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Driven by the Clock

By Megan Kinneyn | Jan. 2, 2007

Law Office Management

Jan. 2, 2007

Driven by the Clock

There's no shortage of dissatisfaction with the billable hour. But will lawyers or their clients ever find a way to let it go? By Kelly Niknejad

By Kelly Niknejad
      Edited by Martin Lasden
      Lacking comfortable alternatives, lawyers and clients stay hitched to the billable hour.
      When Daniel Christopher left his perch at Irell & Manella in Los Angeles to set up his own practice, it was partly to work fewer hours?a desire consistent with the feelings of a growing number of attorneys nationwide. According to a recent American Bar Association report, the number of attorneys expressing dissatisfaction with the profession?or leaving it altogether?has grown substantially over the past two decades, as legal practice has evolved from a profession into a business.
      In response, the ABA's House of Delegates has gone on record encouraging law firms to reconsider the use of mandatory minimum billable hour requirements.
      The pressure to bill more hours has strained the relationship between attorneys and their corporate clients, the report noted. "I think clients justifiably hate mandatory minimums," says Brad Brian, immediate past chair of the ABA's litigation section and author of the report. "It does create in the client's mind an appearance of a conflict, an appearance that the lawyers might be finding tasks to do that don't need to be done."
      The history of the billable hour goes back to at least the 1960s, when corporations began demanding time-sheet summaries as a way of determining the value of the legal services received. But providing time summaries "really doesn't answer clients' questions about value," says Michael Ross, who was a partner at Latham & Watkins before becoming general counsel at Safeway. "Clients don't function that way?at least most of them," he says. "They determine value from results and efficiency, not by how much time gets spent by a bunch of people at different billing rates." 
      Still, the hourly fee model isn't likely to go away anytime soon. From the law firm side, Craig Johnson, a retired attorney who practiced many years at Wilson Sonsini's venture law group, observes: "Once you start the leverage model, where you're trying to make profits from associates or partners and pass them up to the more senior people, you become hooked on the billable hour. It's like heroin. You have to do it."
      And on the corporate side, "C-level" executives seem even more reluctant to abandon the status quo, as Christopher can attest. When he left Irell & Manella in the late '90s to start his own practice, he began offering clients a discounted fee "in return for a premium equal to the same percentage if the transaction is successful." However, not one prospective client accepted the offer. Christopher recalls one instance when a client rejected the idea because he didn't want the legal advice he received to be tainted by a huge financial incentive to close the deal. " 'I already have an investment banker whose only interest in this deal is collecting his commission,' " Christopher recalls the client telling him. " 'I need someone watching my back.' "
      "There's an interesting dance going on," says the ABA's Brian. "A lot of clients want attorneys to think about billing alternatives, but they're nervous about them too because there are risks on both sides. I think people are still feeling their way."

Megan Kinneyn

Daily Journal Staff Writer

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