The Anchor Plate : Intellectual Property Lawyers & Attorneys : BrickHouse Law Group : Open-Price Lawyering, Hourly Billing : St. Louis, Missouri

Only a few months ago we were bragging around here about our good fortune to welcome David Groce as a principal of our entrepreneurial law firm.  David's addition greatly enhanced our ability to provide a full range of business services counseling to our clients.

Now we get to brag again -- this time about our newest partner, Michael A. Kahn.  Some of you may know Mike from our past blogging efforts together on the old Fair Use Blog, and more recently Mike has been a contributor to Bryan Cave's Art Law Blog.  Others may know Mike as the successful author of many novels, including Trophy Widow.  Still others may know him from his long career as a nationally-known First Amendment, media and intellectual property trial lawyer. 

We know him all of those ways, too, but mostly as a good friend, great guy and exceptional attorney.  Truth be told, we've been stalking Mike for a while.  We've always thought he was a perfect fit for our entrepreneurial, client-centered approach to practicing -- he doesn't like the billable hour any more than we do!

Mike is joining the BrickHouse Law Group after more than 25 years of large law firm practice, and he'll be joining the AnchorPlate blog as an author.  I hope you enjoy hearing from him as much as we're going to enjoy practicing law with him.

Welcome to the BrickHouse, Mike!

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Sometimes you're smart.  Sometimes you're good.  Sometimes you just get lucky.  I'd like to think that here at The BrickHouse Law Group we are fairly smart, and often good.  But I know that right now we are very lucky.

We are lucky that for much of the past year, unbeknownst to us, a friend and one-time client, David B. Groce, was thinking many of the same things we've been thinking.  Such as, how to practice law in a more efficient, value-driven way and how to leverage years of experience and expertise with large corporations and law firms into teachable components of value to small and medium-sized businesses.  In short, how to be a legal entreprenuer for entreprenurial clients.  You know, stuff we've been learning from Patrick Lamb, Jay Shepherd, and others.

We are even luckier that David agreed to join The BrickHouse Law Group as a principal.  He brings 25 years of experience as a general counsel and corporate executive at Fortune 500 companies.  He has seen--from the client's perspective--all of the good and bad that goes along with the traditional law firm model, and he has been a tremendous asset to us already. 

In addition to joining the firm, David will be joining The AnchorPlate blog as an author.  You'll get to here from him directly, and I think you'll find that he has a lot to say.

Welcome to The BrickHouse, David!

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Why should any lawyer be surprised that clients don't like the uncertainty of hourly billing? Have you ever taken a car into the shop and been surprised by how much a repair cost?

Let me start by making it clear that I like my auto mechanic. I've taken my cars to the same neighborhood shop for a number of years and have always been pleased and satisfied with the quality of the work and the level of customer service. And even though my car has been in the shop for more than a week now, I'm still satisfied that I've taken it to the right place.

Until this past week, however, I never realized how much auto mechanics are like billable hour lawyers. My ordeal started with steam billowing out from under my hood as I pulled up in front of my house. Like many legal clients, I didn't know exactly what was wrong, but I knew I had a problem. 

With a few prayers (and some less than complete stops at stop signs), I made it to the auto repair shop. Here's a synopsis of my subsequent conversation with the mechanic:

Mechanic: "Well, Pete, you've got a broken thingamawhatsit hose, but we have to take the engine block apart to get to it."

Me: "Can you fix it? 

Mechanic: "Sure, but we won't know if we need to fix anything else until we get the engine block apart and order the part. Call back on Thursday."

Me: "Thursday? Wow, that seems like a long time--about how much will this cost?"

Mechanic: "Well, that depends. This is a labor-intensive job--probably about 5 hours of labor, plus parts, but there's a lot we don't know yet." 

Starting to sound familiar? It's now been 8 days since I took the car in, and the "investigation" alone has taken more than 5 hours, not to mention the total amount of time it will eventually take to fix the problem. And there's not a thing I can do about it because they have my car in the shop, with it's hood open and engine parts disassembled. I just have to see it through to the end and hope the bill isn't too large.

That's the experience most legal clients have when they pay by the hour. Like I said, I like my mechanic, but I'm becoming more and more convinced that there is a better way to bill my clients.

UPDATE (3/2/10): I Picked up my car last night. It runs great, but the $1500 bill was about twice what I expected from my initial conversation with the mechanic.  To be fair, he kept me apprised of everything they had to do, so I knew the bill was creeping up, but it was still a shock. The lesson: even the best customer service in a pure billable hour situation can be very frustrating.

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Have you ever driven by a construction site and wondered "Who actually knows what's going on here?" Somebody must. Even the Empire State Building was completed ahead of schedule.  But what does this have to do with a law practice? 

The other day we had a very productive meeting with a client for whom we had just completed a fixed-fee engagement. That engagement had been short in duration, limited by a date-certain event, and we were able to meet the client's needs at a price all agreed was reasonable and appropriate.

We were very happy, then, when the client engaged us again. At first, however, this new project appeared to be more open-ended, with less clearly defined parameters, and we grappled a bit with how to price it. Nevertheless, by the end of our meeting, we all felt fairly comfortable that we had defined what was in the engagement and what was not. 

When we got back to the office, we started to identify the specific tasks needed to achieve the client's goals, how much time they would take, who would do what, and--most importantly--how we would keep ourselves on task to make sure we could deliver the quality the client expected in an efficient manner. In short--how were we going to manage this project?

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"Our competitor is infringing our trademark and killing our business! You've got to make them stop, whatever it takes!  (pause . . . wait for it . . . )  But we can't afford an expensive lawsuit, especially when we have no idea what it will cost.  Which way do we go?"

So say many of today's clients.

It's 2010 and the client revolution is in full swing -- lawyers are finding that they may just have to justify their bills based on the value received by their clients, not just the amount of time the lawyers devoted to a matter. If you think about it, this shouldn't come as much of a surprise, but somehow it seems like virgin territory for many lawyers.

Of course, certain types of transactional practices have been offering so-called "alternative fee arrangements" for years -- billing by the document or deal, for example -- but it's much less common in a litigation practice.  Most lawyers will tell you this is because litigation is, by definition, an exercise in managing uncertainty.  With apologies to Heisenberg's Quantum Mechanics, many litigators seem to have their own "Uncertainty Principle," which goes something like: "If you don't know what the other side will do, or what the court will do, how can you predict what the case will cost?"

Jay Shepherd disagrees.

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