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Why Would Any Client Continue to Trust Their Law Firm Once They Realize that Firm Is Under Severe Financial Stress

We all know how it works.  Law firms start to see workloads lighten, and they start generating a bunch of "make-work" for their partners and associates.  The work that is generated has little or no value to the client.  It is designed exclusively to generate revenue for the law firm.  Law.com recently posted another "layoff list" setting forth a long list of law firms who are laying off partners and associates. 

What I don't understand is this.  Why would these clients, knowing their large law firms are under severe enough financial stress that they are having to lay off large numbers of lawyers, trust those law firms to avoid "make-work" billing.  One of the many challenges posed by hourly billing is that it requires a high degree of trust between the law firm/attorneys and their clients.  In a growing economy, a client might believe that the law firm has more than enough work to keep it busy and will only allocate hours to things that are meaningful.  If I were a client of any of the law firms on the layoff list, I would actively be seeking other alternatives in the market from firms which are financially stable or growing.  There is no way I would trust that my law firm was going to put my interest ahead of their own instincts for survival.

Comments

Greg

Trust but verify. Clients choose firms based on the lawyers they trust, but, in my experience, scrutinize every bill. A client that saw strange new associate names on their bills, or a substantial uptick in hours billed would take the partner to the woodshed.

Andrew

The solution is not to avoid firms that are on the layoff list and to seek "other alternatives in the market from firms which are financially stable or growing."

First, a firms that is not on the layoff list may still be doing layoffs and as a client you may never know.

Second, just check the bills. Any firm, busy and financially stable or otherwise, can pad bills (especially if they want to appear financially stable).

chris

First, it makes no sense to say that layoffs are signs of overbilling - they are more reliably an indicator that the firm is not "making work." Second, you could also argue that in this economy you shouldn't trust any large firm that isn't doing layoffs - how on earth are they managing to come up with all the work that is eluding every other firm? Clients have a responsibility to check their bills and work with their lawyers. Nothing causes more unnecessary havoc with client-lawyer relationships than clients seeing conspiracies to overbill in every corner of the universe (I think of Jim Carrey in that movie about the Number 23). Clients hitting the panic button isn't going to create more efficient or effective service.

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GAL

jojo: Client's scrutinizing bills is fine. The great thing about hourly billing if you are a law firm is you can 'legitimately' wonder from one shoulder of a 5 lane highway to the other. There are lots of activities in a day which can fatten the time sheet, which are legitimate activities but add no value to achieving the client's goals.

How many lawyers analyze and document the exact strategy which will be implemented at the beginning of a case. How many lawyers do a needs assessment as the first step to ensure ROI. How many lawyers analyze and document a client's goals at the beginning of a case and then describe in detail to the client how those goals will be achieved?

Trust between lawyer and client is based not on time sheets, or activities but on common values and shared interests. When a lawyer has no skin in the game, no contingency to their fee structure, there can never be a high level of trust. That is why hourly billing in a down economy spells trouble for big law.

GAL

Chris: "Second, you could also argue that in this economy you shouldn't trust any large firm that isn't doing layoffs - how on earth are they managing to come up with all the work that is eluding every other firm?"

Both great points. I think that both law firms and clients under financial stress are going to be pushed to consider alternatives. The real battle ground for big firms will be to describe, show and deliver more value to the client. Those firms that use the turmoil to change and innovate on issues of client service will be at an advantage.

Having worked in both large and medium sized firms with 'too little' work, I do not see how 'make work' is avoided. The partners at the top are still reviewing billables. The lawyers at the bottom still need to bill in order to survive. The pressure and incentives push towards the number of hours worked. By the time layoffs come, how many months of being 'light' have gone by?

You are correct that firms who are doing nothing to scale back are, in many instances, simply creating more instances of 'make work.' Trust but verify is a challenging task. Hours which are made up or inflated are tough to catch. But activities which are performed and otherwise legitimate tasks may be very low value.

You are correct that clients will look even harder at their bills. Given the existing tension between clients and law firms on hourly bills even in good times, it will be interesting to see what impact this increased stress will have.

Legal Assistant

Having reviewed bills prior to their being finalized, I have found many times where an associate or legal assistant has worded their entry such that it appears to be a legitimate entry. On the part of the legal assistant, he/she was attempting to protect her job by being the largest biller among the legal assistants. For the associates, they are trying to make their mark in the firm, thinking that more hours means more security. Many times their hours are cut because they are on a learning curve.

Jojo: Your statement that clients always scrutinize their bills is not completely accurate. Yes, they look at the totals to see if the totals are reasonable. However, if they have many matters under their bill and choose to only get an itemization of their general matter, they do not see the details of the other matters. This is a choice they make, but they can tell by the totals and what is going on with the matter (by communication with the attorneys) whether the charges are unreasonable. Clients do have a choice of whether to stay with the firm they have or to move on to another one in a way to cut costs, espcially if its a large firm. Having worked in a large firm (50+ attorneys), they worry is always there as to whether a client who pays on time and generally has a large bill will stay with you or move on. If they think they firm they are with is padding the bill or charging too much, they will move as a cost cutting measure.

B

The simple answer is that a client would not. It is no different than any other industry. For example, people are not buying Chrysler right now because they are afraid they may not be around to service or produce parts for the vehicle (whether this is the case or not). The same goes for people who would not buy gift certificates at Christmas because they did not know whether the company would be around to honor them.

Clients put their trust in a lawyer and the firm that supports that lawyer. Not only do they want to know that hours are not being padded, but they want to make sure the law firm can travel as needed, retain necessary experts, and simply keep the lights on.

Hourly Ethics

Against such a Darwinian backdrop, attorney ethics, particularly when it comes to padding hours, could take a hit as associates and partners alike struggle to stay afloat in the shrinking legal world.

While overbilling has always been a persistent and prevalent problem at law firms, the temptation to engage in that practice could become even worse in the months ahead, according to William G. Ross, a professor at Samford University’s Cumberland School of Law who specializes in billing ethics.

“I think job pressure will inevitably increase billing pressure, which will encourage unethical billing,” Ross said. “It's been a chronic problem since hourly billing first came about in the 1960s and 1970s.”

Overbilling

In his most recent study on the topic, which appeared in 2007, William G. Ross found that two-thirds of survey respondents indicated they had “specific knowledge” of bill padding at law firms.

Ross also found that 54.6 percent copped to performing unnecessary tasks just to puff up their billable figures, a marked increase from previous years.

While some associates do simply fabricate their hours in order to meet quotas and expectations, most of the overbilling that takes place tends to come from excessive work performed by the attorney, Ross said.

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