Billable Hours

For months, we talked to counsel about our prospects in the case. He was sanguine:

“There’s nothing to worry about here. The plaintiff put a huge number in its prayer for relief, but you can’t possibly lose that much. Plaintiff’s liability case is thin, and the damages are inflated. You’ll probably win. If you lose, you’d lose no more than $1 million on an average day. On the worst day known to man, you can’t even theoretically lose more than $5 million. I wouldn’t offer more than a couple hundred grand to settle.”

A few months before trial, we ask counsel to put some skin in the game: “It’ll be expensive to try this case, and you feel good about our prospects. We’d like you to propose an alternative fee agreement that aligns your interests with ours. We’d like to pay you less than your ordinary hourly rates in the months leading up to trial, but we’ll give you a success fee if we win. Please think about it, and let us know if you have any ideas.”

A couple of weeks pass, as counsel discusses the case with his firm’s “senior management.” When the alternative fee proposal arrives, the goalposts have miraculously moved! In the course of just two uneventful weeks, our prospects for success have changed entirely!

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A full house for last week’s in-house counsel panel at Betterment.

Last week, Betterment and Above the Law hosted a great panel discussion about working as an in-house lawyer at a relatively young company. The event, hosted at Betterment’s spacious and airy offices in New York’s Flatiron neighborhood, drew a standing-room-only crowd of around 200 people.

How can you get a job as an in-house lawyer for a startup? And what’s life like once you’re there?

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It used to be that the world of corporate transactions was the sole province of Biglaw. After all, handling complex matters like mergers and acquisitions required manpower and overhead — and lots of it. Well-paid junior associates were an integral part of the process, and the costs of doing business were driven by corporate clients’ expectations of grandiose reception areas and white-glove treatment as proof of both commitment and excellence.

These days, however, technology has leveled the playing field, making it possible for boutique law firms to compete with Biglaw in ways never before possible. Many of these boutique firms, comprised of Biglaw lawyers seeking to practice law on their own terms, have sprung up in the wake of large-firm mergers and dissolutions. Creative thinking and the innovative use of technology have been the keys to their success, allowing these boutiques to reduce overhead costs and run their practices more effectively and efficiently, saving their clients time and money.

Don’t believe me? Well, look no further than Bailey Duquette, a Manhattan-based boutique law firm….

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Ah, the billable hour. It is the bane of many attorneys’ existence, and almost anyone who has spent time within a law firm has their own story about… ethical lapses surrounding billing. Maybe it’s something seemingly small or benign like always rounding up when tracking working time or billing through bathroom breaks (or Farmville breaks) because, hey, your brain was still thinking about the issue. Or maybe it’s billing the exact number of hours a partner believes a task should take, no matter how quickly you are actually able to charge through it.

The perverse incentives created by billing by the hour (especially when the attorneys involved have billable requirements for either their job security or their expected bonus) for legal work has been well tread, but sometimes a document review attorney has a really clever excuse….

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During a time when demand for legal services is flat, average revenue per lawyer is down, and managing partners’ overall confidence in the market is slipping, the proper keeping of time for all of those billable hours generated by toiling associates has never been more important. For better or worse, law firms are desperately trying to incentivize associates to submit their hours on time.

As we mentioned way back in 2010, “Time keeping is more accurate when you do it every day (as opposed to trying to recreate your days at the end of the week or month). Firms are struggling to collect from their clients. And, for what it’s worth, billing hours is part of the job for attorneys.”

Another part of an attorney’s job is the ability to follow rules. One Biglaw firm just rolled out a new time entry policy, and if its associates don’t follow these rules, they can expect some pretty negative consequences when bonus season comes around…

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Exploding courthouse toilet = products liability attorney’s dream.

* Funny that SCOTUS just struck down a law imposing a 35-foot buffer zone around abortion clinics, yet it heavily enforces its own buffer zone. Some call it “supreme irony.” [WSJ Law Blog]

* Despite the slacking demand for legal services — down by 8.8 percent in terms of billable hours — members of the Am Law 100 still managed to keep their heads above water. [Am Law Daily]

* Lorin Reisner, chief of the criminal division of S.D.N.Y.’s USAO and Preet Bharara’s right-hand man on Wall Street convictions, is leaving for greener pastures at Paul Weiss. Congrats! [Reuters]

* New York State’s highest court has rejected New York City’s ban on gigantic drinks that was previously proposed by Mayor Michael Bloomberg. Go on, have yourself a nice Quadruple Big Gulp. [Bloomberg]

* When the long arm of the law flushes the toilet, it sometimes explodes, raining down jagged shards of justice. But on a more serious note, we’re happy no one was hurt at this courthouse. [Billings Gazette]

Most lawyers do not cheat.

But a few do, and they think they’re being clever.

A cheating contract lawyer reads a novel all day, codes a couple hundred documents as “non-responsive” at ten to five, and then heads home.

Cheating junior associates record a few hours that they didn’t actually work. They assuage their guilt: “I’m more efficient than other people are, so I did this more quickly than the average guy. It’s not cheating if I write down how long it should really take to do this job.” And then the cheating associates mysteriously hit their billable-hour targets for the year.

Cheating junior partners are different. Short on work but desperate to bill time, these junior partners hoard work that they should naturally pass down to associates: “I have some free time, and I’m a very talented guy. I’ll write the brief more quickly than an associate would, anyway. I’ll just do it myself, and then I won’t have to worry about being held out of the equity ranks because I haven’t worked hard enough this year.”

But how do senior partners cheat?

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If you plan to work in Biglaw, you know it’s likely you’ll be able to command a very high hourly rate. Just how high we’re talking, though, depends on the area of law in which you choose to practice.

We already knew that litigators handling bet-the-company cases collected nice fees — in some instances up to $1,500 per hour — but there are other practice groups that rake in crazy cash, too.

Keep reading to find out where you’ll be able to make the most bank in Biglaw…

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Image via The Billable Hour Co. If you’d like one of these for your own, check them out here.

I was instructed to take voluminous fax documents from boards, count the pages, estimate how long it would take him to read had he done so, and charge a pro-rata share of $375 an hour, which greatly increased his revenue. He billed my time at $150 an hour while he paid me only $15 an hour. This and other shenanigans artificially pumped up his billing from $150,000 to well over $395,000 for one [homeowner association] case, made up of nonexistent time he claimed he spent researching the client’s case.

– Anonymous law clerk who wrote the Los Angeles Times to ask if he should report his boss’s shady billing practices. The boss also fittingly makes a point of billing clients for the time they exhaust complaining to him about his bills.

This is not a column about getting bloated Biglaw partners into running shape, as much as many of them need the exercise. Instead, let’s focus on another 10K milestone, one that Biglaw associates chase after, spurred on by a number of incentives, ranging from a simple desire to keep their hard-earned jobs to the burning ambition necessary to even aim for partnership: reaching 10,000 billable hours.

In the popular conception, 10,000 hours of practice at any skill is a critical hurdle to achieving mastery. It does not work that way for lawyers, especially those that start out in Biglaw.

As anyone who has started their career in Biglaw knows, the early years are more about survival than anything else. The most critical skill is adaptability, both in terms of being able to handle the lifestyle stresses presented by the Biglaw junior associate experience, and recognizing just how little law school has prepared one for Biglaw legal practice. In fact, I would say that for purposes of tracking personal progress towards the 10K mark, the first year of Biglaw practice (and maybe two or three depending on whether one is in a firm that “rotates” their juniors to expose them to different practices areas) should be thrown out. Consider that time as the foundation that allows for future productive lawyering if it makes you feel better. And first-years would do well to disabuse themselves of the notion that they will be “contributing” or doing “quality” work. Obviously they need to do their best, and perform up to Biglaw standards, but the hard truth is that the first-year in Biglaw is there to force high-flying and well-credentialed aspiring lawyers to humbly confront two uncomfortable questions. First, do you even want to be doing this? And second, even if you want to, are you good enough?

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