Spartanburg Divorce Lawyer & Attorney : Stevens-MacPhail Law Firm : South Carolina Family Law Serving Columbia, Charleston, Greenville, Hilton Head Island

Following up my posts (here, here, and here)over the past several weeks about using fixed fees instead of charging by the hour, I learned that a Boston firm has banned the billable hour.  In fact, the Shepherd Law Group has gone so far as to tell its clients that if they insist on having attorneys who bill by the hour for their time, they should retain another law firm!

The firm's founding partner, Jay Shepherd, says "Hourly billing is wrong, and it's anti-client.  There's a disincentive to be efficient since you get paid more if you take longer to finish a matter—even though the client wants it to be finished as fast and efficiently as possible."  I agree with Mr. Shepherd, and I made many of those same points in my prior posts on this subject.

On his blog, Gruntled Employees, Mr. Shepherd proudly stated that "during 2007, Shepherd Law Group has billed exactly 0.0 hours."   His post references several other articles that discuss the problems with the hourly billing model, and it is well worth a read.  Also, the Boston Globe published an article last week which takes a close look at this same issue.

Source:  "Boston Law Firm Bans Billable Hour" by Martha Neil, published in the ABA Journal Weekly Newsletter.

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My two articles published last week (here and here) on the subject of using fixed fees in family law cases have created a bit of a buzz.  Some bloggers, like Grant Griffiths of the Kansas Family Law Blog, agree with me.  Mr. Griffiths writes that he has been using fixed fees in his family court practice for over three years, and he agrees with me that this method benefits both his clients and himself.

However, others, such as Daniel Clement of the New York Divorce Report disagree and still advocate the "hourly" billing model for his family law cases.  Mr. Clements questions whether fixed fees are appropriate in anything other than "simple" cases, i.e. those that are limited in scope, and he believes fixed fees to be inappropriate in more involved cases.  He focuses his concern on the possibility that parties in family law cases might take "irrational and economically untenable positions fueled by emotions."

I probably had the same type of concern before I began handling cases in this manner.  However, after using this method for a few years, I can say from experience that it is unfounded.  Among other things, I use the following two methods to help prevent this from being a problem in my practice:

1. I am very, very selective in choosing which clients I agree to represent.  I estimate that I reject approximately one-half of the potential cases that I could accept.  I only agree to represent those clients that meet the following criteria:  (a) the client's goals in the case are reasonable; (b) the client is willing to help my office work on his/her case; and (c) the client is someone that I truly want to help.  There are other more subtle criteria that I subconsciously apply, and I will admit that a lot of it is done by "gut feeling".  However, after doing this for so long and handling so many cases, my gut feeling is right the vast majority of the time.
   
2. In most family law matters, I usually break the case down into different phases, at which portions of the fixed fee will be due and payable.  This can be done in different manners, such as by time or by status of the case, but the point is that if a case gets resolved during any particular phase, there are no additional attorney's fees due.  This scenario gives the client incentive to help resolve the case sooner rather than later if a reasonable resolution is possible, but at the same time, the client is protected and knows his total cost if it is not.  Having all of this information available to the client up front helps him/her better assess any settlement offers and the case in general as it progresses.

Mr. Clement's post made me wonder about his thoughts on these questions:

1. How does he handle "unreasonable" clients that he is representing on an "hourly" basis?  I believe that the problem he references is more with the clients themselves than with the manner of charging for the attorney's time.  Back when I did charge by the hour for my time, I would typically withdraw from the representation if my client was acting unreasonably.  I still have that same option available to me now while using a fixed fee, but it is very rare that I have to exercise that option because of my stringent client selection criteria as discussed above.  Either way, I do not want to represent unreasonable clients, period.
   
2. Does he agree with the harsh opinion expressed by Robert Hirshon, former president of the American Bar Association, that “[t]he billable hour is fundamentally about quantity over quality, repetition over creativity”?  I believe that clients don’t care how long it takes you to produce those results – they only care about the results themselves.  I believe that the hourly rate can encourage (or at least reward) inefficiency on the attorney's part, because the longer it takes to do something, the greater the fee charged to the client.  Also, if I were the client, I know that I would feel uncomfortable in effect writing the "hourly basis" lawyer a blank check and hoping that he/she keeps the fees as low as possible.
   

I challenge Mr. Clement to handle just one case on a fixed fee basis and to then post his thoughts about doing so.  I am confident that should he do so, he will quickly see why I am such an advocate of this method.  I handled cases on an hourly basis for over a decade, and I can say without hesitation that the fixed fee basis is vastly superior for both attorneys and their clients.  I invite others to let me know their opinions on this topic by posting their comments.

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Why is it that most family law attorneys handle cases on an hourly basis?  Did they consider and evaluate the many different billing options that are available and then conclude that this was the best one?  I doubt it.  I believe that the reason that attorneys use that archaic method is simply because that was the way they were taught or the way it has always been done at their firms.

When presented with the possibility of handling cases on a fixed fee basis, most attorneys say that domestic cases are too unpredictable to enable them to establish a fee with any confidence.  However, I believe that is a cop out answer.  The fact is that insurance actuaries establish premiums for things such as floods, earthquakes, hurricanes, and even death – all of which are certainly more difficult to predict than Family Court cases.  If they can do it with some level of precision, why can’t attorneys?  The answer is that we can and we should.

Attorneys benefit in the following ways from handling family law cases on a fixed fee basis:

• No longer having to track every minute of every day will mean that the attorney is no longer a slave to the billable hour.  For most attorneys, tracking time is a stressful, cumbersome, and tedious process.  It is inconvenient and counterproductive to have to continuously stop working on clients' cases to record what time was spent on each one, and then to track and review the recorded time at the end of each day or week.
• The attorney will gain several extra hours per week that used to be spent recording time, and this newly found time can be spent working on clients’ files, spending time with family, or relaxing – all of which are better than chasing the tail of the billable hour.
• Even more time will be saved by not having to send out as many bills per month, record and process the payments, and deal with the trust accounting issues that are involved with retainers.
• There should be no disputes with clients over the amount of a bill and/or no questions to be answered about the amount of time that was spent on a given activity, because the amount charged for the services was negotiated and agreed upon before the representation began.
• Handling cases in this manner gives the attorney the ability to decide up front if he/she wishes to represent someone for a reduced fee, such as military personnel, teachers, or other public servants.
• There are other benefits to the attorney, such as the additional leverage gained when establishing fees in this manner and the ability to deposit these fees directly into the attorney's operating account if the fee agreement is drafted properly.

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The American Bar Association released a report just over five years ago that was very critical of the “standard” way that many (if not most) attorneys charge their clients for their services.  Its conclusion was that “[t]he billable hour is fundamentally about quantity over quality, repetition over creativity.”  To me, that doesn't sound like it contributes at all to what should be the attorney's ultimate goal -- providing clients with the best possible service.

Approximately two years ago, I began handling all family law cases on a fixed fee basis instead of charging by the hour as I had done for many years.  When a client hires an attorney on an hourly basis, that client is basically writing the attorney a blank check and crossing his/her fingers hoping that the total fees are what he/she anticipated.  I know that if I was the client, I would definitely prefer the certainty of knowing the total cost instead of hoping for the best.

Specifically, I believe that clients receive the following benefits from hiring attorneys for a fixed fee:

• Clients know the total cost up front, which enables them to determine prior to retaining the attorney whether or not they can afford his/her services and to budget for the attorney's fees and costs. 
  
• Clients have another basis upon which to compare attorneys, both in the manner they charge for their services (fixed fee vs. hourly) as well as the amount charged ($X vs. $Y).
  
• Clients never end up in fee disputes with their attorneys, because all fees were negotiated and agreed upon before the representation began.
• This method encourages open communication from the client to the attorney.  In hourly billing situations, clients sometimes hesitate to provide information to the attorney because they know that they will incur fees and costs for doing so.
• Clients have a higher level of trust with their lawyers, which results in a better working relationship, which frequently yields better outcomes in the clients' cases.

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