The Business Of Law

As close readers might recall, I have long called for an end to the billable hour model of legal service, arguing instead that contingency fees were a better solution for lawyers, clients and justice.

Well, as Claire Ruckin over at Legal Week reports, it appears that no less an authority than Lord Justice Jackson agrees with me.

Lord Justice Jackson, a widely respected appeals justice in the U.K., was asked to conduct an independent review of the rules governing the costs of civil litigation in the U.K. and to provide recommendations that would lead to greater access to the civil justice system.

Among Lord Justice Jackson’s conclusions are that lawyers in the U.K. be allowed to charge for their services through the use of contingency fees.

This is an important step for the U.K. because contingency fees had previously been prohibited on the grounds that lawyers with a significant final stake in the outcome might lose their ability to give impartial advice.

As a good English lord might say, that’s poppycock.

Contingent fees align the interests of counsel and clients, and they allow lawyers to take on costly and complex cases with little risk to the client. Finally, these fee arrangements promote efficiency because they encourage lawyers to be honest with their clients about the likelihood of success on the merits.

Most importantly, contingent fees are client-centric; something the legal profession could use a whole lot more focus on.

Whereas the billable hour essentially reimburses lawyers for their time, the contingent fee compensates the attorney for the client’s outcome. Lord Justice Jackson is 100 percent right, no matter how radical his proposal might seem to our bewigged brethren.

As close readers may remember, back in September I wrote a post calling for an end to the billable hour.  At the time I wrote the following:

The problem with the billable hour is that the lawyers have no skin in the game.  Whether drafting a contract, or litigating a case, lawyers and the law firms that employ them should be compensated based on the quality of their work and the outcomes for their clients.

I also wrote:

Oh change is coming.  At the moment it’s being driven by clients, but it will not be long before the revolution reaches the masses, and people start to demand that law firms and lawyers get paid for outcomes not hours.

Well it seems change may be coming a little faster than I thought.  Two stories last week out of Boston and Dallas highlight lawyers who like me have rejected the idea of a billable hour, and are operating instead on a fixed fee for service model.

In Boston, the erstwhile Lisa van der Pool over at the Boston Business Journal profiles Jay Shepherd of the Shepherd Law Group an employment law firm.  I love the lede of the story:

Shepherd famously doesn’t charge clients by the hour. He’s a prolific blogger — and tweeter. He’s never worked for a big firm. And he thinks that sometimes, as a group, lawyers suck.
I like this guy already!!  Here’s a link to the whole story.

In Dallas, Mark Weintraub of General Counsel Law is helping small- and mid-sized businesses manage legal contracts, mergers and acquisitions, employment issues and more with a “when- you- need-a-lawyer” approach called FlexGC™, a flexible, fractional legal service that cuts costs while delivering senior-level legal expertise. The firm will assess the services offered on a monthly basis and charge clients a fixed fee each month.

The firm’s approach is profiled in a recent story in the Dallas Business Journal.

Kudos to Shepherd and Weintraub.  They seem to have the entrepreneurial spirit that will change the way we deliver legal services in this country.  Godspeed!

Get the smelling salts, I’m writing a blog post on “process management”. Seriously, I came across an interesting piece over at the Legal Intelligencer by Gina Passarella this week, that talked about the idea that the legal profession could improve its business model by indulging in a little bit of project, and process management.

“Egads” you say…and as Gina points out “process management is the antithesis of the billable hour model”.

But I ask: Does it have to be?

Why couldn’t lawyers price their work, not by the billable hour (whose death knell, I have predicted), and instead look to outcomes. The model is quite simple, instead of being at the whim of the billable hour, lawyers would look at an overall legal project, estimate how difficult the project is, and then provide the client with a cost. If the project can be completed in less time, then the law firm adds to their profit. If it takes longer, then the firm knows that it needs to perfect its method of estimating.

Imagine if you went to your mechanic to have the brakes on your car fixed and you were given two options. First, you could have the master mechanic with thirty years of experience fixing your kind of car. Good news is that it will only take him one hour to fix the problem; bad news is he charges 800 dollars per hour.

Second choice would be the new guy, he’s just out of mechanic’s school, and basically has no idea what he’s doing. He’ll tinker around for about 5 hours before he figures out how to replace the brakes, but the good news is he only charges about 50 dollars per hour. Only other issue is that if you have the new guy do it, are you really sure it was done right (I mean after all we’re talking about brakes here—pretty important). So again your choices come down to:

1. Have it done right in one hour, but pay $800 for it, or
2. Have it done (maybe) right, in five hours, but pay $250

Kind of feels like a Cornelian dilemma to me.

Wouldn’t you rather the mechanic just tell you how much it will cost to fix your brakes? You agree to the price, and if the shop can figure out how to fix the brakes really efficiently, then everybody wins—you get your car back sooner, and the shop has more profit?

I’m no MBA (o.k. I am Babson class of 1996), but it seems to make sense to me.

This morning, the ABA Journal recognized our blog initiatives here at Sokolove Law and showcased my blog I wrote back in September to kick off their “Legal Rebels” online and editorial project.

The piece came from a blog post I wrote back in September entitled “This blog post would cost you $400: Billable Hours RIP”. In the article I stated:

“All told, that whole process took me about an hour plus maybe 15 minutes by my secretary for proofing and editing.

If I were a lawyer at a big firm, this blog post would have cost my client as much as $400. That’s a little crazy and I’m not the only one who thinks so.”

To read the entire article click here.