Tort Bunnies: Professional Responsibility

Tort Bunnies Two more bunnies!

Principal Case

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Tort Bunnies comic strip Transcript

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Notes

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July 05, 2010. I've always wondered why law firms bill by the hour. It's a huge moral hazard. I have yet to work at a firm, so I don't know exactly what the justification is, but I can think of a few off the top of my head:

  • Lawsuits involve substantial uncertainty. What seems like a simple legal problem may end up being much more complicated as new facts are discovered. With hourly billing, the cost of this uncertainty is passed on to clients, who, in theory, are better able to mitigiate it. That might make sense for some litigation, but I imagine that most transactional work is fairly routine.
  • Competition among firms will drive lawyers to minimize costs and bill fewer hours. However, while this is true for the market over the long term, it's not true for firms in the short term. There are plenty of examples where managers choose short term payoffs at the expense of long term benefits. Having a system which makes such behavior possible seems like a bad idea.
  • Lawyers have an ethical responsibility to not cheat their clients (that's the reason given in the comic). Two responses: (1) The problem is not that lawyers are consciously choosing to overbill their clients but that they're making subconscious calculations to not work as efficiently as possible. (2) Not all lawyers are ethical.

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