Huffpost Homepage
THE BLOG

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Gershon Hepner Headshot

Billable Hours

Posted: Updated:

Now that gas tanks are no longer fillable
with what once seemed unlimited cheap oil
it seems that lawyers' hours that are billable
will be replaced, attorneys made to toil
for services according to the paradigm
that all the world except for them has followed;
they will not gain by dragging out the time
for services produced, and once they've swallowed
the fact that wasting time won't help them reap
rewards they'll give up padding all their bills.
There's one new thing that that we'll now let them keep:
the self-respect that each billed hour kills.
Once the lawyer problem's been corrected
by altering the structure of their billing
we'll deal with that of oil, and get connected
with energy to Arabs less fulfilling.

Inspired by an article by Nathan Koppel and Ashby Jones in the WSJ, August 24, 2009 ("'Billable Hour' Under Attack: In Recession, Companies Push law Firms for Flat Fee Contracts"):

With the recession crimping legal budgets, some big companies are fighting back against law firms' longstanding practice of billing them by the hour. The companies are ditching the hourly structure -- which critics complain offers law firms an incentive to rack up bigger bills -- in favor of flat-fee contracts. One survey found an increase of more than 50% this year in corporate spending on alternatives to the traditional hourly-fee model.. Pfizer earlier this year reached a deal with law firms, doing away with billable hours and switching to a flat fee. The pharmaceutical company's general counsel, Amy Schulman, talks about what was behind the arrangement. The shift could further squeeze earnings at top law firms. The past 18 months have been brutal for some big law firms as work that hinges on vibrant credit markets, such as deal making, has flat-lined. Pfizer Inc., which spends more than $500 million a year on legal matters, says it expects to reduce its domestic law-firm spending by 15% to 20%, largely through flat-fee arrangements. It will pay 16 law firms lump sums to handle various portfolios of work, such as litigation and tax matters. "I have told firms you cannot make your historical profit margins" on Pfizer work, said the pharmaceutical giant's general counsel, Amy Schulman. Cisco Systems Inc. has notified its stable of outside law firms that it is vital for the company to move away from the hourly billing structure. Cisco now uses fixed fees or other alternatives to the billable hour for about 80% of its legal work, said its general counsel, Mark Chandler. American Express Co. also has stepped up its use of alternative billing arrangements, and "I haven't had one firm in 2009 tell us, no, that they flatly wouldn't entertain something that moves away from the traditional straight hourly model," said the company's chief litigation counsel, Stuart Alderoty. "The paradigm has changed." Pfizer could have demanded a discount from firms' hourly rates, Ms. Schulman said, but she hopes for a shift to a system that encourages firms to work more collaboratively with Pfizer and with other law firms that service Pfizer. The flat-fee program "should be something fundamentally different that will last beyond whatever people think they have to tolerate because of the economy," she said.