Calculation of Legal Charges as per Billable hours

It may seem like a bit of a backward argument, for an extremely financially successful lawyer to try and put an end to something that has brought him so much wealth. He even stated, ''I'm a trial lawyer. I bill by the hour. So do the associates who work for me. I have lots of clients, so I can pretty much work, and bill, as much as I want.'' Instead of commending this set up, though, and all it has done for him, he argues, ''This needs to be fixed.''

Chesler goes on to explain that both clients and most lawyers he knows both hate the billable-hour method of payment for work on a case. Clients have obvious problems with it: the hours can pile up incredibly quickly, and they really have no possible way of making sure that the bill their lawyer gives them is accurate. But why do lawyers dislike this system that seems to be only in their favor? Because it is a waste of time. Chesler argues, ''The billable hour makes no sense, not even for lawyers. If you are successful and win a case early on, you put yourself out of work. If you get bogged down in a land war in Asia, you make more money. That is frankly nuts.''


Logically, I think anyone would have to agree with Chesler here, but several lawyers adamantly oppose Chesler. In the ongoing discussion that has erupted since Chesler's article ''Kill the Billable Hour,'' several have been quick to point out that Chesler is not the first lawyer to pose this idea (nor has he claimed to be), and that it has never gone anywhere before simply because it is doomed to failure. Others remind quick critics that, though this issue has been brought up before, it has never been posited by someone nearly as influential and respected as Chesler himself is. Thus the discussion continues.

Chesler uses an analogy of contractors' billing to put forward a possible solution to billable hours. He suggests that at the beginning of a case a client and lawyer come together to evaluate the client's needs and goals. The lawyer calculates, estimates, and (perhaps most importantly) build in a contingency, until the client and lawyer agree upon a fee. Because litigation can last so long and is so unpredictable, Chesler says this should be done every three months or so. In this way the client is not surprised by a huge bill at the end, and the lawyer can focus on getting the work done without worrying about logging hours or meeting an obscure quota. Chesler recognizes that added motivation is necessary to put ''the incentives where they should be.'' His suggestion is that a fee be agreed upon if the lawyer should win the case or resolve it in the way the client wants. He calls this a ''success fee.'' This system, he says, ''Doesn't suffer from the soft idea that effort, even unsuccessful effort, should get an A. Winning is what deserves an A.''

Interestingly enough, in the past few years, some big-name firms have left the so-called lockstep model of awarding employees bonuses based upon how many billable hours they had logged during the year, and have moved on to a merit-based bonus system. Another of these firms to be added to the list for the 2009 fiscal year is Morgan Lewis & Bockius. A memo the firm sent out regarding bonuses was discussed in a post on the legal blog ''Above the Law.'' A spokesperson from Morgan Lewis briefly commented on the new system:
 

Effective with the 2009 fiscal year, which started October 1, 2008, we have decided to eliminate any hard-and-fast requirement that an associate bill 2,000 hours to get a bonus. In deciding on bonuses, we will look at the entire picture of an associate's contribution, including level of engagement, efficiency and value in serving clients, excellence, results achieved, contribution to our culture, participation in our programs, and other factors. We still expect that an associate meeting our expectations will be sufficiently engaged that he or she will have 2,000 billable hours annually (including pro bono hours), and we will give substantial weight to the level of engagement in awarding bonuses. However, having at least or fewer than that number of billable hours in any fiscal year will neither guarantee nor preclude a bonus.

This move cannot simply be passed off as damage control in a poor economy, either. First of all, several firms have done this in the past several years, before the economy turned south. Secondly, Morgan Lewis had a good year. While it could be seen as a precautionary move by the firm, it still has little or nothing to do with the state of the economy.

Morgan Lewis has simply noticed that their previous system had major flaws. Gregory A. Miller, a shareholder at Buchanan Ingersoll & Rooney, commented on why their firm changed. He said the firm was frustrated with the results of their previous lockstep bonus structure because some of their highest bonuses ended up going to associates who had billed a high number of hours, but who were not well-rounded attorneys. The affect of this on the morale of better employees was also not lost: ''We felt like we were slighting some of the associates most valuable to our firm and we didn't want to be caught in that box,'' he said.

While this move could be completely unrelated to the theory of Chesler and those who have gone before, it does seem that there are flaws with the billable-hour system even beyond those Chesler listed. Could moving to a merit-based model be the first step in killing the billable hour altogether?