Christopher Anderson, the former lawyer at Kirkland & Ellis and Chicago firm Neal Gerber & Eisenberg who admitted to years of overbilling clients, blamed his actions on his firms’ billing targets—or at least how he perceived them.
Anderson said that he would often boost his tally of reported work on days that he felt he came up short, billing a client for half an hour when he had only put in 18 minutes, for example.
Given the intense pressure at law firms to meet billable hour expectations, Anderson’s conduct, while inarguably improper, shouldn’t necessarily be shocking. According to legal consultancy Altman Weil’s most recent Law Firms in Transition survey, 48.8 percent of firms failed to meet their annual targets for billable hours in 2017. With nearly half of the market falling short, the pressure to bill more is undoubtedly real.
But experts on billing and legal ethics say that intentional acts of overbilling such as Anderson’s are still uncommon.
“I see a lot of overbilling going on, but a lot of times it’s inadvertent,” said John Conlon, a legal ethics expert who formerly chaired the Indiana State Bar Legal Ethics Committee. He pointed to the act of filing a document, a task courts have said is a clerical task that can’t be billed.
Adam Smith Esq. partner Janet Stanton, a legal industry consultant, reached the same conclusion. “I think it’s pretty rare that people consciously overbill,” she said.
“I choose to believe in any industry, that includes Law Land, that 99 percent of people are trying to do the right thing,” she added.
Perhaps some credit also should go to the legal education system. New York University School of Law professor Stephen Gillers gathers a number of these cases for his widely used casebook “Regulation of Lawyers: Problems of Law and Ethics.” He was blunt about the issue in an email. “Intentional overbilling a client is a form of theft,” he said. Gillers also used the word “rare” when describing the conduct, adding the caveat that “some of it surely goes undetected.”
Fear of the consequences may also ward off the behavior. Anderson has yet to be punished by the Illinois Attorney Regulation and Discipline Commission. But Gillers noted that sanctions can be severe: from lengthy suspension to disbarment.
The immediate benefit from such conduct is also marginal, particularly when a lawyer might be bringing in a sizable income even before overt manipulations. Neal Gerber has offered to refund clients $150,000 from the three-plus years he was an associate at the firm, representing 20 percent of his total billings.
But firms’ expectations are also part of the equation, considering that inflated hours won’t just yield immediate benefits such as bonus eligibility, but also advancement toward partnership and its far more lucrative awards. Indeed, Anderson successfully grabbed the brass ring of partnership before coming clean about his conduct soon afterward.
“This is a perennial problem over the last generation with American law firms: the intensification of competition not only with other firms but also with lawyers within a particular firm,” Gillers said. “And it’s only escalated. No one has been able to say, ‘Wait a minute, let’s get some sense of proportion here and recognize that there are values in life other than money.’”
That’s why Lawrence Fox, a visiting lecturer at Yale Law School and former managing partner at Drinker Biddle & Reath, suspects this happens “a lot more often than we hear,” given how central implicit or explicit quotas are to success in the profession.
“It started as a little pebble, and now it’s a dramatic mountain,” said Fox, who’s now also a partner at Schoeman Updike Kaufman & Gerber in New York City.
The Billable Hour
There’s one easy way for firms to ward off such behavior: eliminating the billable hour.
Even though Stanton doesn’t think that many lawyers are manipulating their tallies, she says such conduct is only one of a series of pitfalls of the billable hour model. When compensation is based on how much work one does, hoarding of clients by attorneys and inflated bills through overdeployment of talent may also follow.
“There’s a disconnect between the client’s interest and the firm’s interest,” she said.
A move toward alternative fee arrangements like flat fees or task-based billing would make inflating hour totals impossible. But most firms still hew to traditional billing models even if they profess interest in alternatives. And most clients are not pushing either.
“If the clients wanted alternative billing arrangements, they would get them, but the in-house counsel needs to rationalize the expense of legal services to the CFO,” Stanton said. “Hours is a quasi-metric. Whether it’s a metric of anything valuable is an open question.”
But Fox is skeptical of any “silver bullet,” noting that strict budgeting has flaws even if the idea of cost certainty is appealing to everyone. Sometimes things just take longer than expected.
“It’s an art form,” he said of practicing law, “not counting widgets or producing goods.”