Hourly Billing is over-utilized by Too Many Lawyers in Oklahoma

I have never really enjoyed hourly billing, although I have used it in the past, primarily in civil cases where a contingency fee wasn’t possible, and in domestic relations cases.

However, we can all agree that as a whole, hourly billing rewards the lawyer for inefficiency, for delay, and puts the client and the lawyer at odds. Many lawyers believe billing solely based on accrued hours is the only way possible to charge a client in litigation; they say litigation is unpredictable and that anything can happen. For purposes of this article, let’s accept that this sentiment is largely true — that litigation is unpredictable. Nevertheless, the billable hour is not the only solution (or even the optimal solution).  And I will even go so far as to dispel this lawyer-perpetrated myth that litigation is “oh so unpredictable.”  Here’s a hint: if you handle lawsuits all the time, then you generally know (or should know) what they entail.

Let’s be honest: Hourly billing does not build relationships. Of primary concern to myself (and should be to most lawyers) is building relationships with my clients. Because if my clients trust me, then they will seek my advice when they need it and that legal counseling will ultimately benefit them in both their business and personal life. And when the client receives a benefit, they see the value in legal counseling. It’s a two way street that benefits both parties.

Better alternatives to Hourly Billing allow the Client to spread the Risk with the Lawyer

If I am “always on the clock,” will my clients really see me as trusted advisor? Will they really call on me when they need to (or should), or will they immediately dive into a cost-versus-benefit analysis, having to decide whether their inquiry is worth the cost of the phone call? The thought that an existing client or potential client must resort to this sort of evaluation is worrisome… but it is the reality! And that is a shame.

I prefer  two other forms of billing:

  • Contingency Fees, and
  • Flat/Fixed Fees.

While both of these forms of billing are fair, however, I primarily utilize the contingency fee, as discussed below.

Contingency fees: the purest, most honest, and best form of lawyer billing in Oklahoma

A contingency fee means that the lawyer’s fee is contingent upon reaching some result; the lawyer only gets paid if he’s able to secure a settlement or a verdict or some other desired outcome.

In practice, the contingency fee is used primarily when the object is to achieve a certain dollar figure in a lawsuit, and the lawyer takes a percentage of that money that is obtained, whether at trial or by settlement. In Oklahoma, contingency fees are primarily utilized by civil plaintiff’s lawyers who handles cases involving injuries and insurance disputes. However, I see no reason why lawyers in other fields — such as commercial transactions, business disputes, and insurance defense — couldn’t utilize contingency fees, as well.

While the dollar amount of the fee would not be a percentage of the amount recovered, various amounts of fees could be contingent upon certain outcomes, that could be defined by the parties. The options are really endless.

But why am I harping on about contingency fees? What is so great?

Hourly Billing puts 100% of the risk on the Client, while Contingency Fees evenly disperse that risk among Lawyer and Client

A contingency fee arrangement spreads the client’s risk with the lawyer, thereby creating much better economic incentives to ensure the best outcome for the client. Why? Because lawyer’s motivations to obtain the best outcome becomes equal with the clients’ same desire. It places the lawyer and client side by side, since the lawyer will not get paid for his work unless he obtains the outcome desired by the client. I have actually come to believe that because of this intrinsic risk sharing, the contingency fee is the greatest type of fee ever invented for lawyers in Oklahoma.

The only problem with contingency fees is that they are not applicable to all types of cases. In a case where the client is seeking an award of money, then a contingency fee may work (and may be the best option for both the client and the lawyer). However, in a case where the client desires an outcome that isn’t an award of money, such as preventing an eviction or breaking a lease obligation, then the lawyer must have an alternative means of compensation. Also, legal ethics rules explicitly forbid contingency fees in both criminal and divorce cases. In those instances, I resort to fixed, flat fees instead of hourly billing.

Flat Fees: Preferred by Most Clients over Hourly Fees

In a fixed fee arrangement, the lawyer charges a flat fee for the entire matter, start to finish, or for various stages of a case and charge for each stage. In the latter arrangement, I recommend breaking the case up into anticipated stages and charging a flat fee for each. That way, if the client’s goal is achieved early in the case, then the client saves money by not paying for additional legal work that turned out to be unnecessary.

While litigation can be unpredictable, there are many aspects that can be anticipated, especially if the lawyer has had experience with similar cases dealing with similar facts and similar objectives. Can the lawyer always estimate perfectly? Nope. So there will be some risk involved for the lawyer. That’s just more pressure on the lawyer to get the job done in the most expedient fashion possible so the client can move on with their life. Besides, why should the client bear all of the risk, anyway? Yes, it’s their legal problem, but aren’t we supposed to be the experts that know how to handle these situations?

Are Hourly Fees ever a preferable option when hiring a lawyer in Oklahoma?

That’s not to say there’s never a place in the practice of law for billable hours. Sometimes courts actually require them (or at least an accounting of billable hours) in order to award fees.  But billable hours are never the only basis in awarding fees in lawsuits; in fact, Oklahoma case law explicitly says hours times rate is not the only factor, and judges will always want to know other material details before awarding fees.

Then there’s those clients (particularly, sophisticated and experienced business clients) that actually prefer the billable hour. At least that’s what some lawyers say. Maybe they just tolerate it.

I hate the billable hour. I don’t believe in it and I don’t use it anymore.