Today’s Wall Street Journal has an intriguing story on legal fees and the changes that a client-driven marketplace has had on the way that firms bill not merely for their professional fees, but also for disbursements.
For example, the article comments on ways in which technology has transformed processes which would previously have resulted in charges to clients:
To be sure, technology has swept some items off law firm bills entirely. Before the advent of email, law firms spent small fortunes on couriers to hustle documents across town or out to the airport. Lawyers now upload digital briefs and memos to law firm servers, and send electronic versions via email. Widespread use of cellphones—and the attendant rise of affordable long-distance plans—has also changed the game.
“There was a time when clients were basically getting charged for every call you made—not only for the time of the lawyer, but for the cost of the call,” says Richard Rosenbaum, chief executive officer of Greenberg Traurig LLP.
But what really caught my attention was what it said about legal research:
A poll of 64 law firms this year by Mr. Mattern’s firm, Mattern & Associates LLC, found that 80% of respondents had clients who balked at paying for legal research and 69% said they had clients who simply wouldn’t pay at all. “We say, ‘Overhead is overhead, and that’s part of your cost of doing business,’ ” says Jeffrey Carr, general counsel at oil-services equipment supplier FMC Technologies Inc.
Ted Tjaden has commented publicly at times that it’s so difficult to get lawyers to assign billable file numbers to work on Westlaw or Lexis-Nexis – and that even when billed three out of four clients – that we may end up simply regarding online charges as a business expenditure of the firm like buying books.
But what does this do to the business model of Westlaw and Lexis-Nexis, which were premised on low price resistance from customers since the bill would either be passed on, or seen months later and written off.
And the WSJ describes a fascinating Johnson & Johnson strategy for curbing charges for legal-research services.
The health-care-products company maintains its own subscriptions to legal databases such as Westlaw and LexisNexis. It asks law firms to use its accounts when doing work for the company. A J&J spokesman says the practice is one of several used to reduce costs for outside legal work.
And of course the client can then assess whether a young lawyer is flailing around and wasting time trying to strain the ocean for a few drops of plankton, by running overly broad searches or not using feedback intelligently. It can scrutinize its own raw bills for waste, and then cross-examine the outside law firm for why charges were so high.
The J&J model may force us to get serious about training young lawyers on precise search strategies. And it may force a shift in the pricing of the services of the two major online legal research firms.
Here is a video on the issue as well.