David Boies, Too, Pans the Billable Hour.
In a June 26, 2014 post at the on-line version of the ABA Journal, David Peer has written an article suggesting a proposal to amend ABA Model Rules of Professional Conduct, Model Rule 1.5 to list factors which would promote alternative billing arrangements in lieu of the hourly rate paradigm. For example, he would increase the factors placing emphasis on value provided to the client and risks taken by both attorney/client. He also suggests requiring attorneys to have comprehensive discussions to understand client goals and pricing to get them were they want to be. Finally, he wants to limit an attorney’s ability to offer hourly billing arrangements out of habit, ignorance, or laziness, except where the client is extremely sophisticated, the risks of the matter are too variant, or the clients request hourly billing after full disclosures on alternative fee arrangements.
David Boies, too, apparently has labeled the billable hour “as a problem” that “creates a conflict of interest between the lawyer and the client.”
Nonetheless, only 29% of firms responding to Altman Weil’s 2013 Law Firms in Transition Flash Survey changed their strategic approach to pricing since the recession, with alternative fee arrangements accounting for a mere 10% of fees collected.
This article has drawn conflicting comments from readers. However, one general counsel of a Fortune 500 company likes the proposal, because FMC Technologies successfully implemented alternative billing arrangement requirements for outside counsel. The reader reported that, at time of creation, the $1.8 billion company had a total legal spend, inside and out, of $14.8 million. However, in 2013 after the company had grown to $7.1 billion, the total legal spend went down to $9.8 million based on use of value-focused, performance based fee structures. Interestingly, the general counsel reported that this reduced legal spend still paid the company’s law firm alliance firms, on average, 107% of the particular firm’s invoice.
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