Big Law bankruptcy attorneys may have finally killed their golden goose.

We'll never know if less hubris and more thought on the part of those lawyers might have prevented the U.S. Trustee from releasing the new compensation guidelines that surely have prominent members of that bar squirming. Those guidelines earn my latest “Commendable Conduct Award.” Starting November 1, we'll see how many judges have the courage to apply them.

A bit of restraint in the race to the $1,000-an-hour billing rates that help firms maximize short-term profits might have benefited practitioners in the long run. Likewise, more discretion in responding to media inquiries about the lucrative world of bankruptcy law might have been wiser than Weil, Gotshal & Manges partner Harvey Miller's stunning comment to The Wall Street Journal in 2011: "The underlying principle is, if you can get it, get it."

Flying Under the Radar

The bankruptcy practice at big firms is unique because there's no real client putting the usual counter-pressure on attorneys seeking to enhance their personal wealth. It's the billable hour regime at its worst.

Outside bankruptcy, corporate clients everywhere are pushing back against big firms' attempts to increase hourly rates, refusing to pay for high-priced first-year associates, demanding detailed budgets, scrutinizing attorneys' activities, and generally seeking greater efficiency in the way their outside legal services are delivered. Bankruptcy attorneys are mostly free of such accountability. They simply set their rates, decide what tasks to perform, and assign manpower as they see fit.

Hello and Good-bye

Unlike corporate clients who dangle the prospect of long-term relationships and future business to encourage outside attorneys to be more efficient, bankruptcy practitioners have a series of one-shot engagements. After all, when the current proceeding is over, their bankruptcy "client" of the moment disappears, never to return.

Bankruptcy petitions are also vehicles for law firm oligopolies to share pricing information. When most senior big-firm bankruptcy partners request $1,000 an hour, it becomes the reasonable and customary rate. But even more remarkable are the $400-an-hour-and-up rates that they can often get for junior associates—the same lawyers who add so little value that actual clients refuse to pay for them at all.

Theoretical Oversight

The U.S. Trustee reviews fee petitions. But to date, those efforts have amounted to quibbling over obviously suspect expenses, such as $500 hotel rooms when cheaper accommodations were available or limo rides when taxis were a reasonable alternative.

Likewise, attorneys representing parties with competing interests in a bankrupt company's estate—creditors, for example—can object to the fees of other attorneys in the proceeding. But none has any incentive to rock the lucrative hourly-rate boat in which they all sit. Bankruptcy judges have the final word on attorney fees petitions, and they routinely rubber-stamp them.

Now It's Becoming Real

When the U.S. Trustee first proposed the new guidelines, big-firm bankruptcy lawyers throughout the country united in opposition. The most strident objections were to the idea that firms should reveal hourly rates for comparable nonbankruptcy attorneys working for real clients.

Were firms worried about providing data that would allow the U.S. Trustee and supervising courts to compare hourly rates sought in bankruptcy with those resulting from a market that is at least somewhat more competitive? Soon, we'll find out.

The new forms accompanying the guidelines [PDF] require, among other things, that firms reveal the "blended hourly rates" of their personnel in 10 different categories, ranging from equity partners to paralegals. In addition to the blended rates sought in the fee petition, firms also must disclose their firmwide (or, in some cases, officewide) blended rates for each category.

A Step on the Road to Transparency

The new guidelines aren't perfect, and attorneys will manipulate them. Budgets are optional. Hourly "step rate" increases are automatic as attorneys gain seniority. Attorney categories are too broad, with a single category for all equity partners and with associates grouped into categories covering three years. An especially large loophole allows firms to report either the "billed" or "collected" comparable hourly rate. (Real clients request discounts from standard hourly rates, and they often get them.)

Even so, the U.S. Trustee deserves credit for transforming one dark corner of the profession from opaque to translucent. Free market devotees—of which Big Law has many—should embrace the changes. So far, big-firm partners have resisted them vehemently.

The governing principle for too much of the large law firm world has become "if you can get it, get it." Perhaps many of those espousing that view are about to "get it" in a much different way than they have in the past.

Steven J. Harper is an adjunct professor at Northwestern University and author of The Lawyer Bubble: A Profession in Crisis (Basic Books, April 2013), and other books. He retired as a partner at Kirkland & Ellis in 2008, after 30 years in private practice. His blog about the legal profession, The Belly of the Beast, can be found at http://thebellyofthebeast.wordpress.com/. A version of the column above was first published on The Belly of the Beast.