I'm not a psychologist, ethicist, nor economist, but I've often played one or more of these roles at my weblog, especially under the guise of ethicalEsq. So, between you and me, I think you should know:
- the legal profession is suffering from mass chronomentrophobia -- "a persistent, abnormal, and irrational fear of clocks," along with excessive peniaphobia (the fear of poverty), but with no apparent symptoms of plutophobia (fear of wealth).
- from the client's perspective, there is nothing wrong with the billable hour fee system that cannot be cured by the lawyer merely doing what is required of him or her ethically and as a fiduciary: (a) following the standards embodied in Rule 1.5(a) of the Model Code -- e.g., basing the fee on the experience and capabilities of the lawyer, complexity of the matter, etc.; (b) performing in an efficient and competent manner; and (c) keeping the client well-informed [see fees and the lawyer-fiduciary; Model Rule 1.4(b); Intro to ABA Statement on Principles in Billing for Legal Services; and Brickman].
- from the perspective of the overworked associate or partner, there is nothing wrong with the billable hour fee system that is not very likely to be carried over to any alternative billing arrangements, if the firm expects the shift to be made without reducing its income or profits. See fee fie foe and fum; MyShingle; Prof. Schiltz's Sermon as Required Reading; "Money and Ethics: the Young Lawyer's Conundrum," Patrick J. Schiltz.
- clients expect "alternative fee arrangements" and "value billing" to result in lower overall fees, not higher ones. [see value billing or venal bilking? and Brand LEX]
[Please excuse my citing to my own materials, but there sure isn't much out there on the blawgs that looks at these issues from a similar perspective -- it's all just ranting about hourly billing and cheerleading over value billing.]
As for ecomonics and the billable hour, I have to disagree with Bruce MacEwan's assessment two days ago at Adam Smith, Esq (beyond the fact that he wants to avoid issues of ethics in discussing and setting lawyer fees). Bruce's first complaint against the billable hour is that it is "based on 'cost of production' rather than 'value to client'." I didn't go to the Stern School, but I would have sworn that the American economic system is premised on the fact that (workable) competition will yield prices that are based on the cost of production. The real Adam Smith warned us about guilds of sellers, but he surely would have expected a profession with over a million active practitioners to compete actively over price and service, with market forces bringing price down very near to cost.
Bruce says lawyers should be able to value their services fairly and readily, giving as an example the ability to reach purchasing agreements on the value/price of a home, which has "almost too many factors" to consider. What Bruce overlooks is that both buyer and seller have much information readily available -- and professionals willing and eager to help -- in the market for homes. Sophisticated law clients (who I bet will be trying to figure out the cost of production for a law firm when arriving at a fee) may have lots of information, experience and leverage when dealing with the "value" of legal services, but the average legal consumer does not. It is the inability to make informed pricing decisions that creates the lawyer's fidcuiary duty when setting fees.
"What do you think X would be worth to you?" And remember, "X" is not a contract, will, or deed, but rather peace of mind, security, or some other intangible benefit tied to the specific legal service you'll be providing.This approach turns the fidiciary relationship into an auction, where the single potential buyer is unaware of the seller's knockdown price and has no way to judge whether the object for sale is a valuable antique or a fake. No matter the soothng words and good-feely ambience, it comes down to playing on the consumers fears and sentiments and then saying "make me an offer."
In setting fees, the lawyer-fiduciary must act in a manner that puts the client's interest first. Making sure the client is fully informed when entering into the fee arrangement is essential, taking into account the sophistication level and experience of the particular client.
Of course, alternatives to the hourly fee can be ethical and beneficial to lawyer and client, and should be encouraged -- because they are a spur to creating the efficiency, innovation, and competition that lead to better client service and lower fees, not in order to lull the client into paying higher fees. As Niki Kuckes describes in The Hours, the hourly fee was originally used as a tool for capturing a lawyer's value, by measuring the use of his "only expendable resource." There is no reason -- other than the profession's peniaphobia and "plutophilia" -- that the fee based on an hourly rate should be feared by lawyers or clients. Let's stop blaming the billable hour for the profession's focus on profits over professionalism and a healthy lifestyle.