WSJ Law Blog reports on Professor William Ross's recent survey of 251 attorneys, which indicates that most attorneys are aware of other attorneys who pad hours. I don't disagree with this conclusion, but I think the problems of bill-padding and double-billing likely pales in comparison to (1) the expense incurred by parties because of lawyers making overconfident recommendations to embark on misguided litigation where those recommendations happen to coincide with the interest of the attorney to bill more hours; and (2) the excessive billing caused by law-firm technological and human-resources inefficiencies that regularly result in the wheel being reinvented at client expense. A disturbing number of the hours I billed as an attorney came about because my firm got involved in a case where a lawyer with a creative theory of business-competition-through-litigation initiated a suit that ultimately cost his or her client more money in the long run.
Stephanie Mencimer (whose blog post headline seems to misunderstand the fact that the study did not involve self-reporting) sneers that this result should be trumpeted as loudly as well-publicized problems of plaintiffs' attorneys stealing from their clients (e.g., Kentucky fen-phen or the Milberg Weiss indictment). But there is a critical difference. Plaintiffs' attorneys are dealing with one-time players; attorneys for corporate defendants (and plaintiffs) are usually repeat players. Thus, the latter faces a certain degree of market discipline that a plaintiffs' attorney does not: sophisticated clients can compare and contrast bills and results from the different law firms they hire, as well as hire third-party analysts to scrutinize bills. A law firm whose bills are out of line with results will lose business in the long run. Plaintiffs' attorneys face no such disincentive, and their ability to capture rents present a much greater public-policy problem, not least because (unlike the case of defense counsel) it also creates the incentive to engage in litigation with negative externalities.
I especially like one easy customer-service-based solution to the potential problem of hourly bill padding. Seattle law firm Summit Law Group has an innovative policy of a "value adjustment line" on all of their bills: "We empower each of our customers with the right to adjust our billing, upward or downward, based on our customer�s perception of the value received, not ours." Summit claims that, over the years, clients have been more likely to adjust bills upward than downward. This obviously is much more likely to work in the repeat-player context where the law firm can fire the client as well as vice versa.