Greg Lambert, Chief Knowledge Service Officer at Jackson Walker and well-known blogger at 3 Geeks and a Law Blog, recently authored a post entitled The Ethics of It All. In it he talked about another article by Fast Company’s Gwen Moran entitled, Is It Unethical to Not Tell My Employer I’ve Automated My Job?. Moran offers the hypothetical of a worker who figures out how to automate a 40 hour a week job into 2 hours and then wonders whether she should tell her the employer knowing that it could cause her to lose her job. Lambert raises a similar ethical question for the legal profession, particularly for those who charge by the hour versus results.
Moran’s hypo gets precisely at the acute dilemma posed by the billable hour model: reducing time and creating efficiency is the fastest way to lower revenue. And like Moran’s hypothetical worker, a law firm that does that too much for too long risks financial ruin. Certainly for an associate and to some partners in law firms, finding a way to automate work reduces billable hours and could be professional suicide.
We have all heard as practicing lawyers about that lawyer who refuses to negotiate or drags things out until he or she gets their billable hour quota in.
In a way, its similar to another paradox of the legal profession: if we resolve a matter quickly, our reward is less work, less billable hours, and less revenue. The argument, of course, is by doing good work efficiently, your reward is supposedly more work in the future from a happy client. But how many lawyers these days really want to play that kind of long game? And if the matter is one that won’t likely repeat itself, how strong is the incentive to resolve it really quickly? We have all heard as practicing lawyers about that lawyer who refuses to negotiate or drags things out until he or she gets their billable hour quota in.
The ethics of “getting the billable hours into a case” should seem clear at least in principle. But advancing technology raises some interesting dilemmas for lawyers when it comes to billing and the use of technology.
The ethical rules governing lawyer billing are concise but not necessarily clear. Model Rule 1.5 basically prohibits us from charging “unreasonable” fees: “A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.” The Rule goes on to add several factors to be considered when assessing what’s reasonable, including the notion that the fee should be similar to that customarily charged in the locality for similar legal services.
Is it unreasonable under the Rule to expect a firm to use a piece of technology that might reduce the hours billed on something from 40 hours to 2?
But what does this mean in the context of advancing legal technology and automation? What’s reasonable when it comes to the use of technology that might significantly enhance efficiency at the expense of billable hours? Using Moran’s hypo, is it unreasonable under the Rule to expect a firm to use a piece of technology that might reduce the hours billed on something from 40 hours to 2? And how mainstream does a software program have to be before it becomes “customary in the locale”?
Not long ago, JPMorgan began using a program called COIN to analyze commercial loan documents, a highly repetitive task that it took lawyers some 30,000 billable hours to do. It’s one thing to mouth the mantra that automation and technology can help make legal services less costly and let lawyers spend more time doing lawyer things like strategic thinking etc. It’s quite another to tell a law firm that there is a piece of technology that will eliminate 30,000 hours from next year’s budget and expect the law firm to jump at the chance to use it. But does that refusal (or maybe more accurately slow walking reluctance) at some point become unreasonable and unethical under Rule 1.5? When?
Lawyers and law firms routinely ignore all sorts of time-saving technology and automation tools with little hesitation. Is that reasonable?
Lawyers and law firms routinely ignore all sorts of time-saving technology and automation tools with little hesitation. Is that reasonable? Is it reasonable to expect lawyers to keep abreast not just of the risks and benefits of technology but whether and how technology could save their clients’ legal fees? If so, what’s the scope of this duty to investigate and duty to use? At some point, does it become arguable that the billable hour model that rewards inefficiency and places a lawyer in the conflicting position of looking after their self-interest versus that of their clients itself become unreasonable?
Does this mean a lawyer can avoid ethical billing problems and/or has the duty to say: look, we know about the technology that could save us a bunch of time but we aren’t going to use it cuz we don’t want to?
Rule 1.5 also goes on to say: “The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation…” Does this mean a lawyer can avoid ethical billing problems and/or has the duty to say: look, we know about the technology that could save us a bunch of time but we aren’t going to use it cuz we don’t want to?
And if this wasn’t murky enough, here’s another wrinkle: Courts have held that it is unreasonable for lawyers to charge their hourly rates for services provided by non-lawyers or for law-related tasks that do not constitute the practice of law, such as sending faxes or delivering documents to opposing counsel. Well, that makes sense, I guess. But does the work that the JPMorgan program now does not constitute the practice of law? What does the “practice of law” really mean with advancing technology?
The Second Circuit recently addressed just this question in Lola v. Skadden, a case involving whether certain labor standards applied to contract lawyers hired by Skadden. In holding that these services provided by these contract lawyers did not constitute the practice of law, the Court noted:
A fair reading of the complaint in the light most favorable to Lola is that he provided services that a machine could have provided. The parties themselves agreed at oral argument that an individual who, in the course of reviewing discovery documents, undertakes tasks that could otherwise be performed entirely by a machine cannot be said to engage in the practice of law.
So, if a software program can do a task, that task is not part of the practice of law and charging lawyer rates to do it are by definition unreasonable under Rule 1.5.
So, if a software program can do a task, that task is not part of the practice of law and charging lawyer rates to do it are by definition unreasonable under Rule 1.5. What does this mean for a lawyer? Again, does he or she have to investigate whether there are such programs and then use them for specific tasks? This is not a theoretical question: software and AI programs are increasing throughout the industry, and machines are getting more and more sophisticated. To put it in context: if a FastCase tool can do legal research and a lawyer doesn’t use it and conducts research the old fashioned way, is the time spent the practicing of law? Is it ethically billable? Or what about researching the track record of your adversary by surfing the net or reading previous court filings instead of using sophisticated data analytical tools offered by several legal tech companies?
Indeed, the cost of many legal tech tools still leaves room for ambiguity in making use decisions. But there’s no doubt technology is refashioning the legal profession in many ways, some of which we haven’t even thought of. And I think it’s safe to say technology is going to remake our concepts of what is the practice of law and what is-or isn’t – a reasonable and ethical fee.