f/k/a archives . . . real opinions & real haiku

Consumers of legal services won’t find much information online or at their public library to help them keep their costs down when they hire a lawyer.  Some websites or firms might hawk their own services or materials as being a great value, or as an option far cheaper than using a lawyer, but almost no one — including bar associations and consumer groups — has compiled general tips on how to make legal services less expensive when you turn from prospective consumer to client.   Therefore, when I heard a couple months ago that the legal reform group HALT published a free, online Citizen Legal Guide titled “Understanding Attorney Fees So You Can Keep Legal Costs Down” (November, 2008; 8-pp. pdf. version), I was quite pleased.  Unfortunately, once I read it, my reaction to HALT’s Fee Guide was like f/k/a‘s fictional Prof. Yabut:  “Yeah, but . . . “.

HALT has been working for over 30 years to achieve “Simple, Affordable, Accountable Justice for All.”  f/k/a and our self-help-law sister weblog SHLEP have quoted and linked to HALT, its studies, Report Cards, and guides scores of times, beginning on our very first day of blogging in 2003.  To my surprise, however, I was disappointed by HALT’s Understanding Attorney Fees [“UAF“]. It correctly advises consumers that:

“If you find yourself with a legal question, you should explore all of the options available to you and become educated about your legal question. You may actually find that you do not need to hire an attorney. . . . However, if your legal matter is complex, substantial money is at stake, you’re charged with a crime, or you’re simply uncomfortable handling legal matters on your own, you’ll probably need to hire a lawyer.”

However, for those who do need to hire a lawyer, there is simply too much left unsaid in Understanding Attorney Fees about how to keep your legal fees down.  The HALT Guide does note that “As a legal consumer, your best defense against paying more than you should is to educate yourself about legal fees before signing on the dotted line.”  And, it promises to explain “the most common billing arrangements used by lawyers, some new billing arrangements lawyers are using and specific ways you can lower your legal costs.”

Nonetheless, for our money, HALT’s Understanding Attorney Fees:

• Offers very little help for controlling or lowering fees that are based on an hourly rate for the lawyer’s time — not when the client is entering into an hourly billing agreement, while the services are being provided, nor when presented with a periodic or final bill.
• Takes a real dive on contingency fees, completely ignoring HALT’s own position on such fees from a decade ago, as presented in its Injured Consumer’s Legal Bill of Rights (The Legal Reformer, December 1997; issue no longer online).  At that time, HALT insisted that p/i lawyers should be charging clients a lower percentage in less-risky cases, rather than using the same standard contingency fee for virtually all clients (i.e, one third or 40%).  Lawyers were also required to provide the client with key information and estimates relating to risk prior to entering a fee agreement, with the information included in the signed agreement.  Frankly, the contingency fee section in the UAF Guide sounds like it was ghost-written by the plaintiff’s personal injury bar.  It doesn’t even mention the word “negotiate.”
• Seems to offer a blanket endorsement of “alternative” billing methods, with very little help on how to shop for such fees, and no warning that some lawyers offering alternative fee arrangements in fact intend to extract higher fees than possible when billing by the hour (e.g., so-called Value Pricing).

. .   We hope consumers will read HALT’s “Understanding Attorney Fees,” but we believe the HALT staff has left too much out of its Guide. There’s no way the f/k/a Gang can create a comprehensive new draft or supplement to HALT’s publication (especially since we are moth-balling this site tomorrow).  We will, however, summarize portions of HALT’s UAF Guide, suggest some tips for keeping fees down, and point to a few other helpful sources.

Consumers shopping for legal services need to remember that every kind of pricing arrangement can be exploited or misused to result in excessive fees or inadequate services.  For example, hourly billing might result in a lawyer doing too much, but fixed fees can lead to lawyers doing too little, and contingency fees can make you pay far more than is warranted by the risk the lawyer is taking of not being paid or by the amount of work that will be required of the lawyer.  See, e.g., our posts “other thoughtful voices on the lawyer billing debate;” and “the reality of alternate billing.”  Clients need to insist on more information and lawyers need to act in ways that create trust and give full value.

First, two quick points:

• Unbundling can Save You a Bundle: With “unbundling,” the lawyer and client agree that the lawyer will only perform specific, discrete tasks. If you think you’re willing and able to play a large role in your own legal affairs, but know you want or need a lawyer to help perform “discrete tasks” and serve as advisor and coach, look into Unbundling. (see our prior post; and this posting from SHLEP for an introduction); the excerpts from M. Sue Talia‘s book Unbundling Your Divorce can help you determine if they are good candidate. Find State unbundling rules here.
• Do-It-Yourself/Pro Se: For information relating to do-it-yourself resources, see shlep: the Self Help Law ExPress [which was started by f/k/a‘s Editor], where you will find information on locating self-help materials, thinking about whether representing yourself makes sense for you, a Topic Index, and much more.

In “Understanding Attorney Fees,” HALT reminds consumers that “The type of arrangement you enter into can have a huge impact on the amount of fees you’ll pay, so it’s important to understand how each works and the incentives lawyers have for using them.”  It explains that:

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.. They’re peeved over time-based pay . .

note: this is #4 in our final week’s ALF Series on American Legal Fees; click for #1; #2; #3 . . and see our valedictory fee essay, “Understanding and Reducing Legal Fees“.

It’s my last week of posting, so I’m going to indulge myself and discuss a pet peeve or two of mine involving the rhetoric of lawyers and consultants who dislike (and often scapegoat) the billable hour.  Rather than sticking with logic, reason, or economics, they often employ hyperbole, overkill, psycho-babble, Straw Men and class warfare (not to mention ridicule).  As discussed below, they even insist that being paid by the hour demeans a lawyer.  Please.

Thus, as mentioned last week, Ron Baker’s acolyte and echo Christopher Marston recently insisted that “there is not a single customer that wants to buy an increment of our time. Increments are excrement.”

Of course, I’m not an excrement expert (and Mr. Baker has accused me of ranting and raving and being “someone who lacks a rudimentary understanding of basic economics.”), but the not-buying-time cliche is just a silly Straw Man.  The client who pays by the hour, like anyone who employs a lawyer to do legal services, “wants” the lawyer to apply his or her legal knowledge, expertise and experience to the client’s problem or project.  Hourly billing is simply one way to compute compensation in a situation where the buyer does not employ the service provider exclusively (and the amount and type of services needed may not be reasonably discernible in advance).  As Prof. Jeffrey Lipshaw recently wrote:

“The real question is whether, overall, the total price approximated by billable hours is an acceptable surrogate for the value to the client. . . . [M]y intuition as a former buyer and seller is that the overall acceptability of the surrogate is indeed revealed by the overwhelming instance of its use in the market.”

Similarly, Steven Matthews pointed out at slaw.ca last year, in “The Economist: Killable Hour” (September 1st, 2008):

“Neither party seems to care that much about the billing model. Cost certainty? yes. Getting value? yes. Those are worth fighting for, but method of billing? If clients or firms were demanding changes, wouldn’t we have seen it by now?

“The push-pull between clients & firms when negotiating price (and understanding costs, for firms…) is going to exist in either scenario, and frequently depends on the situation. Think: area of practice, work volumes, the substance & length of client-firm relationship, average time for matter execution, and so on. But rather than describing this balance to readers, the sensational prevails – pitting one billing model against the other in a full-on death match! I suppose it’s not sexy to say ‘different clients & matters may require different billing models’. A shame, really.”

At times billing by the hour is a reasonably good measure of the value of those services, and at times it may not be.  More price competition is needed for hourly rates, and abuses need to be eliminated, along with excessive quotas imposed on lawyers by their firms.  But, hourly billing is clearly not an inherently irrational, exploitative or unethical method for calculating price.  By painting hourly billing as the benighted source of all evil, proponents of alternative pricing methods hurt their credibility — especially, when they fail to acknowledge there are incentives inherent in every pricing method that could lead to unreasonably high (or low) fees. (see e.g., ALF#1; and our post “broadening the hourly billing debate“)

.. Mauled by Marxism! Demeaned by Da Man! Ronald J. Baker (see prior post), the guru of “value pricing” and ceaseless crusader against hourly billing, isn’t content with his price sensitivity charts and promises of higher fees in his quest to convert lawyers and accountants from the Almighty Hour.  Ron motivates poor downtrodden professionals with his brand of class-based snobbery.  He urges them to rise up to capture their true (higher) value by labeling hourly billing as Marxism, and contrasting his superior “knowlege workers” with mere “cattle,” “union workers,” “blue collar occupations,” and those who “work with their hands” rather than their heads, and are stuck laboring by the hour (see, e.g., here and there).

Meanwhile, the usually level-headed and clear-minded Bruce MacEwen of Adam Smith Esq, recently evaluated the billable hour (in “The NYT‘s Obit for the Billable Hour“, January 31, 2009).  Included in Bruce’s “Con the billable hour” list is this factor:

“It’s dehumanizing, reducing talented and highly educated professionals to fungible units as factors of production.“

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.. Click for the video of ALF’s “Risky Business” spoof ..  .. [or, Heidi’s R-rated version]

note: this is #3 in our final week’s ALF Series on American Legal Fees; click for #1 and #2; and #4 –

While I was in law school, bar association Minimum Fee Schedules went from being commonplace, apple-pie, “old-time rock-n-roll” in the legal profession, to being Risky Business in violation of antitrust law.  The fee schedules were lists of recommended minimum prices for common legal services.   Through disciplinary actions and ethics opinions, bar associations made it clear that a pattern of charging less than the minimum fee constituted misconduct.  See, for example, this NY Bar ethics opinion from 1964; a 1961 Colorado Bar opinion; and the Virginia Bar opinion discussed by the Supreme Court at Fn 1. in Goldfarb.  The president of the New York Bar Association had himself requested the 1964 opinion concerning departures from the minimum fee schedule, and his so-called ethics committee agreed with him that:

“[T]o let it be known, by whatever means, that a lawyer will customarily charge for his services less than the recommended fees set forth In a duly adopted schedule is not in accordance with Canon 12 and is unethical as a form of solicitation and advertising.”

At the end of my 2L year, the Supreme Court’s decision in Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), closed the book on those quaint little non-compete clauses, holding that the Fairfax County Bar Association’s minimum fee schedule was price-fixing in violation of §1 of the Sherman Act.  Until then, bar groups had gone around saying they could do whatever they wanted regarding fees, because there was a blanket “learned profession” exemption to the antitrust laws, and that they also had State Action immunity for conduct permitted by state courts in overseeing the legal profession.  However, as the case Goldfarb syllabus explains.

“The schedule and its enforcement mechanism constitute price-fixing, since the record shows that the schedule, rather than being purely advisory, operated as a fixed, rigid price floor. The fee schedule was enforced through the prospect of professional discipline by the State Bar, by reason of attorneys’ desire to comply with announced professional norms, and by the assurance that other lawyers would not compete by underbidding. . . .

“. . . It is not enough that the anticompetitive conduct is ‘prompted’ by state action; to be exempt, such conduct must be compelled by direction of the State acting as a sovereign. Here the State Bar, by providing that deviation from the minimum fees may lead to disciplinary action, has voluntarily joined in what is essentially a private anticompetitive activity, and hence cannot claim it is beyond the Sherman Act’s reach.”

While in law school, we discussed the fee schedules a little bit in my Professional Responsibility class in 1974 (where my famous Harvard Law professor believed lawyers should not be allowed to advertise), and much more in my antitrust classes. [Thereafter, for more than a decade at the Federal Trade Commission, my law practice was focused on the anticompetitive practices of learned professions like medicine and law.]

I’m bringing up this topic now, before we close shop here at f/k/a, because I’m afraid far too many members of the legal profession (and virtually all of the public) have forgotten this chapter of lawyer history and lessons to be drawn from it and its aftermath.   A lot of lawyers reading this weblog have suggested the f/k/a Gang is far too suspicious of bar associations and lawyers when it comes to fees and competition.  But, I want the “don’t be such a cynic” crowd to remember the Minimum Fee Schedules and what they say about our profession.  For me, history (including rather recent history at that) clearly shows:

• lawyers almost always feel underpaid and entitled to higher fees
• lawyers hate competition, especially price competition and related advertising, and will use peer pressure and ploys like an appeal to the “dignity of the profession” to stifle rivalry
• lawyers will exploit any pricing mechanism (turning it into a racket) — and will always find new ways to increase fees when one method of billing becomes disfavored

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– note: this is #2 in our ALF series on American Legal Fees; click for #1 and #3 and #4–

.. .. ALF-Esq & Prof. Yabut discuss self-regulation .. ..

ALF: But, Yabut, why can’t the Melmac Bar & Grill sponsor the Feline Protection League?  You know how important cats are to us.

Yabut:  For snacks and meals, you mean.

ALF: Our motto remains: “we always serve you first.”

The f/k/a Gang has been writing about the lax, self-regulated lawyer discipline system since we started this weblog in the Spring of 2003. [See Should Lawyers Control Lawyer Discipline?, June 22, 2003, and links on our Lawyer Disciplinary System Page.]  Sleepy Bar watchdogs often seem to be enabling their lupine kin rather than protecting the sheep. Like the legal reform group HALT, we believe our nation should:

“Replace the failed system of self-regulation — lawyers policing lawyers — with disciplinary panels on which non-lawyers have a majority voice.” [see our post HALT Suggests a “Better Way to Discipline Lawyers” (June 25, 2003)]

For more, see HALT’s 29-page (pdf) paper “Consumers of Legal Services: Unprotected and Underserved,” which notes: “The system of attorney self-regulation is an abject failure and lawyers’ so-called ‘Rules of Professional Responsibility’ do not require attorneys to provide even the most basic consumer information to prospective clients.”  HALT urges the broader consumer advocacy community to join their efforts to help achieve “Simple, Affordable, Accountable Justice for All.”

Foxes in the Chicken Coop:   We’ve spent 6 years complaining about bar associations that act like mercantile guilds, by protecting lawyers from competition rather than clients from greedy lawyers. There is, in fact, no better reason to junk the self-regulatory system utilized by the legal profession than its utter failure to take its ban on unreasonable fees seriously.  In most jurisdictions, the rule against excessive fees has devolved in practice into merely a ban on outright felonious, fraudulent, or otherwise dishonest billing practices (e.g., billing for phantom hours, charging more than one hourly-fee client for a particular interval of time, keeping unearned retainers), rather than telling a lawyer “You’ve charged this client far more than your services of worth.”  As demonstrated by their reactions to opinions expressed at this weblog, many lawyers have convinced themselves that any fee a mentally-competent client agrees to is by definition “fair” and they should be able to charge whatever the market will bear.

Except for judicial review in million-dollar cases, the monitoring of excessive fees by the legal profession has been basically delegated to Lawyer-Client Fee Dispute programs.  When HALT reviewed such programs state-by-state in 2007, and issued Fee Dispute Report Cards, it found:

“The most pervasive complaint about lawyers is that their fees are too high for the work done. But in evaluating the programs established to settle these disputes between clients and lawyers, our Report Card found a system plagued by an appalling pattern of biased procedures, insufficient resources and little enforcement.” And,

“By allowing lawyers to refuse participation in the fee arbitration process, hiding information from the public about the system, placing roadblocks in front of consumers wishing to resolve a fee dispute, stacking arbitration panels with attorneys and refusing to assist clients in recouping their money, fee arbitration programs across the country are routinely failing to provide a much-needed service to American legal consumers. Until there is meaningful reform, the legal profession has only itself to blame for the widespread public belief that lawyer fees are out of control and going unregulated.”

If self-regulation isn’t to blame, how else can we explain:

• So Little Guidance from the Bar or Bar Counsel on How to Avoid Hourly-Billing Excesses and Abuse: You have to look pretty hard to find actual, practical discussion from bar associations or official bar sources on how lawyers and firms can properly use hourly billing.  (One exception, which itself could use some amplification, is the 1996 Statement of Principles from the ABA Task Force on Lawyer Business Ethics).  As a result, far too many lawyers seem to have forgotten that:

—  Hours Expended x Hourly Rate is meant to be the maximum fee that a lawyer can charge under an hourly billing agreement.  The figure is not automatic or set in stone but,  as the ABA Statement of Billing Principles says: “The lawyer is expected to use professional judgment in determining whether the number of hours spent on a matter is reasonable under the circumstances of the engagement” — e.g., making appropriate reductions for time that is not used in an efficient, cost-effective manner.

— Having multiple partners and associates billing their full hourly rates for attending a meeting or court session where they have virtually no active role is unacceptable.  In addition, as the ABA Statement of Billing Principles says, “If the primary purpose of participation in a meeting or project by a less experienced lawyer in a law firm is to train such lawyer, then the lawyer’s time should not be billed to the client.”

— Excessive time spent reviewing and rewriting the work of other lawyers suggests that the original work was not adequately done and should not be billed at regular rates, if at all.

update: See our valedictory post “understanding and reducing legal fees” (Feb. 28, 2009)

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