A Client´s Perspective - The Billable Hour

Jake Paber looked at the bill his company had received from their law firm and swore to himself. He pushed the intercom button on his phone.

"Marie, call our law firm and set up a meeting with John Clarkson and Irving Schlott. I want it as soon as possible. Tell them that I don’t care if it has to be on a Saturday or Sunday. We need to talk."

The following Saturday morning the three men gathered in Jake’s office with the two lawyers seated in front of Jake’s desk.

"Thanks for coming over on the short notice", said Jake. "Help yourself to some coffee." Jake motioned to a pot and cups sitting on a credenza. "I asked you guys over as the senior people at your firm who are involved with my company’s legal representation. I want to deal with this quickly and then we can all do something more enjoyable with the rest of the weekend."

"We have known each other for a long time so I am going to speak frankly. The immediate reason for my meeting request is this invoice for services from your firm that was sent up for my review is testing my sense of humor."

Jake laid copies of the statement on the desk in front of each of the two men.

"Although", he continued, "this bill is just the latest in an on-going series of financial assaults. All you guys need at that firm are masks and guns. Then you could just take our money and save us the time and expense of the paperwork and we could have the psychic satisfaction of calling the cops and, at least, hoping we would see some of our dough again."

Erwin and John both started to speak when Jake raised his hand to stop them.

"Don’t start arguing and rationalizing before we even get started. I said the comments are going to be frank, but I realize the good you and your firm has done for us over the years. If you hadn’t, I wouldn’t be having this meeting. We would have voted with our feet and I would be spending this time interviewing other firms."

"Look at the invoice in front of you. Notice the third item on the first page."

John put on a pair of glasses and both men picked up the papers in front of them.

"It says that the one of the gaggle of your ever-present associates took 45 minutes to review a letter we asked you guys to look at. I had the letter pulled so I could get a sense of why it took so long. All it said was that the other side in the Sunam deal wanted to add a sentence to a clause in the agreement. Now I have seen enough of these agreements over the years to know that the addition they want is no big deal. In fact I would have expected that they would request that language if I was handling the deal myself." Jake placed his hands on the desk and leaned out of his chair across the desk. His voice grew louder. "What the hell was your guy doing for 45 minutes, checking each word in the dictionary?"

"Jake," said Irving. "Take it easy. I will go back and look at the letter. If there needs to be a time adjustment, we will make it and reduce the bill."

John nodded his concurrence.

"You guys aren’t getting it," said Jake, "I could make the same comment about 15 more items on this bill and as many or more for any previous bill. Neither my controller nor I should have to go over these things looking at and researching all the entries that don’t appear to make sense. We have to spend more time reviewing and analyzing your bills then you guys are claiming that you spent on our files. Getting a bill from your firm shouldn’t kick off a treasure hunt with a prize of not getting robbed."

John motioned Jake back to his chair. "Nobody is trying to rob you or the company Jake, just the opposite. These are young associates without a lot of experience. They are trying to be careful so you and the company aren’t taken advantage of. It just takes them longer to make sure no mistakes are made, but their billing rates are lower, in part, to compensate for their slowness."

Jake waived off the comment. "You sound like the ads on television trying to convince me that I’m saving money if I buy something that’s marked down. If we look to get bargains like that we’ll be scrounging leftovers out of garbage cans for the company cafeteria. When something is worth next to nothing, getting a discount from Wall Street rates is no benefit."

"And that brings me to my next point. Look at items 6 through 15 on pages 2 and 3," said Jake turning the pages and pointing to the offending entries. "All these relate to the apartment lease for visiting executives. Your firm managed to rack up more than three quarters of a year’s rent in reviewing a standard apartment lease where we didn’t have diddly in the way of leverage to get much of anything changed. And not all of this is associate time."

Irving cut in. "Jake, are you accusing us of not putting in the time stated on the bill?

"Your team may have spent the time on it, but why", said Jake? There is no logic here. This lease just isn’t worth these bills. And this happens all too often. Somebody has to apply some business sense to jobs. Benefits have to be weighed against costs. Too often partners or associates seem to get caught up in how clever they are in playing the game and pay no attention to the costs they are generating. Not every file is worth taking to the U.S. Supreme Court, no matter how neat it is from a lawyer’s perspective. You guys are honing your skills by using our bank account as the whetstone. With this approach you will drive us into bankruptcy and then charge us to get us through that process."

"Do you want us to be constantly calling you to find out if what we intend on doing is business appropriate," said John. "That doesn’t strike me as a very efficient use of your time or our time."

"No," said Jake. "There’s a better way. It will solve my problems and it should help you as well. Your firm can start acting like the business it is. When we start anything new give us an estimate on the total cost. The estimate won’t be binding, but we’ll expect that it will hold unless something totally unexpected and substantial happens. When something like that does happen we want to know about it right away including the impact it will have on the costs. When we know what it costs from the get-go, we can budget for it as well as make the decision to keep it with you or find some other method of dealing with the situation."

"I don’t know, Jake," said Irving. "Lawyers have been billing on an hourly basis for a long time. And there are reasons for it. One big one is the number of variables that can happen. You know when you start litigation, for example, it’s impossible to tell how many court appearances will be required or how many depositions or interrogatories will have to be dealt with. Too much depends on the other side and how aggressive they are to be able to make those kinds of estimates. We’re lawyers not economists."

"Not good enough Irving," said Jake. If I make any other major purchase beside legal I can get an estimate. It doesn’t matter if I am building a house, getting a heart transplant, having an audit performed whatever. In every case I expect an estimate. If I signed up to have anything major done without having a good idea of what it would cost you guys would be the first ones to tell me I’m crazy; that I’m just begging to be taken."

And everything major has unknown contingencies that can effect the cost. For god’s sake if I’m having a heart operation and something goes wrong I could die. So far your people haven’t killed me yet but I sense you’re building up to a financial assassination. Just give us estimates and give the assumptions on which they’re based. If something big happens that isn’t covered in the assumptions you have a basis for coming back and discussing revising the estimate. All business is done that way and you guys and your firm are running a business."

"As for being lawyers and not economists, do you think that every businessman out there has got Alan Greenspan on the payroll? They make estimates based on past experience and expertise in their fields. You guys aren’t about to tell me you aren’t experts in your fields and that firm of yours has been around plenty long to have a ton of past experience."

"You are always telling me that your firm views itself as a partner to my company. Time to put words into action. If making estimates puts a little risk into the relationship that’s part of business. Welcome to my world:

"Even considering it from your side, doing business on an up-front estimate basis is a good thing. You can keep sending over all the associates you want. Let them do all the research they feel they need. Let them kill trees by the thousands with all the memos they’ll write. I won’t complain because I won’t hear a meter ticking in the background.

John and Irving stood. "We will think about it Jake," said Irving. "You make some good points, but it would take some serious adjusting on the firm’s part. We need to run it by our partners."

"You do that," said Jake. "Keep in mind that my business isn’t getting any easier either and I need the ability to plan and budget that this would provide. Competition is forcing changes for you and me. Let me know by the end of next week if we can start putting things on a more business like basis. Enjoy the rest of your weekend."