In weak economy, billable hours under attack
Wake up and good morning. There are certain non-negotiable cliches in business. Banks only lend to people who don't really need money. Call centers were created solely to induce mild strokes in those seeking help. And lawyers have figured out how to cram 25 billable hours into every 24-hour day.
Well that last cliche seems to be under siege. A story in The National Law Journal says more corporations are pushing law firms to compete for business based on flat fees -- not on the notorious model of the billable hour. In one example, when Burger King Holdings Inc. looks about for outside attorneys, the company includes this message:
"We don't necessarily believe the billable hour is the most efficient way of billing so please suggest some alternative and creative billing methods."
So far, the story says, the $2 billion fast-food company has been able to negotiate a variety of alternative billing methods with such firms as big Florida firms as Greenberg Traurig, Holland & Knight, Genovese Joblove & Battista and others across the country. Arrangements can include fee caps, blended rates and monthly retainers.
One law firm, Valorem Law Group in Chicago, has gone so far to trumpet on its Web site "The Billable Hour is Dead" and ask "How many lawyers does it take to screw a client? On a billable hour basis, only one." (Among other snappy phrases.)
The law journal story also quotes one of Tampa Bay's high-profile lawyers: Rhea Law, chief executive officer of 150-lawyer, Tampa-based Fowler White Boggs. She says her firm is "exploring" billable hour alternatives.
"People are looking for more certainty so they can budget their costs," Law says. "We're looking at a lot of things, some of them pretty specific to the client. These are tough economic times, and we are partners with our clients -- we want them to be successful. We can be as creative as they want."
Among the alternatives Fowler White has considered are retainers and "success fees." Law says she even recently did a "double-or-nothing" fee deal with a client on a land-use entitlement case -- and won double her normal fee. If she had lost, she wouldn't have gotten a dime, the story reports. "I wouldn't really recommend anything that high-risk for others," she laughs.
Common since the 1970s, hourly billing has been the subject of griping by clients and debates by legal experts, a Washington Post story explains. Critics say billable hours give lawyers an incentive to work inefficiently. But law firms have been slow to embrace alternative billing.
Chalk up at least one good thing to come out of this lousy economy.
-- Robert Trigaux, Times Business Columnist