The Anatomy of a Billable Hour, Part 2 of 4: “The Work that a Lawyer Does”

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dealWIP
May 31, 2018 · 5 min read

Billable hour = 1) the work that a lawyer does, 2) for an hour, as measured by the lawyer.

There are two distinct points we want to make with respect to the first prong of the definition of “billable hour” (as discussed in Part 1 of this series). The first is that, as technology advances, the “work” that lawyers do will continue to change as routine tasks are increasingly able to be dispatched by machines. The second point is that, because of the (perhaps surprising) amount of discretion afforded lawyers to choose how to approach a given task, there exists the potential for great variability among the billable hour totals recorded by different lawyers for such task.

Disintermediation.

With respect to the first point, if you haven’t checked it out, we’d encourage you to visit our last post, which built on the concept of the “disintermediation” of legal work first introduced by Jordan Furlong. Distilled to its essence, disintermediation in this context refers to “work that was once done by lawyers, but which no longer must be done solely by lawyers”. This is an uncomfortable concept for experienced attorneys — the work that lawyers do is beginning to change rapidly, and the pace of that change will only accelerate.

To illustrate the application of the disintermediation concept to the billable hour, consider as an example that lawyers (once upon a time, we understand) used to redline different version of the same document by hand. Yes, combing through documents to identify and demarcate differences was formerly within the scope of “the work that a lawyer does” and properly charged as billable. Billing for (or even doing) such work today would be patently absurd given that technology at lawyers’ disposal can perform what was once such a painstaking exercise in a matter of seconds.

Now, consider the rapid advances that technology is making in its capacity to perform certain of the work that lawyers perform today. Suppose that secure and cost-effective technology exists that has the ability to reduce substantially (or as with redlining, replace entirely) tasks for which attorneys routinely bill, yet an attorney/law firm refuses to adopt such technology for one reason or another. Is the market for legal services efficient enough to root out or force change to such behavior? Is that attorney even allowed to bill $500+/hour for such work under the model rules of professional responsibility? Unfortunately, the answers to these questions are “no” and “yes”, respectively. In fact, today alone we would suppose that millions of dollars will be charged by attorneys for work that could be competently performed, or radically assisted, by technology. Add to that the fact that the pace of technological disintermediation promises only to accelerate, and it becomes clear that clients must demand a more rigorous system for their lawyers’ adoption of legal technology solutions.

Discretion.

Further complicating things, when approaching a task, lawyers are given wide berth to perform whatever work it is that they think is necessary, proper, justifiable or appropriate in service of a matter. Put another way, lawyers are free in their discretion to determine what needs to be done, and how they will do that work, with respect to any given project. If time spent on a task is plausibly in the service of the client’s matter, it is billed. That’s true whether the “work” is an all-hands meeting, a one-off phone call, research, writing, proofreading, emailing, texting, formatting, searching for square brackets, printing, photocopying or renaming file extensions. Although some law firms may have internal policies/procedures in place with respect to best billing practices for a given task performed for a given client, such policies (i) vary from firm-to-firm, (ii) may or may not be closely adopted by all attorneys at a firm and (iii) most importantly, may not conform to the client’s desired outcome.

The justification for the broad discretion afforded lawyers is that they know what they are doing and will apply reasonable discretion, bound by ethics, to the pursuit of any project. But even supposing for the sake of argument that all lawyers are ethically unimpeachable, that may not be enough. To illustrate: 3 different lawyers live in parallel universes, and each has the same non-disclosure agreement (or “NDA”) come across her desk.

1. Lawyer 1 reviews the NDA, which is on opposing counsel’s form, and determines that it looks reasonable and customary, within market terms, and poses limited risk to her client. She tells her client to go ahead and execute it. 15 minutes of billable time.

2. Lawyer 2 reviews the NDA and notices that in the event that her client is compelled by law to divulge confidential information, her client would be required to abstain from doing so until the disclosing party had an opportunity to intercede, and that in the event of a dispute, legal costs are to be borne by each party separately. With respect to the first issue, she would prefer an exception for instances where her client couldn’t reasonably give notice to the disclosing party while complying with the legal compulsion, and with respect to the second issue, she would prefer that the prevailing party pay legal costs to discourage frivolous claims by the disclosing party against her client. These may be minor wins, but Lawyer 2 is in pursuit of a bulletproof NDA and with them, she thinks she‘s got one. Her edits, back and forth with opposing counsel and finalization take 2 hours of billable time.

3. Lawyer 3 reviews the NDA and notices that, in addition to the above issues, there are several formatting/styling errors that flow throughout the document. Some of these could be pertinent to a post-execution interpretation of the contract (for example, there are a handful of undefined terms); others would not. She decides to correct them to be safe. Finally, she wants all of the section references in the document automatically “cross-referenced” in MS Word in the event that any paragraphs in the document change, just to be sure that everything is perfect. Lawyer 3’s definition fixes and stylistic wizardry take 1.5 hours, bringing her total billable time to 3.5 hours.

One NDA, three different lawyers billing 15 minutes, 2 hours and 3.5 hours respectively. We would argue that none of the approaches above is unreasonable or unethical. It’s all perfectly adequate lawyering. But is it what clients want? Did the client want Lawyer 2’s edits, which while customary address edge probability cases? Did the client want Lawyer 3’s work in order to perfect the document’s formatting and styling? Maybe, but maybe not. Lawyers 1, 2 and 3 can each be said to have performed the same work (their billable time descriptions would each likely read “reviewed and marked up NDA”, but at vastly different levels of service. Although many clients may use firm names as a proxy for the “Service Levels” they can expect to receive, the fact is that most lawyers are capable of providing different Service Levels themselves. And too often, those Service Levels are determined by factors other than the client’s demands.

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