Economy Has Lawyers Rethinking ‘Billable Hours’


The difficult economic times are promptimg some law firms to reconsider what the New York Times calls “the most basic yardstick of the legal business – the billable hour.” Clients have complained for years that the practice of billing for each hour worked can encourage law firms to prolong a client's problem rather than solve it. “This is the time to get rid of the billable hour,” said Evan R. Chesler, presiding partner at Cravath, Swaine & Moore in New York, one of a number of large firms whose most senior lawyers bill more than $800 an hour. Big law firms are worried about their budgets. Deals are drying up, and only the bankruptcy business is thriving. Two top firms, Heller Ehrman and Thelen, have collapsed in recent months. Others have laid off lawyers and staff. So cost-conscious clients may now be able to sway long reluctant partners to accept alternatives.

The evidence of a shift away from billable hours, a system widely used since the 1960s, is anecdotal. But partners at a half-dozen other big bellwether firms and lawyers at corporations, who sometimes engage outside counsel, say they are more often seeing different pay arrangements. Chesler said that instead of paying for hours worked, more clients are paying Cravath flat fees for handling transactions and success fees for positive outcomes, as well as payments for meeting other benchmarks.

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