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

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.

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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Anchor Plate: a metal plate fastened to the exterior of a brick building with a washer or tie rod to reinforce structural support, usually decorative.

The Anchor Plate: a virtual gathering place for dialogue about the nature of practicing intellectual property law, to increase knowledge and to amuse.

 

Well. It's great to be back in the blogosphere again.  When you last heard from us, we were biglaw IP litigation partners and co-authors of Owners, Borrowers & Thieves 2.0, a fine blog (if we do say so ourselves) about IP litigation in the 21st Century.  (Our good friend, the great Dave Rein, now steers that ship more ably than we ever did -- and he was nice enough to leave our old posts up, too!)

Things change, however.  If you've followed the legal industry at all in the last 18 months, you know that some things have changed dramatically.  Last fall, Geoff Gerber and I left our long-time jobs as partners in a large St. Louis law firm to start our own boutique intellectual property, media and entertainment law firm.  We did it for a lot of reasons, most of them good (we think).  Ultimately, we just wanted to practice law differently (much more on that later).  So now you can find us at The BrickHouse Law Group.  And you can find us here, at The Anchor Plate. 

We hope to be valued participants in the dialogue -- good listeners as well as good contributors -- and we expect to have guest authors from time to time as well.  We'll cover some familiar territory (fair use, copyright and parody, IP litigation, comic books, for example), but we'll also reach out into some dynamic new areas, such as open-price lawyering, cloud computing and social media, to name a few. 

As with any new venture, we expect some twists and turns in the road ahead -- that's half the fun of driving.  We hope you'll find it worthwhile to join us on the journey.