Monday, March 16, 2015

Is the Billable Hour a Conflict of Interest?

From the interesting-arguments-in-ethics department comes this provocative opinion piece by Ralph Baxter, who concluded a 23-year tenure as Chairman and CEO of Orrick a few years ago, and was named one of the "Top 50 Big Law Innovators of the Last 50 Years" by The American Lawyer: "The inherent client conflict of interest caused by hours-based billing" --
  • "For some time I have been troubled by the potential conflict of interest that hours-based billing causes between the lawyer and the client. The more I focus on it, the more profound the problem appears."
  • "Let me start by saying that I have deep confidence in the dedication to ethical conduct of the members of our profession. My concern here is not with their fundamental professionalism. Instead, it is a concern that, notwithstanding that professionalism, the hours-based billing model can put them at odds with their clients in ways they do not intend, and in ways they may not recognize. It is a structural issue, not a moral issue."
  • "It is not just that what is bad for the client is good for the lawyer. The model incentivizes the lawyer to make it worse for the client."
  • "And law firms need to take responsibility for what they are permitting to occur. A material gap has developed between the costs incurred and fees charged and what those costs and fees could be. At some point the fundamental fidelity firms owe their clients and their ethical responsibility not to charge an unreasonable fee require them to revamp their business and service models."

1 comment:

Unknown said...

The problem for lawyers is that getting paid is inherently some sort of conflict of interest. Billable hours encourage you to bill as much as possible. A flat rate encourages you to bill as little as possible. A contingency fee encourages you to balance the desire to minimize hours with what you think it takes to win. It especially discourages activity that would tend to create a marginal increase in recovery because you only get a portion of that (just as real estate brokers have little incentive to get you an extra few thousand for your house).

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