Guest Column

21 November 1994

St. Peter quickly responded that no mistake had been made at all and that his case had been closely reviewed by the appropriate members of the Special Committee who had concluded that he had lived a long, productive and indeed prosperous life. 

Convinced at this point beyond a reasonable doubt that a grievous error had occurred, the lawyer blurted out, "But St. Peter I'm only 30 years old!" "Certainly not," said St. Peter, "because we have reviewed all of your time records and they clearly show that you must be at least 97!"

For some reason, this lawyer joke reminds me of a hit song recorded by Bob Seger in the 1970's entitled "Running Against the Wind." One verse from the song goes something like this: "Deadlines and commitments; what to leave out, what to leave in."  It's obvious from these lyrics that Bob Seger has never been a lawyer who billed his clients by the hour because all of these lawyers know exactly "what to leave in," and it usually includes a lot more than they could ever have "left OUT." 

To paraphrase Will Rogers, the billable hour has made more liars out of lawyers than the federal income tax code has made liars out of the American people.

What is the billable hour anyway?  Generally speaking, and regrettably in theory only, it is the product of a fee contract whereby the lawyer agrees to represent a client at a set hourly rate, such as $100. (I have intentionally selected a low hourly rate). The lawyer then keeps "detailed" records of all time devoted to the case and then sends the client a computer generated bill based on the number of hours purportedly devoted to the case times the agreed hourly fee. The problem, of course, is in the details. And lawyers are certainly notorious for the details.

The details in most cases can be found in the myriad of computer systems and time-keeping programs that record and report the time that is eventually multiplied by the hourly fee to generate the bill.  Many of these so-called time keeping programs appear to have been designed to create more billable hours than to produce a reliable and honest bill for the client. 

Quite curiously, the most popular of these programs has been developed and designed by lawyers. After all, who would know the game plan better than the players themselves?  These time-keeping systems come in all shapes, sizes and formats.  Many of these systems are set up or programmed so that the minimum entry that can be recorded in the system is 15 minutes or 1/4 of an hour of billable time. In other words, if you only devote 1 minute of time to a case and then enter that work in the system it will be automatically recorded as 15 minutes of "billable" services to the client.

Accordingly, under these minimum time-keeping systems, if lawyer A simply places a 30 second telephone call to lawyer B, then the "system" will automatically record 15 minutes of billable time. This results in a charge of $25 to the client who is being billed at the rate of $100 per hour.

And, in the real world, as country music star Alan Jackson might say, the real charge is $3,000 per hour.  After all, one hour will create 120 separate 30-second time units.

These 120 telephone calls will generate $3,000 in billable hours for one hour of real, honest work. And, if the hourly fee is $200 as is the case in many of the larger North Carolina cities, then the real world charge is $6,000 per hour. This is a lot of money for either an NBA or an NFL Superstar. Maybe Michael Jordan should think about law as his next career!

A related system that produces virtually the same result is commonly known as "unit" billing or "value" billing.  Under this type of system, a short letter will generate a fixed or unit fee of $25 and a long letter will generate a fixed or unit fee of $50.  These unit fees have no relation to the amount of real time required to produce the document.

Accordingly, in order to maximize the dollar capabilities of this billing system the lawyer simply creates a form letter in the computer assisted word processing system and then produces 6 short letters per minute or 360 such letters per hour. This ploy will produce an hourly fee for the lawyer of $9,000. Obviously, the only value in this system is in the form of more money for the lawyer.

Many pundits say that the legal profession as such is almost extinct because too many lawyers are more intent on making money than rendering services to their clients. It is these lawyers who make the funny money billing systems appear to be more or less honest in design and implementation. Many of these lawyers are motivated by nothing more than sheer greed which results in fraud, and just as many more are motivated by the managing partner who publishes a top ten list of the hardest working lawyers each week. Of course, in order to attain the number one ranking on this list you must be the number one producer of - you guessed it - billable hours.

Many of these outright dishonest keepers of time have developed some rather ingenious strategies for inflating their time records. For example, if your office is 60 minutes by car from the courthouse and you have 10 cases set for hearing on the same day, then you charge each client two hours of travel time for the hearing. Accordingly, your two hours of travel time in the real world is translated into 20 hours of billable time in the world of deceit and deception. 

A less imaginative scheme is to charge the client a fixed amount of time for each service, regardless of the amount of time actually needed to complete the service. This scheme is actually nothing more than a bastardized version of the so-called unit billing program.

For example, many lawyers charge one hour of billable time for each court order they prepare, even if the order is nothing more than a pre-printed fill-in-the-blanks type of document that could take no more than 2 minutes of real world time under any circumstance. Other lawyers have been known to have their secretaries re-type an order drafted by opposing counsel and then charge their own client by the hour as if they had prepared the order themselves. 

Yet another group of these keepers of time may be described as the "fudgers" or the "Little white liars." On second thought, maybe we should call them the "little green liars" since we are talking about money. Nonetheless, this group of lawyers has fallen into the habit of adding a little extra time for each service performed. As a result, when they actually devote 10 minutes of time to a client's case it somehow is recorded in the billing system as 25 minutes. Likewise, 30 minutes ends up as a one hour time entry.  This may sound like a minor problem at first blush. But, by the end of the year these little green lies can result in 1,000 or more hours of ghost time which is then billed to the client.

And finally, there is the little-known practice of time fraud that falls under the heading of "case review," "research" or "legal research."  The only thing legal about this must be that the guilty lawyer in fact has a law license, which qualifies as a legal document. I have heard many lawyers refer to this as the "Alice in Wonderland" portion of the bill or the "Phantom of the Opera" section of the statement. Here, lawyers simply fabricate non-existent time which is then recorded as necessary for the research of legal rules and principles or for the review of the case.

A related practice is to record nonexistent conferences with law partners and/or associates to discuss the status of the case, the litigation strategy, etc. Many lawyers refer to this practice as "double-dipping" since you can charge two times for the price of one (i.e., a phantom conference with a partner results in two time entries, one for each lawyer). It sort of reminds me of the chewing gum commercial, "double your pleasure, double your fun." Unfortunately, there is really nothing funny about any of this.

Something just as suspect but not quite as sinister is what is known in the profession as "billing conventions." This practice must have resulted from some bar room discussions among lawyers at a continuing legal education seminar in Acapulco or perhaps at the ABA's annual meeting in Hawaii.  In any event, this theory of billing clients is supported by the notion that a subsequent client should pay for the skill and training the lawyer has acquired at the expense of prior clients. Therefore, if a lawyer is especially talented and expeditious in a specialized area of law, he or she should have the right to charge the subsequent client what is called an "enhanced fee" by recording more hours than the lawyer actually devoted to the matter.

For example, let's assume that in the real world lawyer A worked eight hours in developing the proper procedures and forms for filing a specialized type of court case. Sometime later, lawyer A has developed his expertise in this specialized area to the extent that he can now perform the exact same services in 1 hour. However, under this theory of billing lawyer A still records eight hours on his time records. And the subsequent client ends up paying for seven hours of "ghost services."   I have heard of going back to the well one too many times but this practice seems to undermine this old adage. This practice also reminds me of Mark Twain's often quoted saying that "the principal difference between a cat and a lie is that a cat only has nine lives." Twain obviously made this statement long before the first billing convention.

And, to add insult to injury, many if not most lawyers working on the clock actually charge the client for drafting and preparing the bill that summarizes all of these so-called services. Such additional time can include such things as editing and revising the bill, reviewing and re-drafting the time entries, etc. Believe it or not, if the client questions the original bill he or she may end up being charged again for the time necessary to re-compute and redraft the bill.

The hourly fee cannot be fully appreciated unless you also understand what is not included in this fee. Most clients would think that a $200-per-hour fee would be enough. But no, it seems that greed does not stop with the hourly hilling system.  1n addition to these hourly fees, the vast majority of lawyers impose additionalcharges on their clients for computer time, copies, postage, paralegal time, fax usage, telephone charges, and even secretarial services. In addition, the client is normally charged for all mileage and travel expenses, including those infamous three martini lunches. The buck may stop somewhere, hut it is certainly not at the desk of the modern lawyer.

A lot more could be said about units and conventions and computers and little green liars but the point seems clear: the power of the hour has corrupted the legal profession. The corruption is not just civil. In some instances it is criminal both in its nature and intent. And, as lawyers have become increasingly more economically competitive, they have also become more concerned about their financial bottom lines than with their clients' best interests.  This focus on money has caused many lawyers to believe they are like members of the United States Congress who seem to operate under the theory that they can just pick money out of the air. In lieu of money, these lawyers are picking time out of the air and then recovering the money from their clients.

Americans and the legal profession currently face an unprecedented anomaly: an explosion in the number of lawyers on the one hand and a decline in effective access to counsel on the other. The number of lawyers in the United States has more than tripled since 1960 and not surprisingly we currently have more lawyers per thousand citizens than any other country in the world. As the number of lawyers has dramatically increased, effective access to counsel has dramatically diminished for all Americans - rich, middle-class, and poor. The same access to the profession that impacts on individuals has hit our businesses and corporations. Why do you think we have so many in-house legal departments in American businesses?

Simply stated, how many lawyers could afford to hire themselves? Not many at the real world rates and possibly not any under the fraudulent and inflated billing schemes and scams.  Is all of this the result of the almost universal use of computer billing systems or the transition of the practice of law from a profession to a business? I submit it is neither. All of this is nothing more than the product of the choices lawyers make every day of their professional lives. They can choose to be either honest or dishonest in the keeping of time. They can choose to make themselves unavailable to the individual client, rich or poor, by billing at an hourly rate (whether real or inflated) that simply denies access to our system of civil justice.

We do not need any more experts or study commissions to tell us what we already know is wrong with our system of civil justice. In a nutshell, the almighty billable hour has finally served to render many lawyers too expensive or irrelevant or just plain-out dishonest to too many litigants.  If the legal profession fails to recognize and deal with these related problems, then the system itself may go down in history as something that died of self-inflicted injuries as we entered the 21st Century. We will not have to kill the lawyers, as suggested by Shakespeare, we can simply wait and watch them bill and kill themselves.