Legal Professionals Discuss Cost Predictability, Billing
Salt Lake City—A group of 25 legal professionals gathered Wednesday morning at Holland and Hart to take part in Utah Business’ annual industry roundtable.
The legal profession—like most—is seeing a shifting landscape on the horizon as workforce challenges emerge, such as an overabundance of lawyers or Millennials entering the workforce and demanding more work-life balance. Longstanding issues, such as how to change general misunderstandings regarding the profession, the unfavorable public perception of lawyers, or the need for attorneys to help with more pro (or low) bono work, still remain.
Another topic discussed at the roundtable was the shift in how those in the profession have begun to bill their work. For the past several years, the question about the relevancy of billable hours has persisted.
“When I go to any other service provider, I generally expect to know what it’s going to cost to fix my problem before [I commit],” said Scott Young, office managing partner at Stoel Rives. “It seems to me that we’re unique in that oftentimes we’re presented with problems and we can’t tell our clients how much it’s going to cost to deal with it. [But] we’re no different than anybody else. Sometimes, especially in litigation or different things, it’s difficult to know how much it’s going to cost to fix the problem… But to me, it’s about working with your clients, understanding their problems, understanding their needs so you can craft a solution for them.”
Communicating to clients what they can expect—rather than potentially incurring resentment by keeping costs hidden until their problem has been solved—can lead to a much better, smoother relationship. Heather Farnsworth, co-owner of Match and Farnsworth, P.C., says that for her clients, often low-income individuals, she operates on a contingency schedule-fee with a built-in cap. The client always knows the absolute maximum they would have to pay, although it may never reach that amount. The cap can be lifted depending on whether their legal issues progress to various other stages, but generally, they know what to expect.
Furthermore, Farnsworth says that she contacts her client before incurring other expenses—recovering medical records, for instance—to see if they want to do it themselves or have the firm do it at a cost.
“Sometimes, if they go get their medical records instead of me getting the records, it will save them cost. So we do give them that opportunity,” said Farnsworth. “Some clients feel like it’s them doing our job, picking up the records, so of course we’ll get the records. Other clients would rather save that $50.”
According to Shantelle Argyle, executive director at Open Legal Services, bills should be based on prior experience of how long different cases have generally taken in the past.
“We use metrics to determine what our retainer amount should be. Instead of an arbitrary amount—every firm does $5,000 for a custody case—it’s based on the number of average hours, the average number that we do for a custody case, which is between 10-12 hours,” she said. “We get that amount up front. I literally yesterday wrote a 20 cent refund check. We write a lot of small refund checks, because we’ve been able to pinpoint the amount of money needed in the trust to perform the work, almost to the dollar.”
Argyle also said that her firm also enters the expenses they incur, such as process service, in real time, so that the client can know at any moment what remaining balance they have in their trust, or whether they will need to add to it.
The billable hour is still widely used, but Melissa Beutler, general counsel for Big-D Construction, says that the process is fair so long as firms can ensure to their own efficiency and predictability. “If you’re managing your case so you’re actively communicating with me and giving me predictability, and I know that you’re managing it efficiently, I’m not concerned about the hourly rate,” she said.
The idea of predictability in billing is the most important, because the fear of being overwhelmed by cost is causing many clients to shy away from litigation entirely, said Todd Leishman, executive committee mentor at Durham, Jones & Pinegar.
“The industry has got to do better or we’re going to lose a huge chunk of revenue, because people are going to go to the ultimate alternative dispute resolution mechanism, which is do it yourself,” said Leishman. “Don’t litigate it. Don’t arbitrate it. Don’t do anything with it—keep the lawyers out of it and just have your CFO negotiate it. If I were a litigator…I’d really want to focus on what we can do to make it more predictable and less costly, because nobody can really say what a piece of litigation is going to cost.”
Angelina Tsu, president of the Utah State Bar, moderated the roundtable. Read the full discussion in the June issue of Utah Business.