Hourly billing: Presumed unethical

[Originally posted at Gruntled Employees on 22 August 2007]

Lawyer Scott Turow, acclaimed author of Presumed Innocent and other legal thrillers, has fired a warning shot at hourly billing. His provocative article "The Billable Hour Must Die" is the cover story of this month's ABA Journal. It's a well-written, well-argued piece that catalogs the problems that hourly billing creates for lawyers and the legal-services industry.

But the key passage in the piece is this one, where Turow argues that hourly billing is actually unethical:

But at the end of the day, my greatest concern is not merely that dollars times hours is bad for the lives of lawyers—even though it demonstrably is—but that it’s worse for clients, bad for the attorney-client relationship, and bad for the image of our profession. Simply put, I have never been at ease with the ethical dilemmas that the dollars-times-hours regime poses, especially for litigators....

But from the time I entered private practice to today, I have been unable to figure out how our accepted concepts of conflict of interest can possibly accommodate a system in which the lawyer’s economic interests and the client’s are so diametrically opposed.

Looking again to the Model Rules [of Professional Conduct], Rule 1.7 provides in part that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest,” which the rule defines as occurring when “there is a significant risk that the representation of one or more clients will be materially limited by ... a personal interest of the lawyer.”

I ask you to ponder for just a few minutes whether that rule can really be fulfilled by hourly based fees.

As Gruntled readers know well, I agree with this argument. If I bill by the hour, and a task takes me longer to complete, that's good for me (more money) and bad for my client (more time before satisfaction). That's why my firm has completely abandoned hourly billing — we've billed exactly 0.0 hours in 2007. Once a law firm has done the analysis and has learned how hourly billing is bad for its clients, how can it not be unethical to continue the practice?

Here are some other voices on the topic:

• Luke Gilman, Blawgraphy: "More on the Billable Hour, Charting Your Own Course." Key quote: "The overriding incentive of the billable hour regime is to bill as many hours as you can get away with. When you have a fiduciary duty to your client and a minimum billable hour requirement from your firm, the conflict is inevitable."
• Daniel J. Solove, Concurring Opinions: "Bye Bye to the Billable Hour?" Key quote: "The billable hour does little to measure and reward quality of work. It simply measures how long it took an attorney to complete a particular task."
• David Giacalone, f/k/a: "Broadening the hourly-billing debate — consider yourself, your clients and your ethics." This is a thorough and comprehensive post on the different sides of the argument from an ardent defender of hourly billing. (David's a Harvard Law guy, which I guess explains the poetry at the end of his posts. Hope he's following the Harvard Law blog policy — see here.)

Please lend your own voice to the debate.