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American Bar Association - Defending Liberty, Pursuing Justice

June 2008

Vol. 4, No. 3

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Litigation

 

An Experiment in Task Order Billing

As a solo I have wrestled with billing issues for more than a year. This actually started before the ABA Journal article by Scott Thoreau on the demise of the billable hour. After talking with a number of clients and potential clients, I’ve discovered that they really do like the idea of fixed-price billing. Then I read and reviewed many of the “value billing” articles on the web, took a seminar, and talked with a lawyer/consultant who specializes in helping firms use “value billing.”

I’ve been unable to make this model work for litigation, and litigation is more than 90 percent of my practice. The complex business and commercial litigation I practice, with multiple parties, claims, counterclaims, third-party claims, electronic discovery, various discovery disputes, (tens of) thousands of pages of documents, and various injunctions and experts just were not sufficiently predictable to let me give a fixed price for the litigation.

In fact, I grew quite frustrated with value billing proponents. Some claimed that the key was talking to the client and explaining the “value” being provided. Others said that the problem was the same as in hourly billing. Still others insist that the difficulties could be solved by giving better billing estimates and by better anticipation on my part. One proponent emailed me that

Even in your kinds [sic] of crazy business brawls, you should be able to give some estimates—or a sense of the phases. You probably know how long it takes to draft a complaint, prepare rogs, RFP, and RFA. Obviously, review of discovery docs will depend on how many you get—so give a range. Motion to compel—depends on completeness—so an other range. Depos—you should be able to come up with an average amount of time per depo, plus a list of witnesses based on what your client tells you. And so on …

Of course, this person doesn’t do the kind of “crazy business brawls” she knows I do. She also will do 3–5 hours free work to come up with an estimate that could be wildly off or have so many variables as to be meaningless. (She thought a good estimate for cases like some of mine was 100–300 hours of work.) Maybe her clients would find that information useful, but mine would just laugh.

Other litigators would write me and sympathize:

As a fellow commercial litigator, I share your pain precisely. Either you and I are dumber than some others, or I’m not sure it’s possible to do true value billing and still have both you and your client be satisfied; this is particularly so from the perspective of the outset of a case—when a new one comes into my office, I don’t necessarily know whether it’s likely to settle in 3 or 4 months or become a hard-fought 5-year litigation war. I’d find it hard to value-bill as a result. I’m ready to be enlightened … The best I think we business litigators can try to do is to estimate by stages or phases of a litigation, but even there it’s often wholly unpredictable.

Then, while remodeling my kitchen, I had an idea: treat litigation as a task order contract—no total, but a price for each task. If I could find a way to list all the tasks that could occur in litigation, I could then use that list as a way to create a fixed price for each task for my client. So I went back to the Internet.

Amazing! Somebody who is even more compulsive than I analyzed litigation and came up with a total of 987 separate and distinct steps (without duplication) to a complex litigation case, including the initial investigation and through the appeals process. (This compendium does not attempt to predict how many times you might have to repeat a step, however: for example, if one files more than one motion to compel or takes more than one deposition. I took that exhaustive list and condensed it to five phases totaling 29 steps. (See “29 Steps,” below.)

What does this have to do with my experiment in task order billing? Everything. My experimental retainer agreement incorporates the 29 Steps and specifies that the client and I will agree on a price for each before I start work on that task. For example, I might charge $5,000 to draft a complaint. If a counterclaim is filed against the client, drafting and filing an anwer requires a separate task order. The retainer agreement also contains a clear statement in several places that, if I recommend a task be done and the client decides not to do the task (not that the price is too high but that the task not be done), then I may withdraw immediately. The retainer also specifies that if we cannot agree on the price to do the work, I may withdraw immediately.

Will this work? I really don’t know. It’s an experiment. But I’m sure of one thing: any work done will have the explicit approval of the client, and the client will never be surprised by the bill.

To test this new approach, I decided the first three new cases that came in would not be billed on an hourly basis. The clients were all informed that I wanted to try a billing experiment and all agreed up front, in writing, to the experiment.

  1. “Roger” was referred to me by a former business client. I offered to do an initial consultation for Roger of not more than two hours for a flat rate. “Roger” agreed. The consultation took 90 minutes. Then he asked me to write a letter in the 30 minutes remaining. Because this was outside the scope of the initial contract, I asked for a change order and fee. “Roger” was offended and (literally) cursed me.
  2. “Pete” needed work done preparatory to business litigation. He had a letter he needed reviewed, and then he anticipated serious litigation. The letter was first of several steps that would have to be taken, and I would do them one at a time with a different price for each task. “Pete” liked the idea and retained me.

Progress Report

  • Every time a new task is required, I contact “Pete,” explain why we have to (re)do that step (referring to the 29 Steps), and get his agreement on a price. This seems to enhance Pete’s understanding of the case.
  • Where he thinks the cost is high for value, we discuss and negotiate. So far it’s going well.
  • The biggest problem with Pete’s experiment is this: “Clients are always going to have a tough time putting any kind of value to a task-they can’t see the big picture and don’t know why individual tasks are important, nor are they going to see how failing to perform a specific task may make it impossible to do what they want to do.” That makes negotiating for “value” more than a little difficult. Proponents of value billing say that the problem is the same in hourly work–only you don’t find out about it until after you have done the work.
  • “Mary” asked me to review documents and tell her how much trouble she was in. I looked at the file for a fixed fee and concluded that she was in imminent danger of major litigation with multimillion dollar exposure. Because litigation had already commenced against others (but not her), she agreed to the task order experiment, and I agreed not to bill her until work on the case commenced.
  • Progress Report

    1. It took five months before litigation started against “Mary” because settlement talks among the parties were protracted. For two months “Mary” called almost every day, sometimes several times a day. Eventually I realized that she had talked with me for well over 18 hours—all of it uncompensated.
    2. Finally, I told “Mary” that I would have to change the arrangement to bill her using the traditional hourly method. She agreed to that change, too.
    3. Immediately after the change to hourly billing, “Mary” became an ideal client—detailed reports but no wasted time, full cooperation.

    My conclusion is that this form of task order billing is not for everyone or for every client. But maybe, just maybe, it can work.

    29 STEPS

    There are five basic phases or aspects of a trial. They are:

    • Case assessment, development and administration
    • Pretrial pleadings and motions
    • Discovery
    • Trial preparation and trial and (if necessary)
    • Appeal

    Each phase consists of a number of tasks, and sometimes more than one task can be going on at the same time, or tasks can be repeated. Overall, there are 29 tasks. They are:

    1. Case assessment, development, and administration

    • Fact investigation/development
    • Analysis/strategy
    • Experts/consultants
    • Document/file management
    • Budgeting
    • Settlement/nonnbinding ADR
    • Other case assessment, development, and administration

    2. Pretrial pleadings and motions

    • Pleadings
    • Preliminary injunctions/provisional remedies
    • Court-mandated conferences
    • Dispositive motions (motions for summary judgment or motion to dismiss, etc.)
    • Other written motions and submissions
    • Class action certification and notice

    3. Discovery

    • Written discovery
    • Document production
    • Depositions
    • Expert discovery
    • Discovery motions
    • Other discovery

    4. Trial preparation and trial

    • Fact witnesses
    • Expert witnesses
    • Written motions and submissions
    • Other trial preparation and support
    • Trial and hearing attendance
    • Posttrial motions and submissions
    • Enforcement (of verdict/judgment)

    5. Appeal

    • Appellate motions and submissions
    • Appellate briefs
    • Oral argument

    David Kaufman’s practice concentrates on business and commercial litigation. He has personally tried more than 30 jury trials and more than 80 bench trials to verdict. For more information about his practice, visit www.BusinessBrawls.com.

    © Copyright 2008, American Bar Association.