The billing question post in this bowl that has been getting so much action in this bowl raises a bigger question for me- why are law firms still billing by the hour? Isn’t there a better way? I have a lot of friends in accounting and consulting, and the way they do billing seems so much better for everyone involved with no real downside, but I’m pretty junior. I’d love to hear from some senior partners & firm managers- what’s stopping law firms from moving in that direction?

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Just a paralegal, but I’ve been doing this for a long time. I think it depends on what you’re doing. Given the uncertainty of how far litigation can and will go, it would be wildly unfair to clients to estimate how much it would cost to take a case through trial and then settle at some point in between. You also cannot predict how motion practice will go during the course of the case so if I tell you it’s going to cost xxxx at the onset, but then opposing counsel files a motion that takes a significant amount of time to research and respond to, I’m out time & money if I didn’t predict that. Too many moving parts and unknowns in litigation in my opinion. Maybe it would work in a different practice area.

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Thank you, LA1! I appreciate that.

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For reference- the “accounting & consulting” style I’m talking about is this- at the beginning of a case, the firm sits down and estimates how much work the case will be, how it will need to be staffed, how many hours, etc. then presents it to the client as a proposal. Everyone at the firm still bills their time internally to keep track of productivity, and if the costs go significantly over, they reassess with the client, but if they’re significantly under, the firm just makes more profit. Efficiency is rewarded! Imagine that.

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As a former McKinsey consultant, I can report that the extent of my internal time tracking consisted of recording which project I spent a given day working on. (Granted this system is easier when you work on only one project for weeks at a time, rather than switching between projects within the course of a single day, as is more typical for lawyers.) But I mention this to emphasize just how much hassle was avoided, relative to having to track 6-minute increments.

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Litigation can be estimated in stages. We always provide budgets through motions to dismiss, and then through discovery to summary judgment. To the extent the complaint is amended (for example) and we need to move again we have another discussion. The point isn’t to provide a binding estimate or a cap but to allow the client to budget effectively and ensure he/she isn’t surprised in dealing with their own internal client. My experience is that most motions fall into a general range, discovery falls in general ranges (varies based on the number of documents or depositions) and can be fairly accurately estimated, etc.

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Agreed. It doesn’t have to a single ex ante discussion. Consulting firms negotiate a flat price for a particular scope of work. As the project proceeds, if the scope expands or contracts materially, the price is renegotiated. With a little creativity, litigation pricing could be negotiated in a similar fashion.

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I’ve been litigating for several years now, and don’t think this will happen for several reasons (unless clients literally demand it).

First, firms simply make too much money to change. Big firms especially, which can command insane rates, have no real motivation to mess with a good thing.

Second, litigation is super unpredictable. I’ve worked every type of fee arrangement - from typical billing, to flat fee, to stage budgeting (I.e., 20k from inception to summary judgment). We almost always blew past the budget using flat fee or stage budgeting. Also, when a case gets tricky and an associate wants to dive into the issues to kick the other sides ass, but they’re up against a billing cap, it disincentivizes getting into the weeds and you either end up blowing the budget (which pisses partners off) or blowing the case (which pisses everyone off).

Third, law firms consist of lawyers, most of whom are very reluctant to change and/or practice extreme risk aversion. There are lots of boutiques that utilize alternative fee arrangements, but I just don’t see firms charging first year associates out at 500/hr deciding to switch it up.

I do thing that clients will eventually push back more and more. But I don’t think that every F500 company will get together and collude to force change. It’ll be a SLOW process.

Just my two cents.

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A3, the most profitable litigation firms in the country don’t bill by the hour. Bartlit Beck is a great example. So firm conservatism is for sure an issue. Real profitability is not a primary reason that firms still Bill mostly by the hour.

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Don’t necessarily disagree with the above, but there’s another important factor here - clients. I routinely propose alternative rate structures. Most client have been trained to believe that a win in few negotiations is a discount from hourly rates. So when I offer a flat, staged, bracketed, or some other alternative fee, they most of the time say “how about 15% off of standard rates.” I think in house lawyers often fear the unknown, and they are terrified of overpaying for services with a flat fee arrangement under which the firm “wins.” Some clients are indeed getting better but as someone who handles very large complex cases for sophisticated clients and at a firm that’s pretty progressive on AFAs, my experience is that clients are as much or more responsible for adherence to the billable our model as firms are.

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If you work at it you’ll get there. Like so many things in the profession, in this area there’s no substitute for experience and exertion.

The billable hour is established at this point and firms don’t tend to change much (it’s also been extraordinarily profitable for them). It provides a simple metric of productivity and cost, particularly in harder to predict areas. And many many clients have accepted it as the method of billing. I’m sure there are better ways but they’ve yet to catch on broadly with the larger, more profitable firms.

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I am on the other side from most of the commentators (I am in house) and have discussed this with colleagues at other companies at length. There is a belief among many in house attorneys that firms will give substandard service on fixed fee arrangements compared to hourly rates. Having worked on a number of AFA cases while still at a firm I know that isn’t always true, but there definitely is a perception among some in house and I have no reason to doubt that they have been burned by unethical attorneys in the past, knowing how numbers and money obsessed some at firms are.

That said, I think things are changing, albeit at a glacial pace. I suspect law will end up like the inverse of consulting, so the top firms bill hourly and the lower firms increasingly get flat fee work (my understanding is that in consulting it’s flipped). There simply isn’t a need for 75 highly priced law firms all offering the same relative quality of services anymore, and hyperinflating billing rates are reducing the amount of work that is worth spending that much money on.

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This is a very interesting topic. Just in the time that I’ve been practicing (a shade under 20 years), I’ve seen cases go from leave no stone unturned with massive teams to very lean staffing and strict budgeting. And this is on cases with tens of millions at stake, at a minimum. The interesting thing is watching the large number of lawyers who have had significant difficulties adapting to having to follow a budget, and the internal politics between groups that really can charge a premium price and those who do commoditized (albeit very high stakes) commercial litigation. The successful lawyers at my firm who do general litigation have learned that they need to focus on volume rather than billing large amounts to individual cases, which in most cases just doesn’t fly anymore. It’s going to be interesting to see where this issue goes in the next ten years or so.

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I can't imagine trying to flat fee a client for civil litigation. Even trying to flat fee a particular motion is difficult because you don't always know how long research will take. As for transactional work, I could maybe see a different system working....but at least in litigation, every case is different and the opposing party may want to litigate more aggressively than normal or bury you in documents. I cannot see a flat fee working for the vast majority of cases...

I’ve done plenty of caps for different stages of litigation. I’ve done enough motions to dismiss, for example, that I have a pretty good idea what they typically cost for us. At a minimum, I’ve gotten pretty good at estimating how many hours it will take to research and write. If I’m wrong it’s usually just a few percent. I can’t have people spending hundreds of hours researching and writing a basic MTD, so i also tell the team what type of guidelines they have to live within.

In my experience, clients don’t agree to realistic flat fees or alternative fee structures. I tried agreeing one, because it is easier, but the client was not willing to agree a realistic flat fee, and so we went hourly...

I’ve seen that often, clients confuse using a different billing system and getting a discount. They are two different things entirely.

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