more expensive.

        More likely, the lawyer has to not accept volatile cases in which people need help, or bare all of the risk of this happening. I think this is what happens in many litigation cases based-upon a fixed fee. The lawyer tends to look for ways to throw the client under the bus when the case blows up into something not predicted. It happens every day. I know. Many of these clients call me. They are in court complaining to the judge when I am waiting on my case to be called. They call the Bar. Why? The lawyers will go broke based upon what he or she has collected based upon the amount of work to be expended.

        I tend to think that fixed fees (if not the charging of them then the setting of them without much empirical evidence such as the time spend on a typical case) is one of the main reasons that many lawyers are unprofitable, or are struggling financially, in their work. I get calls from these lawyers often. There solution in the past has been to try and increase their caseload. But, ultimately, it is like a restaurant trying to make a profit selling prepared food for less than its costs of preparation. You can increase volume, but it will only increase losses.

        The culprit is the amount of money collected by the attorney for the actual work done by the attorney. To the extent that an occasional attorney is making a lot of money on fixed fees, at least in a litigation standpoint, is because the attorney has found a way to disguise the actual value of the work being performed in the typical case from the amount of money collected.

        So, my first point is to be self-aware. Fixed fees are already the norm in the greater number of practice areas. They have been for a long time. You can walk into Mexican restaurant in this day and age and then proclaim that you have discovered the taco, and then start evangelizing the taco as the new wonder food. However, that is not true.

        And then, my point is that even if you engage in fix-fee or alternative billing methods, you have to properly gauge those fees to make sure they work. You do that by maintaining time records of what you do and compare those to what you charge in a typical case.

  • I get that, and you’re right.. I just wanted to point out the SPU faculty flat fee billing philosophies that dealt with civil litigation and value. I am such a creature of the billable hr, I still grapple with the pricing/value issue…. and I don’t litigate ! (BTW, didn’t see reference to civil lit on your site)./

  • I would be very interested if you could provide me or the audience with a template, I guess a form of task-billing. I do not need nor want to intrude on your fees, but an empty schedule would help.

    Thank you-

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