August 30, 2010
LAW: The Billable Market
One of the enduringly stupid genres of legal writing is bemoaning the billable hour, which everyone hates but which has endured for a variety of practical reasons I've written about repeatedly in the past. This from the American Lawyer's AmLaw Daily is an extreme example of the genre:
Yet it survives because it has powerful defenders, including the U.S. Supreme Court's conservative five-man majority. Yes, the obstacles facing those seeking better days are that formidable.
The lawyers in Perdue v. Kenny A sued on behalf of children in Georgia's state-run foster care program. After eight years, the trial court awarded attorneys fees under the federal statute permitting winning plaintiffs to recover from the losers in such cases. In its April 2010 ruling, the Supreme Court adopted a rule that, ultimately, will reduce that monetary award by several million dollars.
Writing for the majority, Justice Alito took offense at the suggestion that the prevailing civil rights lawyers should "earn as much as the attorneys at some of the richest law firms in the country." He seems to think that's a bad thing.
Importantly, the Court rejected the argument "that departures from hourly billing are becoming more common." It noted that "if hourly billing becomes unusual, an alternative to the lodestar method [hours worked times billing rate] may have to be found. However, neither the respondents nor their amici contend that that day has arrived."
But now how will that day ever arrive? In 1983, the Court first adopted the lodestar calculation as a useful starting point for fee awards. Now, its first significant ruling on the issue in almost 30 years has stripped away almost everything but the lodestar in determining a lawyer's appropriate compensation level.
Where's the room for practitioners to experiment away from hourly billing? Nowhere to be found in the majority opinion. In fact, the Court's analysis extends beyond civil rights cases to "virtually identical language in many of the federal fee-shifting statutes." It will influence any federal court evaluating any kind of fee request--fee-shifting or not, including bankruptcy petitions. State courts will continue to use the lodestar approach in probate, divorce, and other proceedings.
This ignores the fact that - as the Court pointed out - the Court would be open to reconsidering its rule if the market changed, i.e., the market for legal services not subject to court approval but negotiated between willing parties with their own money. The job of the court in approving fee-shifting awards (or in class action or bankruptcy cases) is to attempt to produce a judicial resolution that best approximates what would be negotiated privately. If the private market changes, so will the law.
Yes, another attorney who hates those articles as much as I do. "Why can't lawyers be paid in sunshine and puppies?" Look, I'd like to not have to keep track of my time as much as the next guy. But, I'd also like to get paid to play short stop, and that ain't gonna happen either.
Favorite lawyer joke:
Lawyer dies and goes to heaven (OK, it could happen!). He is at the pearly gates and confronts St. Peter. He starts yelling at St. Peter that it was not his time to go. He just was made a partner, has a new house, a beautiful wife, and two great kids. Life was just getting great.
St. Peter says "OK, let me check to see if there was a mistake". So he looks in his book and says "Your are George Smith, living in Miami?"
"Yup" says the lawyer.
St. Peter says "Yes, today was your day".
The lawyer yells "But I was only 35 years old!".
St. Peter says "35? It says here you at 90 years old! Wait, I see the problem, we used your billable hours!"