I am going to explain how the entire American legal market scam really works. BIGLAW. The billable hour. Failures in the market for legal services. AI. And, then, I am going to explain where I think things are headed. These days, I am mostly regarded as a plaintiff-side employment lawyer. But that is purely because I chose to expand into that arena and tackle systemic dysfunction and judicial activism that most lawyers are afraid of confronting head-on.
Make no mistake: I continue to litigate multi-million dollar complex commercial cases, particularly in the arena of non-compete defense, trade secrets, unfair competition, and partnership breakups. Just last year, we defended a group of several employees who broke away from their old company (in the broader revenue cycle management space) and started a competing business. The old company sued them and sought more than $25 million in lost profits. This was bet the company litigation and one of the biggest trade secret cases being litigated in America at the time. There were TRO proceedings. There was a multi-day preliminary injunction hearing with several witnesses and with me debating the law with the Chief Judge of the United States District Court for the Southern District of Florida. There was a partial injunction (that still allowed my clients to operate and remain profitable). We did extensive discovery. I deposed the plaintiff’s expert witness, thoroughly cooked him, and the case settled a few weeks later for $8 million. My clients paid the $8 million in less than six months.
Right now, I’m representing one partner in the breakup of a multi-million law firm. I have another case in medical staffing involving a big health care system that cut out my client (a medical staffing company) and direct-hired all the physicians. There are many millions of dollars at issue in these cases. And none of these cases involve billable hours. Instead, they involve a flat fee schedule. I create a unique fee structure for each case depending on dozens of factors including the parties, the stakes, the complexities, counterclaims, injunctions, discovery issues, likely volume of documents, and more. Typically, there is a fee for each segment of the case. At a minimum, those segments are phase one, discovery, pre-trial, and trial. Where there are TROs and injunctions, there are fees for that phase, too.
I have been doing this for the past 3+ years. I will never again accept billable hourly litigation. A few months ago, I turned down a large piece of litigation at $900 an hour. Because that is no longer attractive business for me. It’s a waste of time and a pain in the ass.
A Blunt Explanation of Why I Like Flat Fees
After leaving Boies, Schiller & Flexner in 2012, I launched Pollard PLLC. For more than a decade, we ran on billable hours. Sure, we would take an occasional contingency fee case. But we were fundamentally a billable hour firm. 95% of our work was billable.
That entailed an absurd amount of extraneous bullshit tied to billing hours (and totally disconnected from the provision of legal services). Clients signed on and agreed to hourly rates. They posted retainers. From that point forward, here is a snapshot of just some of the bullshit billable hours entailed:
- Inconsistent bills = confused, nervous clients. The litigation is relatively quiet for two months. The bill is light. Then the case ratchets up. There’s a renewed motion for a preliminary injunction and a motion for contempt. The bill that month is $100,000. The client has concerns. Why couldn’t they have spread this over a few months? How many months are going to be like this? Should they plan for $100k invoices every month? They want answers. They want predictability. But the billable hour offers none.
- Preparing client bills = massive waste of time. Right before Covid, we were at the peak of our billable hour phase. We had 5 or 6 attorneys. All billing hours on a portfolio of 10 to 15 paying cases. First, I had to enter my own time on a near daily basis or else I would lose time and money. Then, I had to chase everyone else to put their time in. Then, I ran pre-bills. Then I reviewed those bills line-by-line and wrote off any time that I thought was unreasonable. Then I finalized bills and approved them to be sent out. Then I would have to talk with certain clients about their bills. I spent about two days each month on this process.
- Getting the bills paid. Our best clients would pay their bills within days. Our decent clients would take two weeks or so. They would have questions about the bill. Questions about the next bill. Questions about planning and cashflow. Over time, we became increasingly selective about clients. But, inevitably, there would be a client who got upside down financially and viewed outstanding attorneys’ fees as payment optional. Let’s be real about it: If a client owes your law firm $150,000, the client doesn’t have a problem. The law firm does.
- Being too good and too efficient = we make less money. Eventually, things reached a point where were had become incredibly efficient in our core areas of expertise. We had litigated 100+ cases of the same type. We had a playbook. Our team could spend a total of 20 hours on a case or a project and accomplish what other firms couldn’t do in 150 hours. So, not only was the billable hour creating tons of extra administrative work, it was also undervaluing our services.
So, around 2022, I switched the firm from billable hours to flat fees. That solved a ton of problems. It did the following:
The client knows exactly what the litigation costs. There is a fee schedule. Fees are set per phase of the case. The client knows what to expect. There is no surprise monthly invoice of $250,000. This is good for clients. But this is this not attractive to BIGLAW. Why? Many reasons. This cuts off BIGLAW’s ability to unnecessarily expand the scope of the litigation or the scope of discovery.
With relatively few exceptions, BIGLAW does not look at a case and ask: How can we get the best, most efficient outcome? Instead, they look at cases and say: How can we bill more hours? Spare me the denials and faux outrage. That’s how the game works.
Example: We had a defamation case where the defendant filed a 30+ page motion to dismiss. Complete trash. No chance of being granted. But they probably billed $40,000 on it. Not because it was a reasonable strategy. But because it was billable and they could get away with it. That sort of nonsense is ubiquitous. Would they have done that if they were working on a flat fee basis? Of course not.
The risk is shared. Again: The billable hour is a law firm de-risking mechanism. Commit that concept to memory. It is a critical piece of why law firms love the billable hour and protect it like gold. Because it’s better than gold. It is a risk-free, blank check.
This is where we come to one of my favorite points about how asinine and hypocritical the defenders of the billable hour are. Here is their primary critique of flat fees for complex litigation:
What if the law firm charges a significant flat fee and the litigation ends before they have spent enough hours on the case to justify that fee? That just wouldn’t be appropriate.
This is a stupid argument. Here’s why:
First, the companies and individuals who are paying flat fees for our kind of litigation are sophisticated clients. And we both agreed to these rates. These aren’t poor people or consumers in the typical sense. These are sophisticated market actors. They have options. I offered them elite caliber representation. They accepted the offer. These clients are comfortable paying X dollars for the work we do, regardless of how many hours that work entails.
Second, the value of legal services is not intrinsically tied to hours worked. I am often working in areas of law where I have 20,000+ hours of experience. Think about that. And not only do I have more experience by hours and years, I have incredibly meaningful experience. I have experience in billion dollar (yes, billion with b) litigation from my time at BSF. And in my own shop, I have litigated multiple cases with $20 million+ at issue. I make complex, high-stakes legal decisions every single day. Legal judgment is like a muscle. You train it. You develop it. I have been THE guy calling the shots since I was 30 years old. Often in cases where I was up against BIGLAW, huge companies, lawyers twice my age. And my track record speaks for itself. You don’t price that level of expertise on an hourly basis.
Beyond this, we need to completely reconceptualize the concept of value when it comes to legal services. Value has nothing to do with hourly fees. Suppose I agree to represent a client on a flat-fee basis. The client is being sued for theft of trade secrets and the plaintiff is seeking $20 million. Under our fee agreement, the initial phase of the litigation is $400,000. This is the injunction phase. We do all the typical initial case requirements. We answer the complaint. We countersue. We respond to the motion for a preliminary injunction. And we do a two-day evidentiary hearing. The Plaintiff is seeking an injunction that completely shuts us down. Literally freezes us out of the market. The court grants a limited injunction that allows our client to remain operational and keep making money. Fast forward. We get into discovery. Multiple depositions. Then expert witnesses. We destroy both of their experts at depositions and file Daubert motions to strike their testimony. The case settles. Our side gladly pays X million to put the litigation to bed and move forward in their insanely profitable business. All told, the defendant spent $750k, all on a flat fee agreement. Does anybody care how many hours we worked? No. Nobody gives a shit. We got the outcome desired.
And our clients are still saving money vs. BIGLAW.
In cases like this, our adversaries typically are represented by BIGLAW. And they typically pay at least 2x the fees that our clients pay. That is why BIGLAW and its defenders cling to billable hours. Because flat fees require discipline, good judgment, and efficiency. Consider my perspective: I have litigated or arbitrated 150+ cases in the non-compete / trade secrets / unfair competition / fiduciary duty arena. I feel comfortable pricing these pieces of litigation on a flat fee basis. I feel comfortable taking a certain amount of risk.
Because I am sharing that risk with the client. I am taking on the risk that the case might require significantly more time, manpower, stress, mental energy, staffing, etc. The client is taking on some risk, but the client’s risk under a flat fee agreement is much lower than the client’s risk under a typical BIGLAW billable hour engagement. First, the client’s risk is capped at a dollar certain. The engagement letter explicitly states what the attorneys’ fees are for each phase of the case through trial. Beyond that: The client is agreeing to a price that they believe represents the value of pursuing the claims or defending the lawsuit. That is a business decision. As in: We are comfortable investing $450,000 in this matter.
For a BIGLAW firm to agree to this sort of flat fee arrangement is virtually unheard of. There is too much red tape. Billable hours are too important to the firm and to the individual partners getting paid on what they generate. And flat fee arrangements require too much expertise and confidence in one’s judgment. It requires a lawyer to have meaningful insights into the litigation landscape and different ways the case could unfold. A BIGLAW billable hour firm doesn’t need to provide any of that. They are the ultimate, perpetual hedge: We don’t know. Nobody can tell. It all depends on what happens in the case. Anything could happen.
So BIGLAW billable hour defenders insist that flat fees are somehow unfair or improper. But consider the source. These are the same people who think giving firms a blank check to bill hours (the current system) is superior. Get real.
The Billable Hour is a Zombie that Rewards Idiots and Inefficiency
Prior to the 1900s, the billable hour was virtually non-existent. Instead, lawyers typically charged per task or based on value. The notion of attorneys tracking time began to emerge in the early 1900s, but we did not have the rigid, billable hour system that we have now. That began to dominate the market in the 1950s and 60s. In the 70s, the billable hour became fully institutionalized. At the time that law firms adopted the billable hour, that was how all other industry functioned: engineering, accounting, consulting. Labor was charged by the hour.
The billable hour has allowed large law firms to completely de-risk legal work. If you remember one thing from this article, remember that: The billable hour is a de-risking tool. The client takes all of the risk. The law firm is paid X per hour worked, regardless of how many hours are worked, regardless of efficiency, regardless of necessity, regardless of outcome. This creates numerous perverse incentives and absurd outcomes.
- Law firm revenue at a billable hour firm is completely detached from skill, efficiency, or value. Most large law firms are trading on the names and reputations of men who died decades ago. Sophisticated general counsels at large companies will tell you that the vast majority of BIGLAW firms in America are trash. There are a handful of truly elite, large law firms. And every large firm has at least a handful of very good lawyers or teams (operating in certain practice areas). But, on the whole, BIGLAW is trash. That is a well known fact. I have several friends who are either the outright General Counsel or right below that at Fortune 100 companies. They all express the same sentiment. The knock on most BIGLAW firms is the same: No guts. No strategy. No real brains. Just billing as many hours as they can get. Overstaffing cases. Putting 1st or 2nd year associates on wild goose chase research projects. Wasting hundreds of thousands if not millions of dollars on pointless discovery crusades. I hear it all the time. These firms get the work because of the firm name. Because law is slow to adapt and a firm that was elite for several decades can still trade on that elite reputation long after its actual value has become dog shit. Barring bankruptcy or a massive scandal, it takes a long time for an elite BIGLAW firm to lose its market cache. As such, these firms have little concern for value. Their business is billing hours. Some say selling their time. But I push back on that one. Yes, in a purely technical sense, they are selling their time. Hours worked times billable rate. But that almost mis-frames the reality. Selling time makes it seem like there is a meaningful bargain or exchange that is contemporaneous and ongoing. But it doesn’t operate like that anymore. BIGLAW is not selling anything in that sense. The sale already happened— when the client gave them a blank check. From that moment forward, BIGLAW’s objective is to bill as many hours as possible. Nothing else matters.
- Paying $1,000 an hour for lawyers to learn about shit they don’t know and experiment on your case. Bring a BIGLAW firm into a multi-million dollar case. Let’s say it’s a contract case. Fairly straight-forward. But not to BIGLAW. Complexity ratchets up the billable hours. Our BIGLAW lawyer for the case is Bob. Bob thinks there’s an antitrust angle. And a claim under Florida’s Deceptive and Unfair Trade Practices Act. Maybe there are other partners at other offices of the firm who know about these things. But that could get complicated. Bob could end up having to split some of the fees if he brought in a real antitrust partner from DC. So what does Bob do? He wings it. After all, he’s a local big time muckity muck. He’s in Best Lawyers or some shit like that. He’s on boards and bar committees. He knows a bunch of judges. He participates in all the glad-handing and cronyism. So he’s made lots of money in this racket and is convinced of his own genius. He assigns one of his $800 an hour associates to do some research. He takes that research and does some more of his own at $1,000 an hour. And why not? It’s like an all-you-can-eat buffet. Bob decides they’re going to turn what is really a simple breach of contract claim into an massive antitrust and FDUTPA claim. After all, fucking around, learning as you go, and experimenting with the law is great billable hour strategy and a profitable business model. Would any law firm operating on a flat fee arrangement do that? No. Never. Not in a million years. Does BIGLAW do that sort of thing? All the time.
- Worthless Discovery Crusades and Other Profit Centers. From the late 1990s through around 2015, discovery emerged as one of BIGLAW’s favorite profit centers. Here’s how the scam worked: I am BIGLAW. In my judgment, we need to pursue an ultra-aggressive, leave-no-stone-unturned discovery plan. This will result in numerous discovery disputes and the collection, production, and review of millions of documents (both ways). We pay $30 an hour for staff attorneys to do the first layer review. But we mark that time up and bill it to you at $300 an hour. We also own a document hosting company that charges exorbitant fees for collection, processing, and hosting. We will pass that cost onto our clients. Our discovery plan will generate at least $300,000 extra in fees on this litigation. And here’s how we sell it to you: We insist on this discovery. It is necessary for the case. If you refuse to do this discovery, you are not following our professional judgment. So if we miss key evidence and shit goes south, we are not liable. You know how many shook beta general counsels and deputy general counsels fall for this? This gets into personality archetypes and psychology. I hate to be that guy, but let’s take a step back and consider that piece of the equation. How many outright killers go into law in the first place? I mean people with that Michael Jordan level killer instinct. Relentless. Brilliant at their craft. Driven. Tireless workers. True leaders. Very few. Most of those people have better shit to do. And very few of those people go into BIGLAW. And if they do go into BIGLAW, they never stay. Example: My old big boss David Boies. Boies was a savage. That’s why he left Cravath. Typical BIGLAW is too stifling for savage geniuses and renegades. Where do GC’s come from? BIGLAW. See how that works? It’s easy to dupe a corporate client into WWIII discovery crusades when the company’s general counsel comes out of BIGLAW, has internalized that paradigm, and often is the same sniveling, risk averse persona.
The BIGLAW Myth: Complex Litigation Cannot be Priced on a Flat Fee
This is their constant refrain: Complex litigation cannot be priced on a flat fee. It is too complex. Nobody knows what could happen or how much work could be required. The only option is an hourly fee. But, if you read this article, then you know that is completely false. Of course complex litigation can be priced on a flat fee basis. I have been doing it for years.
That fee can be based on the specific nature of the litigation, the parties, the stakes, the claims, the counterclaims, injunction proceedings, etc.
That fee will likely be on a per phase or per time basis.
Example: Phase 1 of the case: $150,000. Injunction phase (if necessary) $150,000. Discovery initial phase (depends on scope): $100,000. Discovery final phase (depends on scope): $100,000. Pre-trial: $75,000. Trial phase: Set once there is clarity into what claims and defenses will be tried but capped at X.
Example: Phase 1 of the case: $200,000 through X date. Then monthly fee of $100,000. Then pretrial X. And trial Y (with trial capped at a dollar certain). And possibly an overall fee cap after X months.
These are complex, multi-million dollar cases. And we have been doing it this way for years. It’s not that complex litigation cannot be priced on a flat fee basis. And it’s not that billable hours are better for clients. It’s that billable hours are a de-risking tool for BIGLAW and shifted all the risks to clients. And those clients are typically risk averse, conformist, and brainwashed (by ex-BIGLAW GC’s who drink the billable hour kool aid).
The Future: AI, BIGLAW Downsizing, and Redefining the Work of Litigation
The landscape is rapidly changing. AI capabilities in legal are growing at an exponential rate. Within 5 years, it will no longer be commercially viable for BIGLAW firms to bill hourly for legal services. Research and drafting will largely be automated. Reviewing through millions of documents and building timelines will be automated (it already is) and extremely high quality (that’s the missing piece right now). Litigation will be more about quarterbacking cases, strategy, judgment, taking depositions, courtroom work, negotiation, and trying cases. Yes, clients will pay for the research and writing — but they will not pay hourly. The market will tier based on quality. Elite quality will still come at a premium, but that premium will be detached from hours worked.
Litigation pricing will be about paying lawyers for perceived value and good judgment — not hours billed.
The new landscape will be fundamentally incompatible with (a) the billable hour model and (b) the current headcount in BIGLAW. Within 5 years, BIGLAW will lose at least 20% of its current headcount. The work of early career associates will largely be done by AI. Firms will hire much smaller 1st year classes. What I’ve predicted for the last several years will come true. And instead of everybody acting like I’m an unmitigated crazy person, they’ll realize that I’m a first-mover who has better vision than they do. Maybe that’s because I spend a fair amount of time thinking about systems and models and structures — instead of billing and tracking my hours.
Jonathan Pollard is a lawyer and writer. He is the founder of the high stakes litigation firm Pollard PLLC. Pollard and his team have extensive experience litigating complex non-compete, trade secret, unfair competition, employment, sexual assault, and defamation cases. Pollard has routinely been honored by Super Lawyers and Chambers & Partners. The firm’s headquarters can be reached at 954-332-2380.