Over the last year or so, much has been written – both in the legal press and in the mainstream media – about the predicted demise of the dreaded billable hour in our profession. The cover of the August 2007 ABA Journal featured an article by lawyer and best-selling author Scott Turow entitled "The Billable Hour Must Die" in which he argued that billing clients by the hour could actually be unethical.   In January 2008, the on-line magazine Slate published an article the title of which labeled the billable hour as a "scourge" upon the profession and posed the lawyer’s age-old dilemma – spend two hours at your daughter’s soccer game or bill the two hours instead?

 

The ABA itself sounded the alarm about billable hours in 2002 when it convened a special commission to study the practice and to recommend alternatives. Just last month Jeff Bleich, the President of the California Bar Association, publicly said that it was “obvious” that the practice of billing clients by the hour “is corrupting to our profession . . .” And, as Bleich noted, young lawyers in particular feel “degraded by the experience” of having to bill by the hour. 

Clients, too, hate the billable hour. Based on recent comments attributed to Susan Hackett, General Counsel of the Association of Corporate Counsel (ACC) (the in-house bar), her corporate clients are angry about their legal bills and they are not going to take it anymore. What are corporate clients so mad about?

So if we all agree that we don’t like billing by the hour, how is this going to change?

 

The conventional wisdom has been that large corporate clients will demand alternatives to billing by the hour. Indeed, the Slate article on the billable hour is subtitled “Could Law Firm Clients Finally Kill It Off?” Mark Beese, the marketing head of Holland & Hart, a 350-lawyer firm in the Mountain West, reported that at a recent Legal Marketing Association conference, the ACC announced that it established a committee to come up with a list of best practices for corporate law departments to contain outside counsel costs.

Is this the beginning of the end for the billable hour? Will this ACC committee start the corporate client revolution toward alternative fee arrangements?

Perhaps.  But not likely, according to Ron Baker of the VeraSage Institute. Writing about the same ACC presentation at the same conference, Baker summarizes it this way:

                        Ho hum. I’ve heard this all before, ad nauseaum

Allow me to do something I rarely do, make a prediction: This ACC committee will amount to nothing. Not because its goals aren’t correct—they are. Not because law firms need a push into alternative pricing paradigms—they do.

But because the impetus for change must come from law firms, not their clients. I know this sounds counterintuitive, but I firmly believe it’s true . . .

While I was initially skeptical of Baker’s argument, I now think he’s right. Think of it: if one or two Wall Street mega-firms were bold enough to completely stop billing their clients by the hour and instead used alternative fee mechanisms, what would be the likely result? Happier clients and happier lawyers in the firm. That combination should quickly lead to higher profits – a true “win-win” result.

So while some Fortune 500 companies like Cisco and DuPont are demanding their outside counsel adopt alternatives to billing by the hour, and while a growing wave of small to medium sized firms in cities such as Boston, Columbus, Chicago and Denver are moving entirely to alternative fee arrangements with their clients, it’s not enough. The practice of billing clients by the hour will end only after a Wall Street firm or two demonstrates to the rest of our profession that there is a better way that is actually more profitable.

As California Bar President Bleich correctly notes, in the current billable hour law firm model, the only way to make more money is to “work longer hours, increase the number of lawyers, or raise rates.” In the long term that approach is not sustainable. Eventually, a new revenue model will have to be developed. 

So some day, a visionary Wall Street lawyer will convince his or her partners to take the leap into the bold new world without billable hours. Which lawyer and which Wall Street firm will lead the Revolution? Right now, that remains to be seen. But that lawyer and that firm will emerge some day. And our profession will be the better for it.

D. Michael Grodhaus is an attorney at Waite Bailey Bayless & Chelsey in Columbus, Ohio.  His blog on alternative fee setting can be viewed at http://thealternativefeelawyer.blogspot.com/