A Virginia couple that gave birth to the billable hour | Hacker News Reader

A Virginia couple that gave birth to the billable hour

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32 pointsyoloswagins10 comments

Ok, many problems with this article. First the main theme is just wrong. It is quite a stretch to say that ruling minimal flat fee schedules illegal led to the billable hour. Flat fees are still legal and many lawyers use them. It is only illegal to have the bar association set minimums.

The article is also not quite correct to imply that the billable hour causes more misery than flat fees. If you have flat fees the partner will make the most money by forcing an associate to the largest number of flat fee assignments possible and that would still result in overwork. There are other worse problems with flat fee arrangements. In a flat fee situation you get paid the same regardless of how much work you put in, so there is incentive to finish the task with minimum amount of work. But if you are a perfectionist and/or a lawyer that takes pride in his work, you will spend extra time to do the job right when it requires it. And that will make your life extra miserable because the partner expects you to finish a certain number of tasks regardless.

So the problem is not billable hours or flat fees, the problem is that the partner makes money from associates labor and wants to squeeze out as much labor as possible. This is an issue in many careers of course, but it is somehow worse in law.

And yes, I have worked in top law firms (if you haven't noticed by the bitterness) and have worked both for billable hour and for some flat fee arrangements. I much preferred the billable hour stuff. If you are in a top firm you can just assume you will get the more difficult assignments so you shouldn't be taking flat fees.

Not a good article. Plenty of other professions don’t charge by the hour. How come lawyers do? This article doesn’t tell you. It doesn’t explain why the billable hour won over flat fees. There’s a whole lot of room between cartel price-fixing and billable hours. Flat fees are not illegal. Price-fixing is. If bar associations tried to set minimum hourly rates, that would be price fixing too. I’m not convinced that the writer even understands this.

I don't know the history, but some observations:

1) Some lawyers do sometimes charge flat fees for simple services. Indeed, even when lawyers charge by the hour, most services will be quoted as typically requiring X number of hours. In litigation it's common for lawyers to charge a fixed percentage of the recovered assets, and for it to be contingent on winning.

2) Lawyers can't guarantee outcomes. Sometimes the lawyer discovers some defect or problem that would require additional attention. Sometimes, especially in litigation or negotiation, the likelihood of achieving a particular result is a function of hours input, and even then it's continuously variable.

3) If a lawyer is losing money on a case he can't necessarily quit like the vendor of a normal service or good can and take a fixed loss. A lawyer has an ethical obligation and fiduciary duty to a client that can go far beyond that required by contract law.

> If bar associations tried to set minimum hourly rates, that would be price fixing too.

In Germany, this is the actual way how lawyers operate - anything that ends up at a civil or criminal court is billed according to the fixed set of the Rechtsanwaltsvergütungsgesetz (RVG), which means there is a base rate and a multiplier based on the monetary value of what is being argued over.

Only stuff that fully happens outside of the court system is excepted and lawyers are free to make their own negotiations.

This ensures a somewhat level playing field in front of courts.

For HN'ers coming from a common law system: the hours in court are probably also fewer, because unless the case is unusually complex, they'll only be arguing about the facts of the matter, not arguing about which precedents to apply.

The billable hour is not actually an hour; it's more fine-grained than that [1]. It may vary from one jurisdiction to another, but the example I found uses 0.1 hour as the increment. The result is that it's possible for a lawyer to spend 8 hours working, and bill more than 8 hours. E.g. assume a lawyer calls a client and gets an answering machine. Three minutes on the phone can be billed at 0.1 hour. Of course, slack time can't be billed, so it probably evens out.

[1] https://cand.uscourts.gov/about/court-programs/criminal-just...

A lawyer in Boardwalk Empire, from the 1920s, charges $80 per hour. So hypothesis disproven.

First, I agree with the other posters who suggest that this article might have flaws with it. It very well might.

But, those aside, let's at the view from 10,000 feet. Let's look at things from the perspective of pure capitalism...

Buyers of legal/law/lawyer/law firm services, specifically the largest buyers (large corporations), typically are run by CEO's who have relatively little knowledge of Law. Oh sure, they might be advised by a Chief Legal Officer / General Counsel, but then the question is, why are they outsourcing their "home-team" legal capabilities to large law firms for certain cases?

Well, let's suppose a corporation was sued for millions, heck, billions of dollars (you remember Carl Sagan, right? "Billions and billions..."? Well, it's like that, but not with stars in the galaxy, but with dollars in a lawsuit, directed against your company! <g>)

Here's a good example, "Google v. Oracle America":

https://en.wikipedia.org/wiki/Google_v._Oracle_America

>"Google v. Oracle America (previously named Oracle America, Inc. v. Google, Inc. in lower courts) is a current legal case within the United States related to the nature of computer code and copyright law. The dispute centers on the use of parts of the Java programming language's application programming interfaces (APIs), which are owned by Oracle (through subsidiary, Oracle America, Inc., originating from Sun Microsystems), within early versions of the Android operating system by Google. Google has admitted to using the APIs, and has since transitioned Android to a copyright-unburdened engine, but argues their original use of the APIs was within fair use.

Oracle initiated the suit arguing that the APIs were copyrightable, seeking US $8.8 billion in damages."

OK, so now let's look at things from Google's perspective:

From Google's perspective, $8.8 billion (not million, 8.8 billion) dollars is on the line.

Is that something that should be kept with Google's home-team legal department, or outsourced?

Think of this like a giant poker game.

That is, it might be worth many millions (in outsourced legal fees, etc.), if the possibility for loss prevention is in the billions.

Hey, you'd spend a few million dollars of your own money, if it could prevent you from losing $8.8 billion of your own money, wouldn't you?

I would.

And I don't know anyone else that wouldn't.

So now enter the "Big Legal" law firm.

Big Legal (their sales pitch): "We're the top legal firm, we've served the following list of corporate clients (insert impressive-sounding list of corporate clients here), and we have tons of the brightest legal minds, recent graduates of the nation's top ivy-league law schools that we poached from other law firms and academia, etc., etc."

Well, from the perspective of the company getting sued, for billions, what's not to love?

It sounds great, it sounds like the solution!

It sounds like the best defense possible!

With a company like that on your company's side, there's no way your company could lose! So how much is all of that going to cost?

Big Legal: "Well that's the best part of everything! We'll simply let you rent X of our brightest legal minds for Y dollars per hour (billable hours!), where we will take Z% as a percentage (a large percentage!) for the privilege of your company having used (what amounts to!) our legal match-making service!

You know, it's like Fiddler on the Roof: "Match maker, match maker, make me a match, find me a find, catch me a catch!".

It's like that, except that the Big Legal law firm acts as a matchmaker between the large corporation who is getting sued, with a lot at stake, and the legal minds (AKA recent graduates) that they have poached from some of our nation's top ivy-league law schools...

Then the partners at the Big Legal law firm -- collect the profits on their matchmaking activities; the difference between the hour billed to the corporation in legal trouble, and the (much lower!) per hour rate they pay their recently-poached legal minds.

And thus, the "billable hour" was created -- as yet another form of trickle-down "Voodoo" economics. <g>

>"Hourly billing also pleased clients, who received a clearer look into the services provided them, though it did not take long for the lawyer’s time sheet to go from a record-keeping tool to a record-breaking profit generator. This was accomplished in large part on the back of associates’ labor — billed out to clients at two to five times their own compensation rate, which meant that hiring legions of young lawyers became, as one big-firm managing partner once admitted, “like owning a printing press.”"

Yes, being a partner at a Big Legal / Big Law law firm is great work -- if you can get it! <g>

(Fun Fact: In Greece, in Athens, a long time ago, while it was permitted for friends to argue and help argue cases for other friends -- it was against the law / prohibited -- for someone to earn their living as a professional Lawyer/Attorney/Bar Association Member.)

(Additional Fun Fact: Getting sued, from a pure economic perspective, comprises negative value.

That is, much like garbage, there's economic value in getting rid of the thing, but nothing of positive economic value is produced, no goods are produced, nothing positive happens to the economy, yet (paradoxically) the transaction is worth money...)

>nothing positive happens to the economy

I’m not sure that’s true, but perhaps I misunderstand. The lawsuit is the enforcement mechanism of private law. You can go make contracts and have pretty good certainty that they will be respected because the threat of the lawsuit looms in the background. You can confidently ride an elevator or walk under a crane or take pills from the pharmacy because the implicit threat of a lawsuit, should you be injured, looms in the minds of the people operating those services. Every successful lawsuit makes that threat all the more legitimate.

A very interesting point!

Yes, that does make sense -- threat of lawsuit should in theory equal higher quality goods and services.

But, I'm sort of 50/50 on it without a little bit of additional proof... It sounds like it makes sense prima facie, but does it really apply to all fields of economic endeavor?

The counter argument (and I don't really want to make it, because your argument is a good one!), if I were to make it, would go something like this:

If you have a system of production, that is a series of people, workmen, following a series of localized rules (that is the rules and the workflows of the company), then after those are established (and they could very well be initially established by a lawsuit or threat of lawsuit), but after those local rules and workflows are established, then the lawsuit or threat of lawsuit - really doesn't apply anymore.

Most methods of production in this day and age are systems, that is, they employ both humans and machines and a series of rules to produce some good or service of economic value.

Once the rules of the system are established -- the system usually works from that point on -- much like a computer program.

But, this being said, I do like your argument, and I do find merit in it!

I feel it would be highly worthy to consider your argument in debates of this nature in the future! There is something to be said for what you're saying! There's something there that needs to be explored (with evidence and economic data) further!

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