TIME FOR CHANGE: UNETHICAL HOURLY BILLING IN THE CANADIAN PROFESSION AND WHAT SHOULD BE DONE ABOUT IT. Alice Woolley* Calgary In the United States hourly billing by lawyers has been demonstrated to lead to both inefficiencies, where clients pay for work done to generate hours rather than results, and dishonesty. While the vast majority of Canadian legal work is billed on an hourly basis no attempt has been made in Canada to analyze either whether hourly billing leads to the same ethical problems here or whether the regulatory regime governing hourly billing by Canadian lawyers is sufficient. This essay argues that hourly billing leads to inefficiency, the temptation to be dishonest and to dishonesty, in fact, in the Canadian profession. After outlining the weaknesses in the current regulation of 2004 CanLIIDocs 100 hourly billing – both formal and market – the essay outlines some regulatory reforms which could help to prevent and correct both the specific forms which unethical hourly billing takes and its causes. Aux États-Unis, des études ont démontré que la facturation horaire des honoraires juridiques entraînait l’inefficacité (les clientes et clients payant pour des travaux faits en fonction des heures à facturer plutôt que des résultats) et la malhonnêteté. Au Canada, où la vaste majorité des travaux juridiques sont toujours facturés à l’heure, personne n’a cherché à savoir si la facturation horaire suscitait les mêmes problèmes éthiques ou si le régime réglementaire canadien la régissant suffisait à la tâche. Ce texte soutient que la facturation horaire a pour conséquence l’inefficacité et la tentation d’être malhonnête ainsi que la malhonnêteté au sein de la profession juridique dans son ensemble. Après avoir esquissé les faiblesses de la réglementation actuelle - officielle et par le marché - le texte brosse un tableau de certaines réformes réglementaires qui pourraient contribuer à prévenir et à corriger les formes spécifiques de facturation horaire contraires à l’éthique ainsi que leurs causes. * Alice Woolley, of the Faculty of Law, the University of Calgary, Calgary, Alberta. The author thanks Jonette Watson-Hamilton and Patricia Hughes for their helpful comments on earlier drafts of this paper, and Frances Woolley, Kate Morisset and Gerald Grenon for their conversations about the ideas it contains. Any errors which remain are the responsibility of the author. 860 LA REVUE DU BARREAU CANADIEN [Vol.83 I. Introduction . .860 II. American Critique Of Hourly Billing . .864 A. Introduction . .864 B. Paying Something For Nothing I: Doing Work Which Accomplishes Nothing . .864 C. Paying Something For Nothing II: It’s All In How You Count It . .865 D. Paying Something for Nothing III: Paying For Work Which Wasn’t . .867 E. Conclusion . .868 III. Unethical Billing In Canada? . .868 A. Introduction . .868 B. Where There Is Smoke… . .870 C. Paying Something for Nothing I: Doing Work Which Accomplishes Nothing (Redux) . .871 D. Paying Something for Nothing II: It’s All In How You Count It (Redux) . .877 E. Paying Something for Nothing III: Paying For Work Which Wasn’t 2004 CanLIIDocs 100 (Redux) . .880 F. Conclusion . .884 IV. What Should Be Done? . .885 A. Introduction . .885 B. Formal Regulation of Lawyers’ Fees . .886 C. Market Regulation of Lawyers’ Fees . .888 D. Some Proposed Reforms . .888 V. Conclusion . .892 I. Introduction The vast majority of Canadian legal work is billed on an hourly basis.1 The ethical implications of this fact have not, however, been a matter of significant public commentary by Canadian lawyers or law professors.2 Specifically, whether hourly billing results in clients paying an appropriate amount for legal services, or whether, by contrast, it creates a culture of inefficiency and dishonesty, has not been discussed. The leading Canadian texts on legal ethics either say nothing or very little 1 An article by Anne Macaulay, “The Billable Hour – Here to Stay?” online: CBA Practice Link <http://www.cba.org/cba/Practicelink/mf/alternatives.asp> puts the percentage of Canadian legal work which is billed on an hourly basis at 85%. Other methods of charging clients include contingency fees, fixed fees and value billing. 2 In general few Canadian legal academics write about the legal profession. See: Adam M. Dodek, “Canadian Legal Ethics: A Subject in Search of Scholarship” (1999) 50 U.T.L.J. 115; Alice Woolley, “Integrity in Zealousness: Comparing the Standard Conceptions of the Canadian and American Lawyer” (1996) 9 Can. J. L. & Juris. 61. 2004] Time for Change: Unethical Hourly Billing... 861 about the ethical issues arising from hourly billing,3 research has revealed no articles in Canadian legal journals on the subject,4 and projects such as the recent revision of the Canadian Bar Association’s5 Rules of Professional Conduct contain no discussion of hourly billing as a significant ethical issue for Canadian lawyers.6 The silence of Canadian practitioners and professors is in marked contrast to the overwhelming level of concern expressed by the American profession and legal academy with the ethics of hourly billing. Since the American Bar Association identified hourly billing as an ethical issue in 19897 there have been at least thirty articles,8 three 3 Randal N. Graham, Legal Ethics: Theories, Cases and Professional Regulation (Toronto: Emond Montgomery Publications, 2004) pp. 455-459; Allan C. Hutchinson, Legal Ethics and Professional Responsibility (Toronto: Irwin Law, 1999) at 79; Gavin MacKenzie, Lawyers and Ethics: Professional Responsibility and Discipline, 3d ed. (Toronto: Carswell, 2001) p. 6.1; Legal Ethics in Canada: Theory in Practice, Donald E. Buckingham et al, eds., (Toronto: Harcourt, Brace & Company, 1996) (no 2004 CanLIIDocs 100 discussion); Beverley G. Smith, Professional Conduct for Lawyers and Judges (Fredericton: Maritime Law Book, 1998) (no discussion). 4 Supreme Court Justice L’Heureux-Dubé’s commencement address to the Northern Illinois University College of Law mentioned the ethical problems with hourly billing: “The Legal Profession in Transition” (1992) 13 No. Ill. U. Law Rev. 93 at 99. Also, Osgoode Hall law professor Allan Hutchinson wrote a newspaper comment on point: “Justice is Greedy: The real cost of high lawyers’ fees is a legal system that’s unjust,” Globe and Mail (6 February 2001) A15. 5 [CBA]. 6 The only proposed amendment to Chapter XI of the CBA Code of Professional Conduct online: Canadian Bar Association < http://www.cba.org > at 25 (which governs legal fees) is the amendment to permit the charging of contingency fees which are now legal in every Canadian jurisdiction. See: “Modernizing the CBA Code of Professional Conduct: Final Report of the Standing Committee on Ethics and Professional Responsibility” (Ottawa: Canadian Bar Association, 1988). Younger lawyers in the CBA do appear to have some concern with the level of lawyers’ fees: Janice Tibbetts, “Legal fees too much, say young lawyers” Calgary Herald (20 August 2000) A.1. FRO. In addition, National, the CBA magazine, occasionally discusses hourly billing: See, e.g., Jordan Furlong, “The Money Tree: There’s more to lawyering than billable hours” National, (December 2003) 4; Jordan Furlong, “Are you hot or not?” (suggesting that value billing is “hot” while hourly billing is “not”) National (June/July 2003) 4. 7 Beyond the Billable Hour: An Anthology of Alternative Billing Methods, Richard C. Reed, ed. (Chicago: American Bar Association, 1989) [Beyond the Billable Hour]. 8 In addition to materials discussed below see: Adam C. Altman, “To Bill, or Not to Bill?: Lawyers Who Wear Watches Almost Always Do, Although Ethical Lawyers Actually Think About It First” (1998) 11 Geo. J. Legal Ethics 203; F. Leary Davis, “Back to the Future: The Buyer’s Market and the Need for Law Firm Leadership, Creativity and Innovation” (1994) 16 Campbell L. Rev. 147; Amanda K. Esquibel, “Law and Literature: A Collection of Essays on John Grisham’s The Rainmaker: Be Led Not into Temptation: Ethics Lessons from The Rainmaker” (1996) 26 U. Mem. L. 862 THE CANADIAN BAR REVIEW [Vol.83 books,9 and a further extensive American Bar Association report10 on the subject. The clear consensus of the American materials is that hourly billing leads to both inefficiencies, where clients pay for work done to generate hours rather than results, and dishonesty. The silence of the Canadian profession on the ethics of hourly billing is also in contrast to the significant concern expressed by the Canadian media11 and Rev. 1325; Lawrence J. Fox, “Save Us From Ourselves” (1998) 50 Rutgers L. Rev. 2189; Marc S. Galanter and Thomas M. Palay, “Large Law Firm Misery: It’s the Tournament, Not the Money” (1999) 52 Vand. L. Rev. 953; Stephen W. Jones and Melissa Beard Glover, “The Attack on Traditional Billing Practices” (1998) 20 U. Ark. Little Rock L.J. 293; Margaret Kline Kirkpatrick, “Partners Dumping Partners: Business Before Ethics in Bohatch v. Butler & Binion” (1999) 83 Minn. L. Rev. 1767; Lisa G. Lerman, “Scenes From a Law Firm” (1998) 50 Rutgers L. Rev. 2153; John J. Marquess, “Conference on Gross Profits: Legal Audits and Dishonest Legal Bills” (1994) 22 Hofstra L. Rev. 637; Virginia G. Maurer et al., “Attorney Fee Arrangements: The U.S. and Western European Perspectives” 2004 CanLIIDocs 100 (1999) 19 NW. J. Int’l L. & Bus. 272; Ankur Parekh and Jay R. Pelkofer, “Current Development 2002-2003: Lawyers, Ethics, and Fees: Getting Paid Under Model Rule 1.5” (2002) 16 Geo. J. Legal Ethics 767; Douglas R. Richmond, “The New Law Firm Economy, Billable Hours, and Professional Responsibility” (2000) 29 Hofstra L. Rev. 207; William G. Ross, “Kicking the Unethical Billing Habit” (1998) 50 Rutgers L. Rev. 2199; Patrick J. Schiltz, “Legal Ethics in Decline: The Elite Law Firm, the Elite Law School, and the Moral Formation of the Novice Attorney” (1998) 82 Minn. L. Rev. 705; James P. Schratz: “I Told You to Fire Nicholas Farber – A Psychological and Sociological Analysis of Why Attorneys Overbill” (1998) 50 Rutgers L.