History of the Billable Hour

A little while ago I got involved in a discussion at this blog about flat-fee billing by lawyers.  I am pretty skeptical about the concept when applied to what I do: “complex” commercial and intellectual property litigation, and I made myself heard.  So did others, on both sides of the equation.

Now there’s this infographic from a firm that calls itself the San Diego Law Firm.  They do everything on a flat-fee basis, including litigation — though, understandably, this page, where they discuss how they handle litigation matters on that basis is somewhat vague, because every case, as they say, is different.

The infographic is, as all infographics are, an advertisement.  Then again, to some extent, so are pretty much all the other blog posts here.  I think, as I do with respect to all the infographics I run, this one is interesting and informative, and not too off-topic.  I am a little skeptical of the claim here that the average hourly rate for a U.S. lawyer is $540, however.  A very little bit of research — it took four seconds — demonstrates that it is incorrect.  That number, as cited in the infographic, comes from this article, which does not actually say that the average is $540; rather, it has a chart that seems to say that.  For the full report from which that graphic came, however, you have to click here — and pay a fee.

A $2,500 fee.  Well, whatever that chart meant to say, that figure is wrong.  It is probably based on a survey of big law firm rates paid by public companies, though the cost of that report is a little rich for my blood. From another source, however — the ABA Journal — here are the free, actual, and somewhat more nuanced, facts, though I think they still deal with the same subset of the profession, i.e., rates paid by “corporate clients” (it’s from the same report).

The average 2012 hourly billing rate was about $536 for law firm partners and $370 for associates, according to the analysis by TyMetrix Legal Analytics and CEB. Corporate Counsel summarizes the findings.

The average billing rate for partners ranged from about $343 at firms of 50 or fewer lawyers to $727 at firms of more than 1,000 lawyers. The analysis takes information from $9.5 billion worth of invoices submitted by 4,800 U.S. law firms to 83 corporate clients from 2008 to 2012.

Partners in New York City had the highest average billing rate—about $756—while the practice area with the highest billing rate was finance and securities, with an average of $673 an hour.

Obviously, a lot more hours are billed by associates than by partners.  And these are the clients that are not finding their lawyers via infographics.  Lots of other legal work is being done on behalf of individuals, small- and medium-sized businesses for much lower rates than that, especially outside of the major cities.  (Not by me, mind you, but … you know.)

Nonetheless, here’s their argument, which is still more or less what it is; graphically dramatized for your viewing pleasure:

Fixed Fee Billing from San Diego Law Firm [Infographic]

© San Diego Law Firm

Trademark lawyer Ron Coleman

N.B. I have never ever received so much as a thank you, much less a link or tweet back in this direction, for running an infographic.  Which just goes to show that you can hire great consultants with respect to social media, but if you don’t get it, you don’t get it.  Maybe notwithstanding my upshlug on the hourly rate, San Diego Law Firm will be the first — they’re certainly willing to do things differently.  Let me know how it goes!

UPDATE:  They were the first!  That is so like the San Diego Law firm, too.

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4 Responses to “History of the Billable Hour”

  1. July 31, 2013 at 11:59 am #

    Their futzing with statistics and numbers is straight out of what law schools do, but their other points, I think, are valid. E.g. incentive to take more time when you’re being paid for it, and the impossibility of actually working as many billable hours as lawyers bill for.

    I’m a big proponent of flat fee billing and do it wherever possible … no surprise invoices to clients, and no surprise non-payments. However, as you say … it’s not always possible. I can’t see how you can do it with complex litigation which could have 1 day or 10 days of trial. If you’re paid flat fee, now it cuts the other way… you’re incentive will be to end the case, not spend more time on it.

    For most people it will come down to “you get what you pay for” with outliers are on either side once you get out of the median range, whichever way you’re paying.

  2. August 5, 2013 at 11:29 pm #

    “You’re welcome” to the San Diego Law Firm — which said “Thank you!”

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