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The Big Lie: There Are Only a Few “Bad Apples” Committing Billing Abuse

April 2, 2013

bad appleSpring is in the air, so it must be time for the New York Times to run out another front-page story on BigLaw billing abuse.  Given the relatively “small potatoes” of the dispute at issue  – in this case, $675,000 of unpaid legal bills – it’s likely the real reason behind this latest “investigative journalism” was the existence of some rather juicy emails between the overbilling lawyers themselves. After all, these types of “churn that bill, baby!” emails almost never make it past the office shredder.  Although, they frequently do lead to BigLaw partner wet dreams of soon-to-be-purchased exotic sports cars.

My fundamental problem with this article and its progeny, which seem to appear every few months, is not the further uncovering of BigLaw billing abuse, but the invariably similar responses of the “go-to” legal experts called upon to comment on the pervasiveness of the problem – namely, that unethical billing practices are limited to just a few “bad apples,” and that the majority of big firms would never consistently engage in such unseemly practices.

Imagine my lack of surprise then, at the Times’ latest Stock Response, this time from the oft-quoted legal ethics expert, Professor William Ross:

Of course, most lawyers are ethical, but the billable hour creates perverse incentives.

In other words, overbilling and bill padding are limited to just a few “bad apples.”  If you believe that whopper, you probably think Congress is doing one hell of a fine job lately.

To be fair, the Times also published an op-ed follow-up by Steven J. Harper, “The Tyranny of the Billable Hour.”  In it, Mr. Harper generally condemned the billable hour model as serving no one except the fat and happy equity partners of BigLaw.  However, even Mr. Harper falls back on the Stock Response when he notes:

For associates, the goal is simple: meet the required (or expected) minimum number of billable hours to qualify for annual bonuses and salary increases. Billing 2,000 hours a year isn’t easy. It typically takes at least 50 hours a week to bill an honest 40 hours to a client. Add commuting time, bathroom breaks, lunch, holidays, an annual vacation and a little socializing, and most associates find themselves working evenings and weekends to “make their hours.” Most firms increase financial rewards as an associate’s billables move beyond the stated threshold.

So according to Mr. Harper, “honest” associates are now working “evenings and weekends” to “make their hours.”  When is this charade of the honest, hard-working BigLaw associate going to called-out for what it is – a pipe dream.  Even my 7-year old daughter wouldn’t seriously believe that fairy tale, and I can still sell her (barely) on Santa and the Easter Bunny.

So for those decision makers writing big checks to their attorneys who don’t want to believe in Peter Pan anymore, let me set forth the Brutal Truth of BigLaw billing abuse:

If your lawyer or firm has a minimum billable hour quota of over 1,800 hours per year, you, the paying client, are being robbed blind.  That’s not a maybe.  You.  Are. Being.  Abused.  Exclamation point!  Please seek help as you have proven you are incapable of helping yourself.  

Okay, I understand it’s hard to look in the mirror and see that you’ve been a sucker, but it’s time to look at just the cold hard facts.  You might want to sit down.

First, we can start with what your lawyer admits to.  None other than the same ol’ Professor Ross, in his 2007 survey, revealed that 67% of responding lawyers admitted having “specific knowledge” of bill padding.  Further, 55% of the scoundrels also admitted that they themselves had performed unnecessary tasks just to increase their billable output.  Pretty damning evidence, wouldn’t you say?  And guess what? The remaining 33% (and 45%) lied on the survey, so how can you trust them to bill you fairly.

Next, let’s look at some scary numbers and the immutable laws of physics.  Mr. Harper notes that DLA Piper associates averaged 1831 billable hours (and 2462 actual hours) in 2011.  He also notes that the average BigLaw associate is now required to bill at least 1900 billable hours per year.  Way back in the 1950’s, the ABA suggested that 1300 hours per year was a reasonable goal for full-time lawyers – which equated to 6 hours billed per weekday, plus a half day on Saturdays.  Fast forward to 2013 and 1900 hours per year, and you are looking at an almost 50% increase in required hours – or closer to 9 hours billed per weekday and a longer day on Saturday.  Add time spent at the office for restroom breaks, NCAA tourney pools, lunch, and other non-billable time, and you are looking conservatively at an 11 hour day (last I checked, despite stunning technological advances in the last 60 years or so, time has remain unchanged, i.e., 11 hours in 2013 equals 11 hours in the 50’s).  Last, but not least, add in commute and suiting-up time, and you are looking at getting up at 6:00 a.m. and returning home at 8:00 p.m every weekday, just to “honestly” bill at the modern minimum billable hour requirement.  The good news is that on Saturday you can probably work from home for your 6 or so hours of catch-up.  Click here for more a more detailed account of these Halloweenesque numbers.

So, let’s see?  What is the realistic percentage of attorneys who can pull off a never-ending series of highly productive 14-hour days, year after year, and honestly bill around 1900 a year? I’m thinking the number is closer to a goose egg than even 5 or 10%.  Which means that closer to a 100% have fallen into the standard “churn that bill, baby!” mode.  Even good people bill badly.  No need to judge.

But, not every BigLaw lawyer is overbilling, right?  Of course not, the honest ones either died from overwork, quit, were fired, and in at least one case, blog.

In case you need more examples of bill padding (polite term) and/or outright billing fraud, please do a quick search on my blog, or check out Grisham’s take on big firm billing in “The Firm”.

For more examples of what to do about the problem, i.e., solutions, do a quick search on my blog, or call me.

For those of you who just learned that the Easter Bunny and Santa are fictional, I apologize.

[Update: You can find Letters to the Times’ editor in response to Mr. Harper’s op-ed piece here.  Way to line up a few cream puff responses, Mr. Editor.]

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8 Comments leave one →
  1. April 2, 2013 5:04 pm

    It’s funny — every ex-lawyer-turned-advisor or advisor that has been working with firms for decades all say that this is not the case. And yet, not only do we know that fraud IS the case (considering every survey addressing it shows that the majority of lawyers over-bill), as you point out, logically it can’t help but be the case. The problem is the partnership model and the amount of compensation that the top partners are taking home over the past 15, 20 years. Firms get bigger, more associates bill more hours, so that more revenue can be brought in…. The outcome is obvious and perhaps inevitable.

    [Originally posted on LinkedIn Updates]

  2. April 3, 2013 7:52 am

    You know my thoughts Mike. The profession and dare I say it, but also many clients , have long been “desensitized” to most of this-until the odd one is caught out then there is much moralising etc- for a short period. Then its back to normal. Except for the truly innovative & courageous outliers the business model,the incentives ,the measurements & rewards are too great for many to do otherwise.

    [Originally posted on LinkedIn Updates]

  3. April 3, 2013 9:16 am

    I actually think sliding scale contingency fees are much fairer to the client than billing by the hour or flat fee arrangements.

    [Originally posted on “Lawyers on Google+”]

  4. April 3, 2013 6:32 pm

    Mike, I thought this article was spot on. What is not being addressed is that the solution is simple. Get rid of the billable hour and allow lawyers to focus on dealing with the legal issues. Fixed price billing or alternative fee arrangements are the answer.

    [Originally posted in LinkedIn group “Profitable Pricing for Lawyers”]

  5. April 4, 2013 7:43 am

    ….and get rid of timesheets. They are the real cancer in professional firms. Wherever you have timesheets you have professionals defaulting to time and a lack of innovation.

    [Originally posted in LinkedIn group “Profitable Pricing for Lawyers”]

  6. April 4, 2013 2:44 pm

    I have never worked at a big law firm, but I cannot see how it takes 2462 hours to bill 1831. And if you are on the clock why would you do anything that you could not bill for? I could do 1831 hours a year standing on my head. The work year with no vacations, holidays, or sick days is 260 days. Assuming 15 days for vacation, 7 days for holidays, and another 5 for sick time, that leaves 233 working days. That is only 7.8 billable hours a day, which is what everyone does who has a full time job. Why is it unreasonable to ask an employee to work 8 hours a day, 5 days a week? They are not there to socialize, web surf, or go on facebook, they are being paid to work. I think though the overarching problem with big law firms is not the billable hour but that they put out such a low quality work. I love it when “big law firm” is on the other side of a personal injury case I am prosecuting. All they do is churn away – letters, demands, discovery motions etc. This is another reason I cannot comprehend the inability to bill a mere 1831 hours, as all they do at big law firms is create billable events for themselves. And summary judgment motions, what a joke, they never make one supported with admissible evidence – why would they shut down a billable file? The problem is not the “billable hour,” the problem is that the jig is up. Their is not enough fat in corporate America to blindly pay ridiculously high hourly fees and hours billed as they used to. At these big law firms it’s not about practicing law it’s about keeping up appearances. Now everyone at these big box firms are running scared, because really, where is Mr. Ego “big law firm” insurance defense partner going to go when his unit gets dismantled due to downsizing? Who is going to pay him to churn files with discovery motions and “read document, .3 hours.” He is going to open a Subway Sandwich franchise, that’s where, because he has no real legal skills, no trial experience, no connections, and no business acumen. Hell, I wouldn’t even hire someone like that as a legal secretary, because he probably doesn’t even know how to scan a document. The article talks about billing abuse, but that is not it. The emperor has had no clothes for years, and now it’s all coming to light.

    [Originally posted in LinkedIn group “Profitable Pricing for Lawyers”]

  7. August 13, 2013 12:57 pm

    Great post, very useful and important information. There are definitely lots of people abusing the billing system.

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