The Standard Billable Hours Fee Arrangement – A Conflict of Interest For The Family Law Attorney?
Virtually all Family Law attorney’s work under the standard billable hours fee arrangement. I have found that this fee arrangement is one of the driving forces behind litigation in the Family Courts.
Attorney’s have not always billed by the hour. This is a relatively new development. Up until the early 1960s a person who had a legal problem would speak with an attorney. The attorney would quote a fee and if the client paid the fee, then the attorney would do the work for the agreed upon fee. We now call these “flat” or “fixed” fees. The fee covered all legal services necessary to perform the required task. And that was it.
With the advent of big corporations and growing corporate litigation in the 1960’s, corporations began retaining law firms to handle legal matters that required continual representation, such as insurance defense, employment matters, mergers and acquisitions, etc. Instead of being retained separately for a series of individual legal matters, law firms and their corporate clients now agreed to simply pay lawyers for their time. The lawyers would be available to handle the legal matters for the corporation as they arose, and would be paid on monthly billings for hours spent on corporate legal matters; Hence, the billable hour.
The billable hour has since created many a wealthy lawyer! The key concept is “leverage”. An associate’s time may be billed to the client at $150 per hour, but she/ he will only cost the law firm $50.00 per hour. This is a 77% gross profit leveraged off the labor of the associate! Law firms have since been transformed from businesses whose primary purpose is to solve legal problems for a client to businesses whose primary purpose is to generate profits for the law firm (i.e. the Partners).
This fee structure is all well and good when the client is a corporation. Corporate officers are used to negotiating contracts and working with attorney’s. But Family Court is different. Families generally don’t negotiate contracts and many are dealing with a lawyer for the very first time in their divorce.
The Rules of Civil Procedure are liberal and extensive. Litigation can be virtually endless. If an attorney has a client with deep pockets willing to pay the fees, why not ask for that extra document, take one more deposition, and so forth. Heck, we will even justify our action because we are simply “zealously representing our client”. Isn’t that what we are supposed to do?
But present day litigation in the Family Court will almost always create personal suffering and significant financial loss to the families involved in the process. A client with a large amount of money may be providing, unknowingly or knowingly, fuel to fan the flames of their lawyer’s “need” to litigate. Families who are involved in divorce litigation deserve options that will help to reduce the financial loss and emotional suffering that is typical with divorce litigation.
A flat or fixed fee structure can serve our Family Court clients much better. Instead of an attorney having an incentive to litigate, she/ he will have a different incentive: resolve the case efficiently and expeditiously. One single fixed fee may be appropriate for the entire case, or a series of smaller fixed fees crafted for each individual phase of the case, such as the filing phase, discovery phase and trial phase, may be better suited in a complex matter.
Any way it is structured, a fixed fee structure would demand efficiency on the part of the attorney and would also help the family in budgeting the legal expenses through the divorce process. However, for a fixed fee structure to work, both attorneys must agree. For obvious reasons, an attorney on a billable hour retainer will simply “out litigate” an attorney on a fixed fee retainer if the financial resources are available.
Families the process of divorce need more options. Paying a lawyer by the hour to litigate a divorce matter is often a recipe for disaster. Due to the unique nature of divorce, attorneys have an ethical obligation not simply to zealously represent their clients, but also bring the matter to an efficient and cost effective resolution that will reduce the suffering and financial loss to the families involved in the process.