"The Hours—The short, unhappy history of how lawyers bill their clients."

(Photo credit below)

Seeing Susan Cartier Liebel's intriguingly titled post The Cockroach of the Legal Profession - The Billable Hour reminded me that I have never posted at idealawg the excellent article by Professor Niki Kuckes on the history of the billable hour. Kuckes begins "The Hours" . . .

Law firms bent on making as much money as possible treat associates "very much as a manufacturer would treat a purchaser of one hundred tons of scrap metal," Chief Justice William Rehnquist observed in the mid-1980s. He explained the firms' attitude like this: "If you use anything less than the one hundred tons you paid for, you are simply not running an efficient business."

I urge you to read the whole article (from Legal Affairs). Here are three excerpts . . .

Firms' reliance on the hour as their billing currency emerged in the 1950s. In the country's early history, state law strictly limited legal fees, which were generally paid by the losing side in a case. Lawyers supplemented their income with bonuses from satisfied clients—like tips for a waiter—or with annual retainers. As economic regulation fell out of political favor in the 19th century, however, such maximum-fee laws were repealed. By the early 20th century, lawyers used a combination of billing methods: set fees for particular tasks, annual retainers, a discretionary "eyeball" method, and contingency fees, which the ABA approved as ethical in 1908. They rarely billed by the hour.

. . .

It didn't take the profession long to figure out that the billable hour could be used to turn the practice of law into a more profitable business. In 1958, an ABA committee put out a pamphlet called "The 1958 Lawyer and His 1938 Dollar." The pamphlet lamented the "economic plight" of lawyers and their failure to keep pace with the earnings of other professions, particularly (and gallingly) the income of doctors and dentists. By devoting themselves unduly to the high ideal of "devotion to public interest," the committee concluded, lawyers were flopping as businessmen. The ABA urged them to take a businesslike look at their work habits—beginning with time records, the lawyer's "sole expendable asset."
. . .

It's striking to compare today's expectations to a lawyer's reasonable workday in 1958. In that year, the ABA announced that unless a lawyer worked overtime, there were "only approximately 1,300 fee-earning hours per year." This assumed a five-day workweek plus half-days on Saturday. At that time, the ABA set a "realistic" goal of five or six billable hours a day. Today, a billable hour target of 1,300 billable hours a year would amount to a civilized part-time schedule—the equivalent of a three-day, part-time workweek in most large firms.

Note (added August 18, 2007, 12:50 PM Mountain): More on the billable hour . . . In Memory of the Billable Hour, Billable Hour Resources at The Billable Hour (lots of links), broadening the hourly-billing debate — consider yourself, your clients and your ethics (more links for you), "The Billable Hour Must Die," ABA Commission on Billable Hours Report 2001-2002 (PDF), No First Year Billable Hours? An Idea Whose Time Has Come

Note (added February 25, 2008, 7:25 PM Mountain): More links and commentary on the billable hour at this post at Jay Shepherd's Gruntled Employees: Hourly billing across the pond.

Photo credit: emilay_08 at photobucket

Comments

[Susan Cartier LIebel]

Great addition to the conversation!