The death of the billable hour and speculations on the limits of legal change

Nancy Rapoport’s recent post ponders the viability of the “death of the billable hour.” There is also a recent NY Times article on changing attitudes toward the billable hour at Big Law firms. Most of the discussion focuses on the lifestyles of lawyers, but what are the long term legal policy implications of such a potentially fundamental shift in fee mechanisms? Several decades ago, fee mechanisms were an integral part of Marc Galanter’s classic article, “Why the Haves Come Out Ahead: Speculations on the Limits of Legal Change.” (9 Law & Society Review 95 (1974)). One of his points was that corporations and insurance companies used Big Law lawyers, whose profitability incentives typically involved putting as many hours into a case as the client would bear. On the flip side of the litigation, single-shot ‘have not’ litigants were typically represented by plaintiff lawyers (working on a contingency arrangement) whose profitability incentives typically involved putting as few hours as possible on a case to attain desired settlement or, in the rare situation, trial victory. This situation and other concerns, Galanter argued, led to long term policy implications favoring “have” litigants. Certainly, other factors mattered – such as the ability to play long term litigation strategies; however, the billing structure may be important.

If Big Law has agreed to a flat fee arrangement in a typical case, might the likelihood of a “Have” winning be diminished? Clearly, Big Law has less incentives to put in hours on a single case – the inability to move on to a new case with a new flat fee is the relevant opportunity cost. If, in fact, a new pay structure for corporate clients means fewer hours per case, does this mean “better” representation and a higher likelihood of winning? And, if so, what are the long term legal implications of this phenomenon?

I don’t pretend to have all of this sorted out, but I think that the specter of the “death of the billable hour” raises some interesting policy questions.