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Eight Billable Hour Scams

by Bitter Staff featuring PhilaLawyer
03:14 AM, 02/19

[Ed. Note: For today’s edition of Bitter by Numbers, we welcome back our friend, the ever-vile (but occasionally insightful) PhilaLawyer, whose magnum opus, Happy Hour is for Amateurs, is available for purchase at Amazon and in bookstores everywhere.]

Perhaps you’ve read the The New York Times article about Even Chesler, the Cravath partner who calls for lawyers to “get rid of the billable hour.” It focuses on why, in this new economy, corporate America will no longer pay outrageous prices for litigation services. 

In the wake of that thrust are a few small references to the inefficiencies and, in some cases, outright frauds, invited by the billable hour system. Unfortunately, but not surprisingly, aside from the well-known practice of bill padding, few specifics are considered. 

I’d like to remedy that here and offer some detailed examples of the more nuanced forms of chicanery engendered by our current billing model.  Here are eight of the more insidious ways some of us separate clients from their wallets.  The ones nobody ever catches. 
________________________________

1.  Fluffing the Exposure

Clients decide how much money to spend on their defense based on how much they stand to lose.  The average case a decent billable hour firm handles is a basic breach of contract claim, limiting the plaintiff’s recovery to the amount of money it would have been entitled to under the contract.  Plaintiff’s counsel will often fix this disadvantage by adding tort claims, like fraud or breach of good faith and fair dealing, which add the threat of additional damages.  Technically. 

A half-witted defense lawyer knows that most of these add-ons are naked leverage plays.  Whether he tells the client that, however, is another issue.  If the client thinks those claims have a chance, it’ll pay more in defense costs.  The enhanced risk also provides “Success Insurance.” So if the actual exposure is $1 million, but the client thinks its $1.7 million, a $1 million settlement with $300,000.00 in attorneys’ fees looks like a win.
________________________________

2.  “Wal-Mart” Document Review

One of the greatest revenue sources in law is a dirty warehouse of old, dingy paper.  In any piece of large, complex litigation, there’s an archive of documents—in Rochester, St. Paul or Topeka—in which some bit of material one of the parties might need to make its case is scattered amongst 50,000 boxes of irrelevant pulp.  Teams fly to the location and spend weeks searching through boxes, making spreadsheet indexes of documents no one will ever read and sending thousands of copies to the firm’s home office, where a team of techies (at another cost to the client) turn them into searchable databases.  While they do that, associates and paralegals from the opponents’ firm watch, to make sure no documents are hidden or destroyed.  Thousands of dollars per hour until every conceivably relevant piece of paper has been vetted. 

And that’s just an example of actual firm employees reading the paper at issue.  The new model, the “Wal-Mart” approach, is much more lucrative.  All you need is a boiler room of temps or independent contractors (young, unemployed lawyers from lousy schools with no other job prospects) to read the material at $35.00-$50.00 per hour, while you bill the client a hefty markup on the labor.  The St. Mary’s Upstairs College of Law graduates scanning those documents are technically lawyers.  And that credential allows you to tell the client “attorneys” are reviewing the material.

If the firm’s new associates would be billed out at $250.00 per hour for that same work, a contract lawyer should at least warrant, say, $100.00-150.00 per hour.  The client won’t complain.  It thinks it’s getting a deal.
________________________________

3.  Volunteering

Litigation’s a piecework business—no profit in having your opponent’s lawyer do something you can do yourself.  We kill each other in open court, but when it comes time for one of us to prepare an order for the judge’s signature or a first draft of a settlement agreement, we’re suddenly doing an “Alphonse & Gaston” routine with one another. 

“Oh, I’ll take the first crack at drafting the agreement.”
“No, allow me.  I’ve done one in a similar case before.”

If your opponent crafts the initial version of anything, he gets the lion’s share of billable time out of the project.  In the case of a settlement agreement, doing the first draft can be the better part of a day’s worth of billables. 

And if a client asks why you didn’t let the other side create the first draft, the answer is always, “Because I wanted to control the process, to make sure you were protected.”
________________________________

4.  Double Dipping

The quickest way to stack up billable hours is a traveling assignment.  If your opponent demands you take deposition halfway across the country, don’t fight him.  It’s an economic opportunity where you bill for every minute of the travel.  Then stack on that all of the time you spend on other clients’ cases during the trip.  Using this approach, a twelve-hour trip from Philadelphia to Detroit for a deposition can net a total of seventeen billable hours.[1]

And nobody who’d care would ever find out you were billing two different clients at the same time.  The overlapping entries appear on separate invoices, the laws of physics in the billable world applying on a client-by-client basis.

[1] 5 hrs on plane (assuming a modest PHL delay) + 3 hrs in deposition + 4 hrs driving to/from airport, checking in and waiting for rental car/cab + 5 billable hrs working on other cases on plane/in airport/in cab = 17 hrs.
________________________________

5.  Scorched Earth

The smallest case can turn into a billing bonanza, if you run it the right way and set a nasty tone:

• Get opposing counsel pissed early by ignoring his letters. 

• Develop an acrimonious relationship where you only communicate in writing.  Letters run up a lot more in fees than phone calls.

• When the opponent demands documents from your client, respond with a high-handed, curt reply.  “Your request is overly broad.  If you hone it to a succinct category of material, I’ll be able to respond.” The average litigator is stressed, irritable, and has an eggshell ego.  A cryptic response is taken as an insult.  He’ll snap and file a motion with the court, which is what you want.  And since most judges are Solomonic, they’ll order you to produce two-thirds of what your opponent demanded.  You look like a winner to your client and pick up a pile of billable hours you wouldn’t have had otherwise.

• When your client’s deposed, object to everything.  Direct your client not to answer a wide variety of questions, forcing your opponent to file a motion compelling him to do so.  You look like a bulldog to your client, get the billable time for preparing a response to another motion, and if the court orders your client to answer what he previously didn’t, you’ll be awarded additional billables for preparing him for and representing him at a second deposition.

These are just a few examples.  If you used those tactics alone, you’d could add 20 hours to your bills.  At $250 per hour, that’s $5,000.00, just for being an asshole.
________________________________

6.  Pre-Fabs

• Dave Chappelle = Richard Pryor
• George Clooney = Cary Grant
• Pam Anderson = Jane Mansfield
• All rock music is a variation on the riff from “Satisfaction” or “Paranoid”
• Everything on television is a rehash of plotlines from Seinfeld or M.A.S.H.

It’s all derivative, and litigation’s no exception.  Whatever brief a lawyer’s writing, it’s been written before—and it’s somewhere in the firm’s server.  A decent lawyer can cut and paste together the guts of a legal argument in an hour or two.

The question then is how to bill for that work.  A lot of litigators say you should bill them for the “value” of the work—approximating the hours it took to create the template you used, plus your case-specific modifications.

Sounds like a good deal, but I wonder: How do you do that?  Look up the associate who wrote the original papers five years ago, call him at his new firm and ask him how long it took?  Call accounting and see if they have his old time sheet handy? 
________________________________

7.  Blind Alleyways

The central issues in a contract dispute aren’t difficult to predict.  The words of the agreement limit the universe of available arguments, and there are only so many credible interpretations of the parties’ duties.  You tend to learn the two or three important facts, pieces of evidence and issues that will decide the dispute pretty early in the case.

Keep them to yourself.  A lot of clients like to play attorney and discuss peripheral matters they think are relevant to a claim or defense.  No harm in encouraging them to flex their inner Clarence Darrows.  The more issues raised, the more work done:

MEMO
To: Client, File
Re: The Napoleonic Code Does Not Apply in Indiana

The client won’t complain—it raised them.
________________________________

8.  The Babel Effect

The best way to ensure a client doesn’t complain about a bill is to write it in language he can’t understand.  Lawyers do the same thing bankers, insurance agents and every other category of middleman does: Blur the simplicity of the service they provide with silly industry language that makes it seem complex enough to justify the fee.

• Brokers use words like “no load,” “field bet” or “collar.”

• Consultants run “models,” talk about “synergies,” or say how some strategy is “baked into” a broader plan. 

• Litigators talk in terms of “statutory preclusion,” “stare decisis” and “promissory estoppel,” and filing things like “demurrers,” appointing “guardians ad litem” or creating “constructive trusts.”

Who understands a 1.1-hour billing entry for “Analysis of North Carolina civil procedure rules to determine form of affidavit for submission of letters rogatory to serve subpoena duces tecum”? 

Baffling bills are a win/win.  If a client calls with questions about the charges, that’s a billing event.  And the more confusing they are, the longer the call. 
________________________________

No one likes this shit.  It’s offensive, backhanded and creepy.  And what’s its root cause?  The billable hour.  A compensation system built to reward inefficiency, married to a profession providing endless pretexts for needless work and granting its abusers impenetrable deniability.

I’d say aggressive self-policing is the answer, but that’s as likely to succeed in the litigation business as it did in investment banking.  The only solution is to completely align the client’s interests with those of its lawyers.  Incentivize counsel to dispose of cases as fast and cheaply as possible, the way they would if they were paying the fees.

And the only way to do that is to get rid of the billable hour. 

Check out other lists, tallies and scores to settle in Bitter by Numbers.


Page 1
  1.  
    Paul | February 19 | 04:33 AM You are too young. Everything on Television is a rehash of The Honeymooners.
  2.  
    BL1Y | February 19 | 04:33 AM Getting rid of the billable hour won't necessarily reduce costs for the client. If the firm charges a flat rate, how do you think it is calculated? The firm will look at how many hours they could have billed, and base a flat rate on that. All that changes is the risk of going over budget is shifted to the firm (along with the rewards of coming in under budget).
  3.  
    Alex Hump | February 19 | 06:54 AM I've always found the best way to earn money for the firm and to curry favor with my favorite 2 paralegals, is to add them to select "document review" billables. It is particularly helpful when it comes to EDGAR filings, as those just can't be wrong, and they're up on sec.gov forever! Of course, as the attorney ultimately responsible, I also review all of the EDGAR docs over the cute paralegals' "shoulders", and we then typically go out for a nice meal and drinks and brewskis on the client's dime, of course..
  4.  
    chad_broski | February 19 | 07:44 AM big fan phila, and another great piece. but none of this is new - the problem is what is a better model for litigation? other practice areas are more suited to flat fee arrangements, such as real estate and estate planning, where much of the work is fairly routine and a fair price can be accurately set ahead of time. but with litigation, it's so hard to price because you never know what's going to happen in a case. the other side is lying to you, but so is your client. i can't count the number of times i thought a matter would be fairly straightforward until i found information that my client conveniently withheld from me that threw a giant monkey wrench into the case. and contract disputes may be limited in their damages, but that doesn't matter when neither side is willing to compromise. because you don't control the work the client asks you to do, it's hard for you to control the price. i agree with you that all of the hour-padding strategies you mention are rife for abuse, but that's up to the person paying to control what they're paying for. the problem is that most in-house counsel come from big firms who don't teach about the business side of things, so they don't know how to trim the fat.
  5.  
    Georgie | February 19 | 10:29 AM PhilaLawyer Rocks!! great piece.
  6.  
    BL1Y | February 19 | 11:32 AM I really like the fake "Will Return" clock idea. I have one, but it's too bad the moving second hand gives away that you're never coming back. This is the second prop from ThinkGeek.com BitterLawyer has used in pictures.
  7.  
    Ron Coleman | February 19 | 12:01 PM I think there are lots of problems and abuse connected to hourly billing. For naively raising some of the issues you talk about here or which are related, I was halfway out the door at my first Big Law job. Having said that, after 20 years in practice in firms large, small and medium, I think your piece is excessively cynical and makes broad accusations against lawyers of conduct that is, as you describe it in some instances, either unethical or unethical and fraudulent. I also believe you do not appreciate the real dynamics of risk assessment, including the risk -- very real -- that that "add on" tort claim you promise the client will "absolutely" be dismissed by the judge ... isn't. Any lawyer looking at the complaint would be a fool to talk down the exposure. Besides, the risk assessment doesn't only go in one direction. Overestimating exposure could result in the client deciding it's too risky to litigate, and you end up with an early settlement. Most lawyers do what they can to do deliver good value and they will get the chance to do so again. On the margins, however, I do believe they pad and cheat like crazy, and that's why I endorse much of what you write here. But I think you've gone over the top.
  8.  
    Eric | February 19 | 12:30 PM #6, the idea is that competition between lawyers would drive prices down.
  9.  
    Bill Dugan | February 19 | 12:45 PM This article has nothing to do with any good looking law babes! Query whether there are any, or not?
  10.  
    Anon Female | February 19 | 05:39 PM Bill, other readers may think you have a one track mind!
  11.  
    Harry | February 19 | 07:05 PM phila lawyer is a stud. dark as hell
  12.  
    Bill Dugan | February 20 | 12:47 AM I concur. Nothing else is as important as a hot babe. The difficulty is finding one and connecting with her.
  13.  
    BL1Y | February 20 | 04:23 AM Bill: Hot babes are easy to find. Beauty is common. ...Just not in a law office.
  14.  
    Anonymous | February 20 | 04:45 AM BL1Y is right. If anyreally hot "law girls" exist, please step forward and identify yourselves for the rest of us tools!
  15.  
    Anonymous | February 20 | 05:22 AM The chick on TV that advertises "BONIVA" was once hot, and is probably one that lawyers over 50 would love to bone.
  16.  
    BL1Y | February 20 | 06:19 AM Sally Field?
  17.  
    Anon | February 20 | 12:58 PM Nice job plagiarizing. This is the same exact article that appeared in the American Lawyer via LawShucks.com. Pathetic.
  18.  
    Guy who knows what day it is | February 20 | 01:21 PM Hey Anon, Why don't you check the date before you accuse someone of plagiarism?
  19.  
    Anonymous | February 20 | 01:24 PM Isn't he a working lawyer? Weren't you taught to sort of think these ways but never bill it like that? You make us people from smaller firms who don't have the protection of the name of big fancy firms look like a bunch of crooks. You're the reason nasty lawyer jokes exist.
  20.  
    Bill Dugan | February 20 | 03:34 PM I like that BL1Y--Boning the Boniva Chick!!!
  21.  
    John | February 23 | 04:11 PM Flat fees encourage expedited litigation. If I receive a flat fee of $50k, you can bet your ass that the case file will be closed before I get close to that number in billable hours.
  22.  
    Sam Glover | August 13 | 10:19 AM Great post, and great argument for value billing!
  23.  
    Pat | March 03 | 10:14 AM Despite claims of competency, who will hire an efficiency expert to determine how long it takes to read an email, or a note, or track phone calls. Setting the minimum of .25/hr, or 15 minute minimum is surely another method of inflating billable hours - which over time - can really add up. If lawyers are competent but can't read an email in less than 15 minutes, should any of them be in a courtroom billing for valuable court time if it takes them that long to read anything? The typical lengthy case must take a day to get through - that's 8 hours of billing.
  24.  
    http://PatentLawNY.com | May 08 | 09:58 PM Well written... flat fees are the way everyone is going. I generally estimate how long something will take, give a price, and there's no fighting after that... both sides know what it will cost.
  25.  
    Tom Galvani | May 11 | 06:40 PM To paraphrase Adam Carolla - you're a bit like the Hollywood producer that says "this joke sucks" but can't write his own joke. He criticizes without offering a solution. That said, I'm probably about to do the same thing. I've been billing on a purely flat-fee basis for a while now, and I can tell you, there are times I wish I hadn't written the engagement letter that way. The trial-and-error process of flat-fee billing is more often painful than windfall-y. There is one thing that can be said about hourly billing: it is proportional. The client knows, at the outset, that he / she is going to be paying X dollars an hour. If he doesn't think the attorney is worth that, he can negotiate with his words or his wallet. The problems you cite are not a symptom of the billable hour, but of the abuses of the billable hour. So maybe the solution isn't getting rid of an hourly billing model, but going after the opportunities for abuse. And in that vein, #4 double dipping? In what jurisdiction is that not a blatant ethical violation? I'm thinking about moving.
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