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| Chapter 1 - The Necessity for Automating the Practice of Law | Changing Economies in the Practice of Law
The process of lawyering is providing the best representation at a fair fee. Until the last fifteen years, the manual tools we have used in practicing law have changed very little in fourteen centuries. In that short period of time, technology has changed the rules of practicing law. Computers and technology can free us from the drudgery of physically handling and organizing documents and physically searching for cases through law books. Time is saved. This forces us to reexamine the economics of the practice of law. The Death of the Billable Hour?  Abraham Lincoln stated that our time and advice are our stock in trade. These two elements - time and advice - form the foundation for the practice of law. We advise our clients on how to conduct their personal and business affairs. This advice must be based upon the best and latest reflections of the state of the law as applied to our client’s circumstances. Time is our commodity. Generally, we provide our time for money, usually by the hour.
However, there has been an obvious clash between implementing technology in the law firm, which produces results in less time than those reached manually. Most of this clash surrounds the controversy in “billing by the hour.” Clients complain that there is a lack of predictability of what the total cost will be when hourly billing is used, the lack of any risk sharing between lawyer and client when hours spent is the sole criteria in setting fees and a lack of incentive for efficiently handling a case.
The billable hour encourages a firm to hire a lot of staff and for the staff to work a lot of hours. If one can show that a computer can do in seconds what an associate attorney can do in 10 hours at $150 per hour, what course will the firm follow? This is especially true when “time-saving” hardware and software costs $50,000 to install.
Shortsighted attorneys may argue that lawyers should spend more time doing things manually because there will be more billable time. The nature of such a system discourages incentive for efficiency and early resolution of your client’s case if billable hours are the sole measure of the value of your services. In the long run, the legal work product should be judged by its value to the client. The rewards for a firm that lowers billing via technology use are obtaining more business from the client. | Price of services is a major consideration by corporate counsel in selecting outside counsel. In a technology roundtable discussion I attended in 1991, the vice-president of a major insurance company asked an attorney from one of their outside counsel law firms whether they would consider a flat fee for a breach of agency lawsuit, instead of an hourly billing rate. The vice-president said that it costs his company, on the average, $58,000 in legal fees for each similar case. He asked the attorney, “If I give you $45,000 for each case with no questions of how the money is spent, would you accept it? If it cost you $25,000 because of the application of computers, CD?ROM, imaging, etc., to handle the case, then we both win?win. If it cost you $50,000, then not only is part of the risk shared, but the value of services using traditional methods of “lawyering” may not reflect your implementation of the advancements of technology.” There was no response to the question | Law firms are going to have to deal with the issue of how clients value the legal services provided by the firm. Clients are increasingly looking at the perception of value for the services provided rather than the number of hours invested in providing the service. As Richard C. Reed, an expert in value based billing, stated: “In a price-sensitive economy, lawyers compete not only on the basis of price, but also on the basis of quality of product. Indeed, price or quality of product, or both, serves to differentiate one lawyer or law firm from another.”
It is not uncommon for corporate clients to suggest and even mandate that mediation, arbitration, and “private” courts be used to resolve a dispute. They are pushing hard to obtain the highest value for their litigation dollar. Some corporate clients are beginning to pay a flat fee for a portion of services requested and a “contingency fee”, depending on the outcome of the litigation. The ABA and in-house counsel passed standards for a task based billing system known as the Uniform Task Based Management System-Litigation. | The Wall Street Journal of January 13, l992 reported that a major national law firm had been making agreements with their clients to handle their cases for fixed fees . . . “Law firms have traditionally billed on an hourly basis but the system has come under increasing attack by clients.” Business Week, on August 17, 1992, suggested, “law firms that don’t adapt to a clockless era may find their time has passed.” | This uniform task based billing system sets fees based upon the task performed, as opposed to the billable hour. These types of standards underline the importance of knowing your costs, no matter which type of billing system is used. Under these standards, the technologically sophisticated will benefit.
One solution to the billable hour dilemma is to use value based or fixed fee billing. Fees under this system should measure the value of services as perceived by the clients. For practical approaches to this problem, I would recommend two books by Richard C. Reed - WIN-WIN BILLING STRATEGIES and BEYOND THE BILLABLE HOUR. Increase Your Firm’s Profits by using Technology
to Leverage Your Daily Work Product
Utilizing technology to deliver high quality work product while improving, rather than diminishing, a firm’s economic health, is a challenge. If a law firm invests in technology and uses it to full advantage, but remains in the same billing mode, then the more efficient the firm becomes, the poorer the firm becomes.
Not only is it very appropriate to include the cost of technology in determining billing rates where hourly billing is the method of pricing the legal services, but firms should also pursue alternative pricing systems to improve the bottom line. . . The fixed fee is one of the most obvious alternatives, and a very effective way for firms to enjoy premiums (not discounts) when pricing legal services. - Richard Turnbow, Executive Director, Annis & Mitchell. | Both books are available through the American Bar Association (www.abanet.org) Without a doubt, we are transitioning through difficult times in trying to implement law firm technology in a sometimes-resistant environment, while at the same time maintaining the financial health of our organization. This transition requires a new way of thinking as we strive to provide advice to our clients while fairly measuring our time and the technology infrastructure cost.
Price is of utmost importance to your clients. The price to our clients is reflected in the amount of time that we spend on their case. Technology will enable us to spend less time on a case and thus lower billable hours to our client. It is not uncommon for the cost of legal services to be carefully reviewed by our clients. Corporate law departments will continue to scrutinize the services, fees, and use of technology by outside law firms to ensure lower costs. | On Siskind’s web site he offers a mix of useful and educational information about immigration and his firm, plus immigration and naturalization forms for downloading. They have grown nationally and now have many offices throughout the United States. “The Internet has brought hundreds and hundreds of clients, and revenue in the last four years that goes into the seven figures.” Gregory S. Siskind, May, 1998 ABA Journal; Co-author - The Lawyer’s Guide to Marketing on the Internet, published by the ABA Law Practice Management Section. |
In the National Law Journal of April 4, 1994, the lead story was about one of the top trial attorneys in the country "Fred H. Bartlett Jr. ? ex?Army Ranger, titan?trial lawyer ? a man with a mission. At 61, he and two dozen colleagues who launched a new firm last year want to do away with hourly billing and, as a result, are inciting revolution in the legal profession." Managing partner Sidney Herman says [that] they do not want to make money on the hourly billing method of doing business. Instead, they will earn their profits by" capitalizing on computer technology and partner experience . . . .” Mr. Bartlett says "The law business ought to be the best way in the world to make a living . . . instead it is the most inefficient industry in the world." The hourly billing arrangement is incentive not to be efficient. Besides the cutting edge approach to alternative billing arrangements, the firm has invested heavily into computer technology. "At a cost of about $60,000 per lawyer, it has the latest computer hardware, software, and office equipment. Each attorney can network with colleagues and clients, process documents, retrieve internal precedents and search depositions or databases with a high?powered portable laptop computer from any location." Mr. Bartlett used to think that trial lawyers who used the technology were "sissies". Now both he and the managing partners are both staunch supporters of the computer productivity that, both admit, has improved their work product. |
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Ch.1 - Automating the Practice 
