18. The rules about fees
The debate about billing at times seems deadlocked between those who seek change and those who have little interest in the subject so that they simply rest on the status quo and don’t even engage. Some support for reformers can be found in the rules of professional conduct under which lawyers ply their trade.
A reference point: ABA Model Rule 1.5
The American Bar Association’s Model Rules of Professional Conduct, which have been adopted by some states and are influential in others, provide a good reference point for what is a “national” standard. (To the extent that anything is “national” in the American legal profession.)
And, as shown below, the ABA rules appear to suggest that a blind, slavish adherence to the billable hour — such that nothing other than time spent is even considered — may not satisfy a lawyer’s ethical obligations regarding the setting of fees.
Specifically, the ABA Model Rule regarding fees says this:
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Rule 1.5: Fees
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(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
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(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
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(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
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(3) the fee customarily charged in the locality for similar legal services;
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(4) the amount involved and the results obtained;
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(5) the time limitations imposed by the client or by the circumstances;
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(6) the nature and length of the professional relationship with the client;
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(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
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(8) whether the fee is fixed or contingent.
That sounds mighty like a formula encouraging value billing. Going down this list, it is clear that the time a service takes to provide — although a legitimate factor in assessing reasonableness — is only one of many factors.
Is it ethical to ignore value?
The wording of ABA Model Rule 1.5 tells us that the factors it lists are “to be considered” (not that they “may” be considered) — suggesting that consideration of all of them is mandatory for those lawyers operating under those rules. To that extent, it is questionable whether an automatic “don’t even think about anything else” policy of charging by the hour does satisfy the ethical requirements of the ABA Model Rules. Although lawyers might settle on a pure hourly rate, they are required to, at least, consider other factors besides time.
Those other factors include “the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly” (factor 1 on the ABA list) and “the amount involved and the results obtained” (factor 4) — considerations that are at the core of value analysis.
The “results obtained” factor appears to contemplate that the reasonableness of a fee has to be revisited at the end of a representation in the light of what was accomplished. I don’t believe that the value of a lawyer’s services necessarily diminishes if the outcome is not successful. Lawyers who take tough cases aren’t going to win all of them — and losing doesn’t mean that they didn’t deliver full value in their efforts.
That said, results can impact reasonableness. For example, a fee that might be unreasonable under some circumstances may seem more reasonable in the light of a good result.
Of course, all lawyers are governed by the rules in their own jurisdictions. Most rules do list various “fee factors” very similar to those in the ABA rule, but some have a different preamble.
For example, in California — where I practice — the rules don’t require a fee to be “reasonable,” but simply say that it should not be “unconscionable.” (See California Rule of Professional Conduct 4-200.) That seems to give a lawyer more leeway in fee setting — I’m not sure that a fee that is not “reasonable” is, per se, “unconscionable.” And if I’m right about that, it means that a California lawyer is allowed to charge an unreasonable fee — so long as it isn’t too shocking.
Still, the California rules do require the lawyer to go through a checklist that is the same as that in ABA Model Rule 1.5 in order to determine whether a fee is “unconscionable.” In essence, this amounts to applying “value-oriented” considerations in establishing whether a fee does conform to the required standard.
Entire contents © 2008 John Derrick