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More Bad News for the Billable Hour

Posted in Marketing Tips

Padding legal bills will be the major reason companies will eventually no longer accept law firms billing by the hour. There I’ve said it. But I’m not alone. Lawyers themselves admit that padding occurs.

Two examples:

1.    The 2006 Inside Counsel survey reported that 6% of law firms agreed that “most law firms pad their bills” (10% were “neutral” on the issue). On the other, hand 42% of in-house lawyers agreed that padding occurs – that’s up from 35.3% the previous year.

2.    According to a post by Nathan Koppel on The Wall Street Journal’s Law Blog a few days ago entitled “Study Suggests Significant Billing Abuse,” there seems to be further evidence of the practice. The study was conducted by Professor William Ross of the Cumberland School of Law.  Ross received 251 responses out of 5,000 lawyers polled. His conclusions according to the WSJ:

  • Two-thirds stated they had “specific knowledge” of bill padding,
  • Further, 55% (vs. 40% in 1995) admitted to working a file “just to bump up their billable output.”

Thanks to Patrick Lamb of In Search of Perfect Client Service for the heads up on the WSJ post. More to my point, Patrick also raised a question in another post as to whether a subsequent story, by the WSJ the next day on the rise of alternative fees, was just a coincidence or related to the padding story. A good question.

Whether it was or not is unimportant. What is important, in my view, is that stories about padding hourly bills (and lawyers admitting that it happens) is only going to hasten the demise of hourly billing as we know it today, and lead more quickly to alternative fee arrangements, such as fixed fees.