Sunday, April 20, 2008

Flat Fee Billing Again

The Oklahoma Family Law Blog mentioned Scott Turow's ABA Journal article, The Billable Hour Must Die. Indiana Family Law Blog picked the thread up from Oklahoma Family Law Blog.

Both makes points I made in earlier posts (here, here and here), but the past four months and reading Mr. Wilson's post crystallized this point for me: the lawyers will be happy to get rid of the billable hour when certain conditions can be met but the greatest obstacle to flat fees comes from the clients.

Let me explain that a bit more. Lawyers in my area have used flat fees for many types of cases for years - criminal, bankruptcy, some family law, Wills. I think the conditions holding up lawyers are the fear of being overwhelmed by client demands and losing any profit, or of having opposing counsel pile on the work because they know you are on a flat fee basis. Both fears can be dealt with via a good fee agreement with the client.

Now why do I say clients are an obstacle? Potential clients do not ask me how I bill. They ask what is my hourly rate. When I explain I generally bill on a flat fee basis, I can hear the confusion in the tone of their voice. The confusion comes from the completely alien phrase "flat fee" - they do not hear this on television or the movies or read about in the print media. Flat fees compound the confusion for those shopping for counsel on a price basis.

My understanding of the current flat fee movement is that it came from the corporate world. Those pushing for flat fee and other alternative fee arrangements were more sophisticated than the vast majority of family law clients. Which is why the push for alternate fees did not from the consumer side of the law practice.

Ordinary citizens hear a big hourly rate and assume that the attorney is as impressive as the hourly rate. Here ignorance is not bliss and causes my own particular gripe. These people get the bill and see every document prepared at an hourly rate. We have computers that should be able to spit out paper in a fraction of the time quoted on fee bills.

I have a point of these fulminations: only when lawyers publicize the difference between billing methods will clients accept alternate billing arrangements and until clients do so there will be attorneys clinging to the hourly rate. I would call this a Catch-22.

Things may be getting, though. Consider this survey from the Madison County (Indiana) Bar Association sent me last month:


Please submit a separate form for each attorney in your firm, and only answer those
questions that apply to your own practice areas.

What is your hourly rate: $________________
(If your hourly rate varies, provide your average or most commonly charged rate.)

2. What is your opinion as to a presumptively reasonable fee award in:

Divorce - provisional hearing: $____________________

Divorce - Contested final hearing,
no custody or complex property issues: $___________________

Divorce - Contested final hearing, with
either contested custody or
complex property issues: $____________________

Divorce - Contested final hearing, with
both contested custody and
complex property issues: $___________________

Post-judgment enforcement of support
or visitation order. $____________________

3. How do you bill in probate matters (estate administration)?
(Please check one)

_____ By the hour, for actual time expended.

_____ A percentage of the estate assets: %

_____ Flat fee, depending on estimated work involved.
For supervised estate administration, my typical flat fee range would be
from$__________ to __________


1 comment:

Dick Price said...

You make an excellent point about needing to publicize flat-fee billing. Some clients may be unnecessarily wary of flat fees if all they hear about from lawyers is hourly billing. In fact, most clients should be very happy with flat fees if the fees are clearly explained and the engagement letter defines the services to be provided. Thanks for continuing the discussion. -- Dick Price, Divorce and Family Law in Tarrant County, Texas.