The High Price of Getting Paid -Hourly Billing – What your lawyer won’t tell you!

Case in point:

• You work hard to provide efficient, high quality construction work to a particular project;
• Despite your cooperation and your teamwork attitude, the general contractor abuses your good will and continually demands extras and changes, is late in paying you, and runs an utterly unorganized and chaotic project which greatly causes you to lose efficiency and eats up your profits;
• You diligently perform changes and extras as demanded and submit written change orders;
• You diligently pay your suppliers and employees for the extra work they provide;
• Months go by and still no word on the approvals of your change orders, instead, you soon learn that the rude, arrogant attitude of the P/M runs company wide;
• Finally, you receive word that, not only are your change orders rejected, but your retention is being withheld indefinitely because of some lame excuse about you causing delays to the project.
• You are outraged and rightly so!
• You call your lawyer – Sue the SOB’s you say! Make their life as difficult as they’ve made mine!

Music to an attorney’s ears!! Especially under the hourly billing model. It takes work to make someone’s life difficult. You have your attorney lien the project, serve a stop notice and then sue for not only breach of contract, but also fraud because you can prove beyond a doubt that they made you do changes without ever intending on paying you.

Sometimes contractors take offense to being sued for fraud – the general contractor is outraged – they call their lawyers and tell them – How dare you sue them for fraud – after all, it was you who delayed the entire project. They tell their lawyer to teach you a lesson. They often carry that chip on their shoulder of being bigger than you – and try to throw their weight around. “You’re not big enough to sue me, just try it!!!!”

A few months later, your attorney reports back to you, yeah – we’re causing them some grief, we served 153 special interrogatories, and a bunch of requests for documents – it’ll take them days to write responses. You cut him off short because you don’t want to get billed for the call.

Yeah, You Made Life Difficult for the “Other Side” – but here’s the rest of the story...

Since you cut him off, you didn’t let him tell you that a week after he served the 153 special interrogatories and the document requests, they served on you 210 interrogatories and twice as many document requests. Pay back is a bitch.

On top of it all, your attorney and the general’s attorney have had run-ins before and would be making each other’s life miserable even had you both not commanded them to do so. Each side plays discovery games and refuses to provide relevant documents and responses without being compelled to do so. It’s not just the contractors that have big egos.

Who pays for all this? You both do.

Is it worth it? The lawyers are probably the only ones that win. The fact is, NONE of these shenanigans get in front of the jury, judge or arbitrator during the actual trial, so none of it really helps your case.

Why does it continue? Because you, and mostly everyone else lets it. There is absolutely no incentive for a law firm to reduce its work load - it’s how lawyers get paid – by the billable hour. There is no reward for efficiency.

Is anything being done about this?

“The villain of the piece is what some call the ‘Treadmill’—continuous push to increase billable hours…”
--The Honorable Stephen G. Breyer, Associate Justice, Supreme Court of the United States

For years, the American Bar Association has urged its members to depart from the traditional billable hour model in favor of a value priced model. The reason for this edict is quite simple: A set price for particular legal service(s) would provide monetary certainty for a client’s legal services while creating balance, efficiency, and personal harmony in a lawyer’s life and practice. The ABA launched a special Task Force on Alternative Billing Methods in 1989 and the results of their findings were published in 2002.

Interestingly, ABA President Robert E. Hirshon cites in the report’s preface that:

[T]he billable hour is responsible for a lack of balance in lawyers’ lives, negative impacts on lawyers’ families, loss of professional mentoring, decrease in lawyer service, less collegiality and a loss of focus on efficiency.

The ABA’s thought provoking report on the billable hour’s effect on a lawyer’s personal life and firm practice sheds light on the fact that the legal industry employs a flawed business model. We grasp the reality that being a tied to this billable hour can enslave a lawyer and rob his quality of life. But what impact does this have on the client?

The billable hour business model affects clients because there is rarely an end in sight or a finite financial cost associated with a particular legal task or service. In essence, a client pays a lawyer and the meter is left running until the conflict is resolved or the client simply cannot afford it any more and discontinues legal services. Many clients can relate to hiring a lawyer for a particular hourly fee and then watching their bills escalate as matters progress (as often the case in litigation matters).



When the value of an attorney is measured strictly on the number of hours he or she can justify for a task, or the reward for the most hours billed is a hefty bonus, the model is ripe for abuse. And the client pays the bill. This model discourages efficiency and effectiveness and rewards inefficiency and mediocrity for performing a task.


What are the Alternatives?
Despite all the arguments by attorneys opposing alternatives to billable hours, there are almost no valid reasons not to apply a fixed price model in situations where it is appropriate – which is exactly what Scholefield has done.

Nearly every other industry operates this way and is successful in a fixed price environment. Most notable and also the easiest industry to compare this to: the construction industry. Contractors depend on their experience and knowledge to offer a fixed price or guaranteed maximum price before any work is performed. A price and scope for the completed work is agreed to in advance and both the contractor and the owner are comfortable with this arrangement. The risks associated with a fixed price contract are borne by the contractor.

Under this billing model, once Scholefield has assessed the needs of a client’s case, the client will receive a guaranteed maximum price for the service(s) provided. No risk shifting, no inefficiency passed on to the client. Each bid will include unlimited phone time, office supply costs, emails, etc. Each bid will also include a time-line and a schedule of values that will show the client exactly what the legal fees will be for each category of tasks. Billing will be shown as progress against the category.

Scholefield is in step with the ABA’s Task Force Findings and rather than just agreeing that it is a good idea, Scholefield is implementing the program and offering a fixed price contract to clients.

Will this model promote lack of quality? The answer to that question is found in answers to other questions:
• Is a contractor’s quality compromised when it is working under a fixed price contract?
• Does a contractor provide better quality under a T&M contract than under a fixed price contract?
• Is the issue of quality really tied to the payment model the parties agree to?
• A strong work ethic and integrity is what determines quality work, so does the provider take pride in their work?

The bottom line is – a high quality firm will provide high quality services regardless of the payment arrangement!

How to Save Costs and Maximize Results for Your Litigation – [Even Under the Hourly Billing Model]:

• Demand a budget for your litigation including a schedule of what costs will be incurred and when – be sure to ask if you will be billed for the preparation of the budget;

• Demand that your attorney provide you with a list of potentially expensive legal tasks and motions;

• Demand that your attorney provide you with an estimate of how much and when, of YOUR TIME will be needed to prepare for litigation;

• Realize that your work is not done when you find an attorney - provide your attorney with a comprehensive written detailed, analysis of the dispute;

• Make sure you thoroughly understand the basis for your claims and what will be needed for evidence (testimony, documents, etc.) to prove your claims – then release from your thoughts all the other side issues that may make you angry – but aren’t really relevant.

• Provide a list of persons with knowledge, their contact information and how they relate to the dispute;

• Immediately organize your documents well before you’re required to for the case;

• As early as possible, go through your documents and make notes on RFI’s, change orders, meeting minutes, etc., to share with your attorney;

• Do NOT make the decision to withhold documents from your attorney because you’ve determined that it is not relevant, or will hurt your case;

• Do NOT withhold anything, even information or events that may be damaging to you. It is better to address shortcomings now than to have your attorney surprised by them later on.

• Continue to be actively involved in your case;

• Ask to interview your potential experts and go to the meetings between your experts and your attorney;

• Attend key depositions if your schedule allows it, or send someone from your company that was actively involved with the project – you can usually pick up something because of your personal knowledge of the project that may go unnoticed by an attorney;

• Review your bills and have the confidence to challenge any entries that are not detailed – ask that you not be charged for questioning your bill.