Legal Commentary

You Buy Hours, You Get Hours. And Hours. And More Hours.

By Patrick J. Lamb

The AmLaw Daily reports today that an insurance company has sought to compel arbitration against a prominent Los Angeles based firm over the reasonableness of its fees handling a toxic tort matter.  Among the allegations are an associate who has not yet passed the bar charging $450 per hour.  Over a 4.5 year period,the firm charged the insured nearly $22 million.  The petition also refers to the size of the legal team:

 For the most part, the team of 15 attorneys and 11 staff spent their time reviewing the same things and then billing to confer among themselves about what they had reviewed.

The firm declined to comment, and it appears from the article that the firm was charging a blended rate, which led to the $450 per hour issue. 

A couple of things bear comment.  First, as I have said before, lawyers who bill by the hour and firms built on that model have a cultural ethos that seeks to maximize hours.  There is no simple way around it--if your model begins with an intent to charge for time, people will look for ways to maximize the time spent.  It doesn't matter what the firm says to contrary in its marketing materials or even if it occasionally negotiates non-hourly fee arrangements.  Institutional culture trumps one-offs every time.

Second?  I'm thinking how much lower the total paid could have been if a results driven fixed fee had been agreed to.  But then, don't get me going on insurance companies and the money that industry wastes.

Full post as published by In Search of Perfect Client Service on April 22, 2009 (boomark / email).