Biglaw Gets A Wakeup Call: The Goose Is Sterile

News flash: Clients are balking at the legal fees charges by megafirms. Question: What took so long? You can spend $800 an hour for a lawyer at Manhattan's Cravath, Swaing & Moore. That is $13.33 per minute. But the firm probably charges in tenths of an hour, or perhaps two tenths of an hour, as is the growing trend among the law's self-proclaimed elite. Want to check in with your big-time lawyer? Make that $80 to $160 for "hello." Ask a substantive question, and he'll have to get back to you after a couple thousand dollars of research.

When the world seemed awash in easy cash, big business didn't mind these fees quite so much. But a tough economy has everyone on edge. So what's a white shoe firm to do?

Several have gone belly up in recent months. They just can't bill enough to keep their doors open and the Perrier flowing. Heller Ehrman and Thelen are no more, or so The New York Times reports. Rumor has it clients settled cases early to save legal fees.

The market for premium legal services is apparently changing. Some work is now being done on a flat-fee basis. In other instances, clients are building performance targets into their retainer agreements. In other words, big firms are learning to live by the same rules governing the rest of us. Hussle, push and scrap for your supper.

This is not a bad thing. Clients should receive value for their dollar. But, as one lawyer told the Times, " [t]he difficulty is, we don't really know what it costs us to do something."

No one does. Billing is always an art, and never really a science. Especially in criminal cases. Just how much time will you need to spend with a client who is faced with the loss of everything?Some folks don't want to hear from you; others need you all the time. Tell me, just how is a lawyer to know how to bill such a client?

New rules of professional conduct are transforming legal ethics from a paternalistic model in which the lawyer makes decisions and is bound only to keep clients reasonably informed of the scope and course of the proceedings, to an informed consent model, in which clients are to be consulted about all manner of things. It takes time to comply with the new ethics rules. And that results in higher fees.

In small firm practice there is a simple rule that practitioners avoid at their peril: It is called the up-front rule. You get paid once most often in this life. Oh that I had all the dollars I was promised, but which never arrived. And just try moving to withdraw if you have received most, but not all, of your fees. It is painful chasing overdue fees.

The death knell of billable hours is not necessarily a bad thing. But it will result in thorny ethics issues. How much of a fee is enough? And how do lawyers protect themselves when the work requested becomes far more complex than anticipated? And how much communication is ever enough for a person in crisis?

Biglaw welcome to the world of small firms. Roll up your sleeves and learn to sleep a little less soundly. Those things going bump in the night are the rules of professional conduct colliding with the economic reality of practicing law.


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© Norm Pattis is represented by Elite Lawyer Management, managing agents for Exceptional American Lawyers
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