Dewey, Cheatham and Howe

Payback is a bitch.

Last blog, I suggested that many business academics were naïve for not noticing the level of fear in the corporate world.
Well, apparently I’m beyond naïve when it comes to legal billing practices.

I was shocked—not in the Claude Rains sense, but honestly, shocked—to read the Wall Street Journal’s Law Blog of May 1, Study Suggests Significant Billing Abuse.

William G. Ross, a professor at Samford University’s Cumberland School of Law…polled 5,000 attorneys from various walks of life throughout the country, and 251 responded…

Two-thirds said they had “specific knowledge” of bill padding ─ a finding virtually identical to one reached by Ross in a 1995 billing survey. Also, 54.6% of the respondents (as compared with 40.3% in 1995) admitted that they had sometimes performed unnecessary tasks just to bump up their billable output.
Ross says that bill padding involves invoicing a client for work never performed — or exaggerating the amount of time spent on a matter—- while unnecessary work is that which “exceeds any marginal utility” to a client.

…the percentage of attorneys who admitted that they had double billed rose from 23% in 1996 to 34.7% in 2007. And only 51.8% regarded the practice as unethical in 2007, as compared with 64.7% in 1995.

I spent 20 years in the large general management consulting firm business. I’ve consulted to Big 4 firms for several years (that’s not double-counting). I’ve worked with a dozen or so law firms and internal law departments. I should not be surprised.

But I am. I don’t recall ever invoicing a client for work I didn’t do. I’m not saying I didn’t, but I don’t recall it. More importantly, in 20 years in consulting, I don’t recall ever hearing of anyone in that business charging for time not spent. I’m not saying they didn’t—but I don’t recall it.

As for accountants, it’s hard to get them to bill actual time, they’re in such a rush to discount.

I’m aware that lawyers are different. Many charge you for their secretary’s time drafting up the retainer agreement they hit you with when you walk in the door. Ridiculous hours get billed. I know that.

I also know some work is charged at a flat rate, which can occasionally cost less than the “standard cost” of that product. I know that.

But this—half the industry with its thumb on the scale? Half the lawyers in the country think it’s not unethical to charge the same hour to two clients?

I just do not get it. Am I hopelessly out of date? Do consultants and accountants do this too nowadays? Or is it really true that There’s Something About Lawyers?

The ethical principles I lived by still seem fine to me:

1. Envision it on the front page of the Times.
2. If the client saw this, would (s)he be okay with it?
3. If another client saw this, would they be okay with it?

When the night lights were on in consultants’ offices, consultants were working—but often not billing beyond the standard 8-hour day.  We called it the quality variance, and it went to the client. At law firms today, if the lights are on, are they charging time-and-a-half plus utilities?

I hate being naïve, but I clearly am. I just didn’t know this was going on at such scale.

How many of you did? And what do you think of it?

How do people in Abraham Lincoln’s profession end up this way? I know some fine, exceptional people who are lawyers; even a good firm or two. I’d like to think there is a reasonable explanation for the results of this survey—other than the obvious one screaming at us.

Is there a reasonable way to explain this? Or is it really just simply, flat-out, plain and simple, a case of a money-grubbing, anti-client, unprofessional, unethical industry?

And if the latter—how did this happen?

I’ve got a few theories, but I’d far rather hear yours. Please speak up.

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