The billable hour model has been criticized for years, both inside and outside of the legal community. Now it has many clients of big law firms questioning whether they have been overcharged.
The latest controversy arose from a fee dispute between DLA Piper and a former bankruptcy client. When DLA Piper sued to collect $675,000 in unpaid bills, Adam H. Victor counterclaimed, alleging a “sweeping practice of overbilling.” The resulting discovery uncovered damming e-mails confirming that the lawyers were indeed churning the bill—creating unnecessary work to boost billable hours charged to the client.
As the New York Times reports, one email stated: “I hear we are already 200k over our estimate — that’s Team DLA Piper!” When an additional lawyer was assigned to the case, a DLA colleague wrote, “Now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode.” “That bill shall know no limits, he added.”
DLA contends that the lawyers were joking. It released a statement acknowledging that “the emails were in fact an offensive and inexcusable effort at humor, but in no way reflect actual excessive billing.”
Whether that is true or not, the billing practices of the country’s largest firms are now under the microscope, along with the entire billable hour model. Even small and mid-size firms have had to reassure clients that these practices are uncommon and not tolerated by their partners.
Studies show that churning, although not widespread, does occur. The New York Times cites a 2007 survey of approximately 250 lawyers in which more than half of the respondents acknowledged that the ability to increase their billable hours influenced their decision to perform unjustified work, including unnecessary legal research or document reviews. Given the pressure to accumulate billable hours and the financial rewards for doing so, many argue that the billable hour model actually encourages lawyers to put their own interests ahead of the client.