Times are changing. Overhead is being slashed. No longer are marble mausoleum reception areas, entire floors dedicated to conference rooms with each room filled with an exotic wood table, or priceless art collections adorning law firm halls and offices a requisite for corporate outside counsel offices. Efficiency and low-overhead are characteristics that are often what clients currently are searching for — law firms that mirror their own business practices.
Why would a business which holds itself out to the public as one which can provide a quality product or service at a lower cost than competitors hire a law firm which does not do the same? Why would a company that boasts cutting luxuries and astronomic executive salaries in order to reach a competitive price-point hire a law firm with inflated costs as a result of owning a few Picassos? This has been a serious question for companies in the past decade.
As a result, legal bills are now closely scrutinized, and the standard payment method, hourly rates, has been criticized. For example, one general counsel once incredulously noted that they were paying large firm partners between $800 to $1000 an hour and, “they’re charging you because they ordered sushi.” In another circumstance, a partner in a prominent Chicago law firm was unable to defend himself when someone inquired how he could bill nearly 6,000 hours a year for four consecutive years. Padding bills and billing for trivialized non-legal items is unacceptable (and in most circumstances unethical).
Simply, look before you pay a legal bill. Review what you’re paying for. For example, recently a very large and prestigious firm was bench-slapped by a New York judge as a result of their proposed attorneys’ fees of $126,000.00. To be fair, these fees were not being charged to their client, a residential tenant, but to the opposing party residential landlord in a lease dispute. However, reviewing why the judge was particularly upset with these proposed attorneys’ fees sheds light on some nefarious billing practices that are arguably common practice today.
The judge noted in his opinion after reviewing the large law firm’s 14 page billing statement that it included, “duplicated effort, research on the most basic and banal legal principles that a client could reasonably expect counsel charging minimally $405 per hour would have prior knowledge of, not requiring review or oversight by a more senior associate, … and a partner, all unabashedly invoiced here.” The judge also noted that many of the things billed for by this law firm were tasks that counsel was presumed to know or could be performed within minutes. In sum, a sterling example of an egregiously inflated legal bill.
Law firms and their clients have become increasingly aware of the disincentive for lawyers in the current billing model to work efficiently. Indeed, churning out a higher bill filled with superfluous tasks is not doing any client a true favor in their matter. But in traditional practice, law firms evaluate associates and partners not by the quality of their work, but by their billable hours.
Consequently, new ideas on billing practices have emerged. While hourly rates are still the norm, many firms have adopted alternative fee structures. For instance, I personally have three rate structures I offer clients: hourly, contingency, and a blend rate — a reduced hourly rate and contingency fee (when a settlement or verdict is reach and funds collected, any fees that have been paid by the client at the reduced rate are credited toward the contingent fee). I’m not the only one who has adopted alternative fee structures. Indeed, there are other boutique commercial litigation firms that have adopted alternative fee arrangements, such as a flat fee with a bonus or contingency fee if an agreed outcome results. These arrangements incentivize law firms to work efficiently and produce a positive result for their own personal benefit. If you’re unhappy with your current fee structure, there are alternatives now, and great firms and attorneys provide them.