DIY A2J 4: Unbundle Your Services, Reinvent Your Billing Model

To date, my DIY A2J posts have talked about ways that lawyers can improve access to justice in family law matters by disseminating information about family law and dispute resolution processes on a voluntary, pro bono basis. Pro bono work is all well and good, and arguably a moral imperative of those practising a generally privileged profession, but at the end of the day you have a responsibility to yourself and to your family to put food on the table and keep the lights on.

It seems to me, and apparently to the Canadian Bar Association‘s Futures Committee as well, that there are other profitable ways of running a law practice that don’t rely on the billable hour. Best of all, a number of these alternatives can actually increase access to justice while meeting lawyers’ need to get paid; the idea of practice models that are remunerative and promote access to family justice is a theme I will be returning to in the months ahead.

What’s wrong with the comprehensive service billable hour

There are, in my view, a number of problems with the comprehensive service billable hour model of practise. First of all, few clients are able to pay for start-to-finish legal services. Pretty much every report on self-represented litigants, from the work of the Canadian Research Institute for Law and the Family to the Action Committee on Access to Justice in Civil and Family Matters to the CBA’s Envisioning Equal Justice Initiative to the National Self-represented Litigants Project, agrees that the cost of legal representation is the number one barrier to accessible justice. Professor Julie Macfarlane, in her report Identifying and Meeting the Needs of Self-represented Litigants (PDF), found that 53% of the litigants she spoke to had retained the services of counsel at one point during their case and that in three-quarters of these cases, the lawyer had been privately-retained but her participants had “exhausted their available resources” and could not afford to continue with counsel.

Of course, it’s not just the poor who have this problem. A report (PDF) from the University of Toronto’s Faculty of Law that looked at access to justice for middle income earners said that “a fee structure based on an hourly billing model is unaffordable to most;” indeed it is, and let’s not forget that we’re talking about the middle class here.

According to Canadian Lawyer‘s 2014 fee survey (PDF), contested divorces in Canada cost $10,406 on average and $39,522 at most, and a five-day trial runs about $26,591 on average and $59,700 at most — and don’t forget the costs that are borne in the process leading up to trial, which often equal or exceed the cost of the trial itself. According to Statistics Canada, the average annual after-tax income of male-headed single-parent families was $55,100 in 2011, and the average income of female-headed families was $43,300; according to Professor Macfarlane’s report, 57% of the litigants she spoke to had annual incomes of less than $50,000.

Second, let’s look at things from the client’s point of view. You walk into the family law lawyer’s office. The lawyer can’t tell you how long it will take to resolve your case, the steps and applications that will be required to wrap things up or what sort of disbursements will be necessary, what the end result will be, or what the total cost will amount to; all your lawyer can tell you for certain is his or her hourly rate, and that isn’t guaranteed to remain the same throughout the carriage of your file. Then the lawyer asks you for a significant chunk of change, usually not less than $5,000 and often well north of that, to get started on the project.

(Speaking of lawyer’s hourly rates, Canadian Lawyer also reports that the average rate for a 2009 call was $267 per hour and the rate for a 2004 call was $322. The magazine found that 44% of lawyers responding to its survey planned on increasing their hourly rate within the year, with 45% of those people planning on a hike of 5 to 10% — well above the national inflation rate, which increased from 1.0 to 2.3% between January and May this year according to the Bank of Canada.)

Honestly, I can’t imagine a business model less appealing from a consumer’s point of view. Professor Macfarlane, writing about litigants who could no longer afford to retain counsel, observed that “it was not unusual for them to still owe money to their lawyers and to be paying this back in instalments” and that such litigants were “often resentful that, despite significant expenditures, they were still not at the end of their matter.”

Third, the billable hour model does nothing to encourage haste toward resolution — not that haste is always a good thing, in many circumstances it is not. However, a file can but put down while other matters are attended to, and when it gets picked back up a month or two later the same number of issues, steps and processes still remain to be finished. Delay does nothing to lessen the overall value of a file; to the contrary, I suspect it rather increases it.

The billable hour could easily be perceived as encouraging a laggardly approach, inclined toward resolution by litigation, to one’s files. (I am sure that few if any family law lawyers could reasonably be accused of milking their files; that said, the main money-makers for litigators are chambers applications and trials. Nothing pays as well as those five-day trial Canadian Lawyer wrote about, or the ten- and twenty-day trials it didn’t.) This perception is often reinforced when clients are billed for time spent reading letters and emails, never mind replying to them. This is legitimate work, but the total amount charged gets out of hand very quickly when the minimum increment of the billable hour is six minutes and associate lawyers are mindful of their employers’ billing expectations.

Fourth, the billable hour model values time spent over progress achieved. That’s fine, I suppose, but over time the ratio of time to results can get seriously bent out of whack. This is especially likely in high conflict files, where the number of letters, affidavits and applications to address a problem are so grossly disproportionate to the importance of the result. As a result, the analysis of time spent versus results obtained is usually our Achilles’ heel at hearings to assess our accounts.

There are a number of different ways that we can retool our practices to reduce our reliance on the billable hour while still making a living. I’ll be talking about more of these in the future, but in this post I’ll discuss unbundling, also known as the limited-scope retainer.

The unbundled alternative

In “Unbundling” of Legal Services and Limited Legal Representation (PDF), the Law Society of Upper Canada defined unbundling thusly:

Unbundling of legal services refers to the provision of limited legal services or limited legal representation. It is the concept of taking a legal matter apart into discrete tasks and having a lawyer or paralegal provide limited legal services or limited legal representation, that is, legal services for part, but not all, of a client’s legal matter by agreement with the client. Otherwise, the client is self-represented.

In other words, unbundling takes the bundle of tasks involved in the normal start-to-finish carriage of a file and breaks it down to an à la carte menu of offerings from which the client can pick and choose according to his or her needs and budget. In family law matters, the menu typically includes:

• initial legal advice and second opinions, in which the lawyer explains the law and provides an opinion as to the range of likely outcomes and the courses of action available to the client;
• independent legal advice, in which the lawyer explains the law and provides an opinion as to the fairness and efficacy of a proposed settlement and the range of likely outcomes available through other means of dispute resolution;
• drafting agreements on terms provided by the client, including cohabitation, marriage and separation agreements;
• on-going advice or coaching, provided on an as-needed basis;
• assistance with court forms, including affidavits and financial statements, which may involve providing strategic guidance, completing the form for the client or commenting on the form as completed by the client;
• guidance through the disclosure process;
• assisting with legal research and drafting or commenting on written argument;
• conducting examinations for discovery on behalf of the client, or attending at the client’s discovery to defend the client from unfair and impermissible questions;
• preparing desk-order divorce applications; and,
• representation in chambers or at trial.

The services I offered on an unbundled basis typically involved advice, agreements and divorces. I usually managed agreements and divorces on a flat rate. Initial advice, independent legal advice and on-going advice I billed on a pay-as-you-go basis, letting the client take as much or as little of my time as he or she wished.

Sharon Silbert, in a useful article in Lawyers Weekly, notes that unbundled services can also focus on the out-of-court resolution of disputes, and could include:

• providing advice and analysis prior to mediation;
• coaching or representation at mediation;
• helping the client understand his or her best and worst alternatives to a negotiated settlement; and,
• preparing agreements on the terms of any settlement reached.

I found that I often liked this sort of work a great deal more than many of my full-service files. These sorts of limited-scope files are in and out of your office quickly and never run the risk of becoming dog files; the work is usually easily accomplished and enjoyable; and, accepting further work is always discretionary. Flat rate work was paid up front, along with taxes and foreseeable disbursements, and most hourly rate work was done in the presence of the client and was billed and paid at the end of each meeting, reducing overdue accounts receivable and collection problems.

On occasion, I would represent a client for the purpose of a specific application, as I would for some pro bono files. This sort of service was a bit trickier to provide as it involved getting on the record (and getting off) and a fair amount of communication with opposing counsel or an opposing party. In such cases, I found that it was critical to be crystal clear with everyone involved — the client, the opposing party or lawyer and the court — about the nature and extent of my involvement in the file. It also helped to get the client to sign a Notice of Intention to Act in Person ahead of time. (This is a form used in British Columbia that takes counsel off the record and provides the client’s new address for service.)

Unbundled work has always struck me as a sensible way of earning an income. It’s good for the client, who gets what he or she is looking for within a determinable amount of time at a fixed or predictable price and is directly responsible for the management of his or her case. It was good for me, as the work was always remunerative and carried very little risk of massive receivables accumulating, and was a welcome change of pace from my comprehensive service files. Although the duration and value of each retainer is inherently finite, I rarely found that I was lacking opportunities for further limited-scope work. (A limited scope retainer was often something that I proposed during initial consultations when it became clear that the client did need the help of a lawyer but couldn’t afford a great deal of it. Other work came from referrals.)

The curious unpopularity of unbundled work

Given my positive experience with working on an unbundled basis, I have never fully understood why unbundled work isn’t more popular with lawyers; it’s certainly popular with clients. In her report on the needs of litigants without counsel, Professor Macfarlane wrote that:

… many [self-represented litigants] sought some type of “unbundled” legal services from legal counsel; for example, assistance with document review, writing a letter, or appearing in court. Relatively few were successful in accessing legal services on this basis despite a sustained effort. This was perplexing to many respondents, who could not afford to pay a traditional retainer and envisaged that they could undertake some parts of the necessary work themselves, with assistance.

The experiences of Professors Macfarlane’s participants are echoed in the literature. In a 2012 survey of Alberta family law lawyers (PDF), the Canadian Research Institute for Law and the Family found that 40% of its respondents never offer unbundled services, and that those who do work on such a basis did so in an average of only 12% of their cases.

This really needs to change.

First, Professor Macfarlane’s report makes it clear that people want to hire counsel on an unbundled basis. Second, unbundled services work and improve access to justice. According to a report on brief legal services (PDF) prepared by the Canadian Research Institute for Law and the Family,

Unbundled legal services have been used successfully in the United States since the 1990s, and many US states have modified their rules of court and lawyer codes of conduct to accommodate limited scope retainers and provided lawyers with guidelines and training on the effective provision of limited-scope retainers. One of the major advantages of unbundled legal services is to provide at least some legal services for those who simply cannot afford full representation by a lawyer and do not meet eligibility guidelines for legal aid coverage.

Third, unbundled services can work for you. In recent report (PDF) of the Alberta branch of the Canadian Bar Association on limited scope retainers, Marie Gordon QC wrote that unbundling represents “an effective niche marketing tool” to grow one’s practice in a way that is much less stressful, allows lawyers to thrive who are averse to court and enables a part-time practice. Fourth, as Ms Gordon also wrote, the early concerns that unbundling might herald a decline in lawyers’ standards of practice have proven to be unfounded:

As with the introduction of collaborative family law, fears and suspicions about a reduction in ethical standards were inevitable in the beginning, but unfounded in the end. I am actually hopeful that [limited scope retainers] may meet some of the interests of clients, lawyers, and the Bench. Probably the most important point to make is that [limited scope retainers] do not import a lower standard of competence or professional conduct than the full scope retainer. 

The limited-scope retainer agreement

The codes of conduct of many law societies specifically address unbundled work. Here’s what it says at s. 1.1 of c. 3.2 of the Code of Professional Conduct for the Law Society of British Columbia:

Before undertaking a limited scope retainer the lawyer must advise the client about the nature, extent and scope of the services that the lawyer can provide and must confirm in writing to the client as soon as practicable what services will be provided.