Has the Billable Hour Taken Another Hit?

Posted on February 17, 2009 by Gary A. Bresee

A month ago I reported on Scott Turow's article, the "Billable Hour Must Die."  Well, apparently, the New York Times now agrees.  In "The Billable Hour Giving Ground at Law Firms," Jonathan Glater reports how the tough economic times are creating a shift away from the old standby billable hour.  Examples given of alternative fee arrangements include:

  • flat fees for business transactions,
  • success fees for positive results,
  • flat fees for mortgage closings,
  • contingency fees, 
  • monthly retainers for litigation clients, and even 
  • fixed fees for each stage of a particular piece of litigation.

The discussion is certainly a healthy one, particularly for attorneys who may be trying to compete for clients by creating a real difference between them and their competitors.  I do not believe the billable hour will go by way of the dinosaurs, but perhaps we will see a changing competitive landscape, where firms may be forced to alter their way of thinking in order to compete in the marketplace.

Have you proposed any alternative billing arrangements recently? 

 

Fixed or Flat Fee Arrangements?: Some Historical Perspective

Posted on February 6, 2009 by John "Jack" S. Pierce

 

"Flat Fee" Arrangements and "Non-Refundable" Legal Fees:    With the billable hour coming under closer scrutiny, flat fee arrangements are again being explored by corporate general counsel.  Currently the ethics of such arrangements are being questioned.   A review of a 1999 Arizona State Bar Ethics Opinion allowing flat and non-refundable fees may provide some insight into the answers to those ethical questions.  [See Arizona Ethics Opinion #99-02: Fees; Retainer Fees; Fee Agreements; Retainer Agreements]

The opinion is significant in that it contains an historical review of similar such fees and principles which also might be applicable to an analysis or today's more popular "fixed fee" arrangements.  It also explores the basis of a disapproval of these fees by  state courts in other jurisdictions starting with the New York case of In Re Cooperman  83 N.Y.2d at 476, 633 N.E.2d at 1079 in which the New York Court of Appeals imposed an absolute ban on such arrangements.


       The arguments set forth in this Arizona ethical opinion also provide a persuasive legal analysis of why the Fixed or Flat fee arraignments might also be prohibited by an outright ban on non-refundable legal fees. 


       More frequently, today's sophisticated clients are demanding that their attorneys consider fixed or flat fee arrangements.   Because of the popularity with such fixed fee arrangements with more institutional clients, it would be problematic to ban such fixed fee arrangements. As noted in the opinion, many states and the federal courts allow non-refundable fees, so long as they are not either "unconscionable" or "excessive".

 

 

Level of Success a Key Factor in Civil Rights Fee Award Cases.

Posted on February 6, 2009 by John "Jack" S. Pierce

The 9th Circuit has recently overturned an attorneys' fee award of $200,000 by the District Court in a civil rights case, holding that the District Court failed to consider the level of success obtained by the plaintiff in that matter.  See Ian McCowan v. City of Fontana 550 F3d 918 (2008)

In that case McCowan had been arrested and "tased" by officers of the Fontana police department who had mistakenly believed that he was in possession of illegal drugs.  After his release, he sued the officers and the City of Fontana for civil rights violations in the U.S. District Court for the Central District of California alleging the use of excessive force, the making of an arrest without probable cause and deliberate indifference on the part of the city of Fontana.

McCowan prevailed on only one of his nine claims and recovered only $20,000 in damages after seeking damages in excess of $75,000.  The District Court's award of $200,000 in legal fees and costs was appealed to the 9th Circuit and was overturned.

The 9th Circuit, applying the LODESTAR method of analysis, held that the reasonableness of a civil rights attorney fee award in a 42 USCA 1988 case is determined primarily by reference to the "level of success" achieved by the plaintiff.  It further held that civil rights attorney fees must be "adjusted downward" where the plaintiff has obtained limited success on his pleaded claims and the redult does not confer a meaningful public benefit.  The 9th circuit reversed after finding that McCowan's lawsuit did not confer a benefit to the public since the claims were brought against two officers and not the entire police department and settlement did not result in a change in any policy of the police department.

The 9th Circuit remanded the case to the District Court for reconsideration of the fee issue consistent with the 9th Circuit's opinion.