Comments on “Trust Me” Capitalism

I received several comments to my post on “Trust Me Capitalism.” The first comment agreed that the hourly billing model has problems but asked for me to post some alternatives. I responded with two different approaches, first is to provide adequate documentation to exactly what the lawyer contemplates doing in order to achieve the clients goals on the front end. Second, is to reserve part of a flat fee until the case is resolved, with the final portion of the fee to be negotiated between the lawyer and the client based on results. The main point is to provide incentives for the lawyer to actually achieve the goals of the client as quickly and cost efficiently as possible. This is the critical missing element with hourly billing.

I received a second comment which essentially said that any fee structure requires a “Trust Me” component. In this regard the commoner comment states:

“True, in a billable hour system you are asking the client to trust that you won’t overbill or overwork a file. But how is that different from a client trusting that you won’t place an overvalue on your service if offered on an alternative billing arrangement. Couldn’t you pad the premium like many associates pad their hours? After all, how is a non-lawyer client really going to know?”

I have to say that I don’t agree with the comment that all billing systems require an element of pure trust by the client in the lawyer. All billable systems certainly don’t have the same elements and incentives. The main point which readers should take away from this discussion is that there is nothing that will protect a client from a crook attorney who is simply out to defraud a client. However, if you are a true capitalist and believe in incentives, a fee structure can be devised which provides all the proper incentives between the lawyer and the client. For instance, a pure hourly billing system has no incentives to resolve a case. A flat fee system with a kicker on the back end for achieving results has a great incentive to resolve the case quickly and to achieve results for the client. Further, there is a huge difference between a standard hourly retainer agreement and a retainer agreement which is based on exacting detail concerning the clients goals and how those goals will be achieved by the lawyer on the ground. Documenting goals and deliverables can hardly be equated with the open ended hourly fee billing retainer which simply states that a lawyer will charge a client for every fraction of an hour that they spend thinking about the clients case.

         I also want to put a plug in for setting budgets at the beginning of a case. Most lawyers don’t really discuss budgets with their clients. I always discuss budgets with my clients and try to work within those budgets. The fallacy that you have to leave no stone unturned in order to provide aggressive representation is simply an excuse to bill more. Well informed clients can make intelligent choices about which issues they are going to pursue and which issues they are going to leave on the sidelines. Client can make intelligent decisions about which depositions they are going to take, and which witnesses they will simply attempt to get written statement from. Lawyers need to put their money where their mouth is and provide clients much more detail concerning both costs and results.