Hourly Billing

You might remember John Grisham’s novel, The Firm. Law school grad Mitch McDeere gets a job offer he can’t refuse from a “small” Memphis law firm.  Unfortunately, once employed, he learns that his firm is full of all types of unsavory characters.  Caught in their web, Mitch needs a way out and ultimately decides to cooperate with the FBI.  In the movie version, he turns his firm in not for murder, fraud, or any of the other outrageous forms of conduct the firm is involved in, but for inflated hourly billing.

Although without much of that drama, the inflated billing story is being played out in a Chicago office of a large national law firm, where a junior partner has turned in his firm for what he believes were fraudulent billing practices.  The Wall Street Journal law blog has a fascinating discussion of the situation, with many insightful comments.

The billable hour billing system has become increasingly under attack because of its potential for abuse and because it might not truly reflect the value an attorney brings to cases or transactions. But despite the widespread belief that billable hours are not perfect, there is little momentum for change, particularly from traditionally defense-oriented firms.  Traditional defense firms are used to hourly billings, the constant cash-flow, and pursuing cases without taking on the risk of the case.  Thus, there is little incentive to change the system.

On the other hand, firms, like ours, that have traditionally represented plaintiffs using contingent-fee arrangements are used to taking part of the risk in cases and are leading the way toward contingent or alternative billing arrangements in commercial litigation.  For example, for several years we have represented numerous commercial entities using contingent arrangements or hybrid agreements that would have traditionally been done on an hourly basis.

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