The debate about whether the legal industry should move away from hourly billing has existed ever since the business model took hold in the 1960s. Over the years the American Bar Association, the Association of Corporate Counsel and all manner of legal industry commentators have railed against the perverse incentives that this approach to billing creates.
Well, the billable hour’s back in the firing line. But this time it’s the most senior partner at one of America’s most prestigious law firms who’s taking aim. Evan Chesler, Presiding Partner of Cravath, has written an article in Forbes (entitled Kill the Billable Hour) about why the “billable hour makes no sense, not even for lawyers.”
Now, I’m a big advocate of alternative fees. But, for mine, Mr. Chesler’s claims fail to acknowledge the fact that both the provision of legal services and the way they are charged for is continually evolving. Sausage factory work – such as commercial leasing and company incorporations – has been done on a fixed-fee basis for years. And, even with more complex legal work, many clients have arrangements in place with their outside counsel specifying that an initial estimate is provided before work commences on a transaction, with the scope to be revisited if and when necessary.
I can’t see hourly billing being removed from the mix anytime soon. I agree with Bruce MacEwen when he says “the primary source of life-support I would cite is clients, not law firms”. Clients have the purchasing power to force change. What they don’t have is the desire. They understand the billable hour, and have decided that for many situations it’s good enough.