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Monday, November 28, 2005

The Costs of Doing Business

Hello all.

Earlier this month, Judge Posner wrote an opinion for the Seventh Circuit in Budget Rent-A-Car v. Consolidated Equity.  What for many judges would have been a routine request for attorney's fees and costs Posner turned into a fascinating brief opinion.  Having won on the merits, Budget submitted a memo for its attorneys' costs which Posner denied as being exorbitant because too many hours had been spent on memos he considered to be pretty insubstantial, and because they had attempted to charge as a "filing fee" the cost of admitting an attorney to the Seventh Circuit.

Over at Point of Law, Ted Frank suggests that Posner simply doesn't understand how expensive litigation really is.

There are, no doubt, attorneys out there who can generate a Seventh-Circuit-quality brief in less than 13.7 hours, especially if they have a client who does not wish to be consulted on such matters, especially if the associate working on the case is already a good writer who has knowledge of the underlying law and doesn't have to do much research because he or she knows, and is confident of, which cases to cite off the top of his or her head. But, in the messy reality of real life, the junior associate will be performing legal tasks without prior experience and will be learning by doing: he or she will never have dealt with the underlying issue before, will need to spend time doing research to familiarize himself or herself with the issue, will need to double-check the cases cited, will do a first draft that requires extensive editing from the partner, will need to spend time implementing the partner's edits, will need to coordinate with the client for the client's approval of the brief and answering the client's questions about the issues and making the client's edits, and then will need to spend time researching the Seventh Circuit's very particularized rules for brief-filing (including electronic filing and service).

Now, it is my suspicion that Judge Posner, who is very smart, and who has clerks who are very smart and have recently worked as summer associates for very good law firms, is not in fact ignorant of "the messy reality of real life."  But if I'm right, the question is:  what gives?  Posner does not go into detail in the opinion about how he knows that the costs are exorbitant and what non-exorbitant costs would be, so I will attempt to offer a theory here.

Budget claims to have spent 27 hours preparing two short memoranda which Posner describes as "exiguous".  They also attempted to claim as a cost a $165 "filing fee" which was in fact the fee for an attorney to be admitted to practice before the Seventh Circuit.  Posner's rejection of the latter sheds light, I think, on the whole theory.

As Mr. Frank suggests, the problem here is that law firms serve as the training ground for young lawyers, who have learned basically nothing about the actual practice of, e.g., appellate law before being hired.  The result is that these lawyers are forced to "learn by doing" and therefore take longer than they otherwise would.  Law firms, of course, externalize these costs to their clients or (in cases like this) to their opponents.  This-- I think-- is what Posner is objecting to.

Speaking economically, litigation incurs both fixed costs and variable costs.  The fixed costs are costs incurred doing things like training younger attorneys and getting them admitted to the Seventh Circuit that will pay dividends long beyond this case.  The reason to give this work to a younger lawyer who will take longer is that this is how he or she gets experience and becomes a better lawyer.  But Posner, I think, wonders why Budget's lawyers should be doing this on somebody else's dime.

Now, I have no idea whether this is a fair or an unfair way for Posner to interpret the rules about attorney's fees.  If this is indeed the common practice, as I suspect that it is, and if indeed clients routinely subsidize the fixed costs of young lawyers, as I suspect they do, then it is not obvious that Posner is right to use a costs motion as the vehicle for this move.  But I do think that's what he's doing, and I don't think it demonstrates a "complete lack of understanding" about the way that litigation works, rather than a challenge to the current practice of training smart young people to practice law in the guise of hiring them as junior associates.

Posted by Will Baude on November 28, 2005 at 10:07 AM in Life of Law Schools | Permalink

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» Blogs on Posner's Budget Rent-A-Car opinion from PointOfLaw Forum
Gail Heriot and Stuart Buck agree with my take in an earlier post on Judge Posner's opinion in Budget Rent-A-Car. Michael Ausbrook, however, agrees with Judge Posner, on the grounds that briefing should only take an hour a page, rather... [Read More]

Tracked on Nov 28, 2005 10:21:34 PM

Comments

Sam raises a good point that it depends on the complexity of the jurisdictional question, but my answer to your question would be 3-6 hours, depending on how much confidence I have in my paralegal to do things correctly without me standing over his or her shoulder. More if I'm filing the brief from out of town, and the local counsel will want input. More if I have a client who micromanages. More if the issue is more complex than this issue appears to have been. Less if I'm already familiar with a case or rule directly on point. (Sam is incorrect that finding a case directly on point in the Seventh Circuit ends the inquiry: at least once I found a case directly on point in the Seventh Circuit and discovered that it had been superseded by a different Supreme Court interpretation of appellate jurisdiction without any sign of the issue in Shephardization, and I caught the problem moments before I made a embarrassing recommendation to file an emergency Seventh Circuit appeal without jurisdiction.) I think Budget's number is high, and I would be disappointed in a junior associate who took ten hours to turn out a four-page brief; I just don't think it's inconceivable because I've seen it happen fairly often.

Posted by: Ted | Nov 29, 2005 1:00:31 AM

I ask this question to the naysayers on this list quite sincerely. How many hours would be excessive for the exiguous filings in question? I write as a 2L at Yale, so I really haven't any idea. How long is a 4-page jurisdictional memo supposed to take?

Posted by: Will Baude | Nov 29, 2005 12:30:30 AM

The real problem with Judge Posner's opinion is the same as the problem with every comment that I have yet read about it: no one explains, and few seem to know, what the jurisdictional problem was. If the problem was that the notice of appeal was filed on the 47th day with no extension, then the amount of hours sought was obviously excessive. If it was (say) an appeal from an order compelling arbitration and there is circuit precedent holding that such an order is not appealable, then the amount of hours sought was obviously excessive. If it was something substantially odder or more complicated than either of those off-the-cuff examples, then maybe not. Judge Posner should at least have explained more, so that the opinion would give more guidance. But the problem lies also in those of us (me included!) who are tempted to draw big lessons from it without knowing the facts.

Posted by: Sam Heldman | Nov 28, 2005 8:47:15 PM

Paul makes an important observation, but, while time is written off for more egregious efforts by junior associates, I've seen the realization rates at two different law firms, and it's definitely the case that clients do pay for some learning-curve time--in short, I concur with Mike's observation on the question. (N.B. that junior-associate-learning-curve costs pale in comparison to the learning-curve costs of law firm attrition as associates leave the firm and are replaced on large long-term cases by new attorneys who spend hundreds of hours getting up to speed.)

Again, however, the Coase Theorem comes into play. The recent development of clients' increased use of auditing services to nitpick at law-firm bills has coincided with gigantic increases in law-firm hourly billing rates. If you look at a ten-year-old fee-shifting case involving a large law firm, you'll be amazed at seeing partners billing less than what junior associates bill today.

I again concur with alkali's observation of what judges do in fee-shifting cases. I agree with Richard that 3.3 hours in partner review time is high, but it's possible that the partner ended up writing the brief after being dissatisfied with the associate's efforts.

Posted by: Ted | Nov 28, 2005 6:27:44 PM

I have reviewed bills for nearly 27 years as a lawyer and I question Posner's analysis. The time for the memorandum was high but not unusual, especially if the task was given to a junion associate. The partner review time is excessive, considering the length of the memo. What most likely killed the sanctions request was passing off the associate's 7th Circuit admission fee as a filing fee. A small untruth undercuts your credibility on every other issue. I wonder how that happened. Was the associate told to bill the admission fee to the client? Did he or she do this on their own? A partner should have caught the problem.

Any firm that charges $425 per hour for partner time can afford to write off associate learning rather than bill it to the client. The partner should have the good sense to realize this point. Now, the partner not only has failed the client in losing sanctions, he has angered the client. The client normally would not learn about paying to train associates; the publicity from this case will give the client an education.

Posted by: Richard Antognini | Nov 28, 2005 6:17:22 PM

To clarify my earlier point: I suspect that Budget's bill is larger than the fee request, and that paralegal time and legal research costs that Budget did pay for were probably not submitted to the court. (Sometimes those costs are negotiated off client bills, too, but not so much in today's market. If somone isn't willing to pay full fare, they can go find themselves a cheaper firm.) The upshot is that the figure Posner labels inconceivable is probably actually lower than the actual bill.

Incidentally, attorneys I know who have abandoned big firm life for solo and small firm practice have repeatedly told me stories about bringing actions to enforce small but nontrivial debts -- say, $5000 -- that have cost-of-collection clauses, and having the judge chop an $800 fee request to $400.

Posted by: alkali | Nov 28, 2005 6:13:37 PM

Paul, your point is good in theory, but most firms (or, at least the megafirm my wife works for) have billing software whereby associates can see their realization and collection rates. IOW, an associate who has never served as a billing partner still knows about billing practices, since that associate can look at his or her log to see how many of his or her billable hours were actually billed to the client; and how many clients actually paid their bills (realization and collections rates, respectively). Anyhow, I'd bet that most people reading this had a realization rate of at least 85% as a first-year associate (and more likely 90% or above), which would mean that the learning curve wouldn't be written off extensively. Legal work is expensive, especially at the most elite law firms.

Posted by: Mike | Nov 28, 2005 6:13:14 PM

If I may build on Ted and alkali's points, especially having billed at the same firm as Ted, I'm not sure that the relevant experience here is the experience of having worked on a billable-hour basis. To be a little finicky, the relevant experience is that of having actually delivered the bill and haggled over the final price. Of course many seemingly routine tasks take longer than expected, and of course the associate bills for that time. But those bills are often substantially discounted, both at the time of the initial invoice and after further communication with the client. I do find something correct about Ted's point observing the differing reactions among the blogosphere, but I'd add a little more nuance: lots of law professors and public-interest (broadly defined) lawyers who abound on law blogs have had experience as billing attorneys at private law firms, but far fewer of us have had experience as billing partners at those firms, given the profile of those who enter law teaching or leave firms for greener pastures. And to add to this point, it seems to me that a law firm, in negotiation with a client, has a far greater incentive to write off the learning curve time involved in some billable tasks, and that the client has a stronger incentive to monitor and haggle over that time; the availability of lawyers' fees presumably reduces that incentive for both parties, although it provides an incentive for the other side to contest the fees. I'm not prepared to offer a view on whether agency slack would be greater in the latter circumstance. Although it would be difficult to isolate the relevant factors, I wonder whether anyone knows of studies examining legal fees and client contestation of fees under American and English methods of allocating the payment of litigation costs.

Posted by: Paul Horwitz | Nov 28, 2005 5:54:02 PM

By the way, I concur with alkali's observation.

The 13.6 hours reflects two filings, a September 28 sanctions motion and an October 11 statement of fees and costs. The 13.6 hours (like the 13.7 hours) seems higher than where I would've made an estimate to a client. But I view myself as a relatively efficient researcher and writer; more than once I gave a list of fill-in-the-blank citations to an associate, had the associate come back to me several hours later and claim that they couldn't find a case on point, and fill in the blanks myself in under an hour. In short, it isn't "inconceivable," especially if neither the attorney nor the associate ever requested fees and costs in the Seventh Circuit before.

I've seen far more over-kill performed by top-of-the-line New York firms. A Chicago Law friend called me for advice from her white-shoe firm, where she was spending a weekend putting together a two-page section for a summary judgment brief on the trivial question of the legal standard for summary judgment. My jaw dropped, since that's something I would've thrown together in under an hour while I was contemplating how to phrase an argument in a more substantive section.

Will, I looked on the Seventh Circuit's site, but they don't post motion briefing or decisions on motions. Here's the docket:

9/2/05 Private civil case docketed. [05-3579] [1899108-1]
Transcript information sheet due 9/12/05 . Appellant's
brief due 10/12/05 for Consolidated Equity . Docketing
Statement due 9/7/05 . (elea)

9/2/05 [05-3579] ROA from No. Dist. of Il., E. Div. due 9/21/05 .
(elea)

9/7/05 ORDER: Appellant Consolidated Equity shall file a brief
memorandum stating why this appeal should not be dismissed
for lack of jurisdiction. [1899108-1] DW [05-3579]
[1899521-1] Briefing is SUSPENDED pending further court
order. (See order for further details) Jurisdictional
memorandum due 9/21/05 for Consolidated Equity. (kell)

9/9/05 Filed motion by Appellant Consolidated Equity to extend
time to file docketing statement. [1900486-1] [05-3579]
(hudk)

9/13/05 ORDER issued DENYING motion to extend time to file docketing
statement until after the district court rules on
consolidated motion for certification. [1900486-1] DW
[05-3579] (hudk)

9/13/05 Filed Appellant Consolidated Equity jurisdictional
memorandum. [05-3579] [1901491-1] (hudk)

9/14/05 ORDER: Filed clerk's notice to Appellee Budget Rent A Car
Sy to file a response to appellant's MEMORANDUM addressing
the jurisdictional issue raised in the court's order of
9/7/05. [1899108-1] DW [05-3579] Response due 9/23/05 for
Budget Rent A Car Sy. (hudk)

9/23/05 Original record on appeal filed. Contents of record: 4 vol.
pleadings; 1 env. in camera. [05-3579] [1905435-1] (darr)

9/23/05 Filed Appellee Budget Rent A Car Sy response to Appellant
Consolidated Equity jurisdictional memorandum. [1899108-1]
[05-3579] (hudk)

9/26/05 Disclosure Statement filed by Rita M. Alliss Powers for
Appellee Budget Rent A Car Sy. [05-3579] [1899108-1] (hudk)

9/26/05 Filed motion by Appellant Consolidated Equity to dismiss
case pursuant to FRAP 42(b). [1906305-1] [05-3579] (hudk)

9/27/05 ORDER: This Court has received one envelope under seal from
the district court. All documents filed in this Court,
except those required to be sealed by statute or rule are
considered public. Pursuant to 7th Circuit Operating
Procedure 10(b), documents sealed in the district court
will be maintained under seal in this Court for 14 days, to
afford time to request the approval required by section (a)
of this operating procedure. Absent a motion from a party
these sealed documents will be placed in the public record
on 10/12/05. [05-3579] Motion shall be filed by 10/11/05.
(hudk)

9/28/05 Filed supplemental motion by Appellant Consolidated Equity
to dismiss case pursuant to FRAP 42(b). [1906906-1]
[05-3579] (hudk)

9/28/05 Filed motion by Appellee Budget Rent A Car Sy for award of
attorney's fees [1907364-1] and, for costs. [1907364-2]
[05-3579] (hudk)

9/30/05 Filed motion by Appellant Consolidated Equity to maintain
documents filed under seal in the district court under
seal. [1908056-1] [05-3579] (hudk)

10/3/05 ORDER re: 1. Consolidated Equity III, LLC's ("Consolidated")
motion for voluntary dismissal of Consolidated's notice of
appeal from the district court's August 3, 2005,
interlocutory order. 2. Budget Rent-A-Car, Inc.'s motion for
fees and costs pursuant to Federal Rule of Appellate
Procedure 38. #1 is GRANTED. #2 is also GRANTED. The
appellant will pay the appellee's attorneys fees and double
costs associated with this appeal. The appellee shall submit
a schedule of its appellate fees and costs by 10/10/05.
**Note: Grant of motion to award fees and costs VACATED, per
10/3/05 opinion.** Mandate issued, record to be returned
later. Circuit Judge Richard A. Posner, Circuit Judge Ilana
D. Rovner, Circuit Judge Diane S. Sykes. [05-3579] [0-0]
(hudk)

10/3/05 [05-3579] [1899108-1] Statement due 10/11/05 for Budget
Rent A Car Sy, per the court's 10/3/05, order. (hudk)

10/4/05 Filed Appellant Consolidated Equity opposition to Appellee
Budget Rent A Car Sy motion for award of fees and costs
pursuant to Fed. R. App. P. 38. [1909375-1] [1909375-2]
[05-3579] [1909375-2] (hudk)

10/11/05 Filed Appellee Budget Rent A Car Sy statement as to fees
and costs, per order. [05-3579] [1899108-1] (hudk)

10/11/05 Filed motion by Appellant Consolidated Equity to stay the
mandate, entitled "Petition for Rehearing and motion for
stay of mandate". [1911158-1] [05-3579] (hudk)

10/25/05 Supplemental record on appeal filed. Contents of record: 1
vol. transcripts. [05-3579] [1916203-1] (cove)

11/4/05 Filed opinion of the court by Judge Posner. Our previous
order granting the motion to award fees and costs is
VACATED and the motion is DISMISSED. Circuit Judge Richard
A. Posner, Circuit Judge Ilana D. Rovner, Circuit Judge
Diane S. Sykes. [1911158-1] [05-3579] (tiff)

11/7/05 ORDER re: 1. Consoldiated Equity III, LLC's motion to
maintain documents filed under seal in the district court
under seal. 2. Consolidated Equity III, LLC's Petition for
Rehearing and motion for stay of mandate. #1 and #2 are
DENIED as moot. [1908056-1] [1911158-1] MJO [05-3579] (hudk)

Posted by: Ted | Nov 28, 2005 5:49:39 PM

As an aside: What does Posner know about money?
Posner doesn't like to waste time, so he sticks to a routine (he calls himself "rigid and Germanic"). But it is not just his regular habits that allow him to be as productive as he is: he has structured his life so as to free his mind from any distractions whatsoever. Charlene is in charge of all the domestic arrangements: Posner describes their relationship as the traditional Jewish one, in which the pasty-faced scholar husband stays home and studies while the wife attends to worldly activities. Until a few weeks ago, Posner had never used an A. T.M.-when he needed cash, he took it from Charlene's wallet.

Posner is a brilliant; there's no denying that. But what makes him think himself qualified to make sweeping generalizations about the cost of legal services? He provided no fee chart, he took no survey, he asked no one. That's what makes his opinion bizarre.

Moreover, he held the lawyers applying for legal fees out as crooks. Someone at the firm likely took a lot of heat because of Posner's opinion and for the resultant bad PR. Posner's ill-informed decision had concrete and immediate consequences for some new partners and associates, and as Ted notes, it might cause some problems in 1998(b) fights.

Posner's opinion wasn't one of his many half-baked essays: no one is hurt when he states his opinion about any of ten-thousands things. This was a real ruling that likely got some lawyers into real trouble.

Posner bills himself as a pragmatist who looks at the practical consequence of his decision. I wonder if he thought about the practical outcome of this ruling.

Posted by: Mike | Nov 28, 2005 5:40:18 PM

Incidentally, this essay worth reading in this context, although I wouldn't use that specific term here:

Lubet, Bullying From The Bench, 5 Green Bag 2d 11 (2001)

Posted by: alkali | Nov 28, 2005 5:40:07 PM

Fair enough. Out of curiosity, does everybody in this thread think Posner is equally wrong about the costs of the sanctions motion? That is, is Budget right that a motion for sanctions takes about as many hours as a jurisdictional memo?

Posted by: Will Baude | Nov 28, 2005 5:24:04 PM

It's trivially evident that Posner thinks that a jurisdictional brief takes substantially less than 13.7 hours. I dispute your larger claim that Posner thought about and intended to send a message about law firms' decision to assign work to inexperienced junior associates (and, likely in this case, an inexperienced partner, judging by the billing rate of "only" $425/hour, which was less than I was billing); his use of the term "inconceivable" shows that he simply finds that a brief taking this long is beyond the pale under any set of circumstances. If Posner did have the meaning you ascribe to him, then his opinion is poorly drafted for failing to establish so much as a "reasonably experienced" standard. All the opinion shows, however, is sticker shock.

(As it is, the opinion is carelessly drafted, because its utter failure to establish any sort of standard promises that the lower courts of the Seventh Circuit will face substantial collateral litigation over any fee-shifting motion. While this opinion is an attack on a corporate defense firm, the effect is likely to fall heaviest on plaintiffs' attorneys who try § 1983 cases.)

Posted by: Ted | Nov 28, 2005 5:19:26 PM

Incidentally, if anybody can find copies of either of the two filings in the case, links would be welcome. I haven't been able to dig them up yet, and that might make it much easier for the lawyers in the thread to make an informed judgment about whether or not Posner is on his rocker.

Posted by: Will Baude | Nov 28, 2005 5:11:37 PM

I would bet any amount of money you could name that Budget paid more than its fee request. In particular, I very strongly suspect that time billed by a paralegal and/or managing law clerk (for those unfamiliar: not a law student, but a full-time manager of court filings and dockets for a law office) was cut from the bill, and that legal research costs were not billed.

Posner is a joy to read and usually right, but here "Homer nodded."

Posted by: alkali | Nov 28, 2005 5:08:32 PM

I think it is the second part of Mike's recent comment that suggests my analysis. It is true that Posner uses the market price language in the opinion, but given the absence of any evidence about market prices, and given the casual way that the bar-admission/filing-fee error is lumped in with this analysis, I believe it is the fixed-cost/marginal-cost theory that is animating Posner. He is thinking that in a free market the going market price for the submissions ought to be their marginal cost rather than their average costs, if $5000 each even is the average cost.

Posted by: Will Baude | Nov 28, 2005 4:59:14 PM

As to Baude's first point: Why look inside Posner's head when he wrote this:
...Budget has submitted a statement of its fees and costs. They are exorbitant.... Budget claims that the memo cost $4,626.50 to produce (3.3 partner hours at $425 per hour and 10.4 associate hours at $310 per hour); for so modest a product, 13.7 hours of high-paid professionals’ time are too many.

Budget has also included in its statement of fees and costs its fees for preparing its motion for sanctions and the statement of fees and costs itself—a total, again too high, of $4,354 (1.2 partner hours and 12.4 associate hours). It is inconceivable that this is the going market price for such exiguous submissions.

Moreover, Posner did not just say the fee was too high, rather, he said: "[d]enial [of a fee award] is an appropriate sanction for requesting an award that is not merely excessive, but so exorbitant as to constitute an abuse of the process of the court asked to make the award."

What is Posner's basis for these statements? Everyone here knows that the market tolerates these fees, so Posner can't be basing his decision on current legal pratices or the market for legal services. Where is Posner's proof for his claims? There is no proof.

Rather Posner here, as he does elsewhere, bases his ruling on The World According to Posner. He always knows best. If he thinks the fees are "so exorbitant as to constitute an abuse of the process," then they are - the market and other evidence be damned!

Someday Paul Gowder and I (unlikely allies, to be sure!) are going to have to start a blog where we chronicle the many other instances where Posner ignores the facts, the law, the Supreme Court, and the world to reach a decision in accordance with Posner's World.

Posted by: Mike | Nov 28, 2005 4:50:51 PM

So. I'd like to make clearer my distinction between three things.

First, is my guess about what is actually going on in Posner's head here. I do think that Posner is asking himself how long somebody with serious proficiency in the issues would take to draft the two short memos at issue and deciding that it could probably be done in a day, or whatnot. And so to the extent he fails to take into account the need to teach oneself proficiency, I think he would say, yes, yes, absolutely. I stand by this claim to have guessed what is going in Posner's head.

Second, is the question of what a fair amount of background knowledge to expect is. As Mr. Buck, Mr. Frank, and several others above point out, even those who are experienced practioners aren't and can't be already experienced in every issue. I don't know what a fair degree of background knowledge is, and Posner doesn't tell us, but I don't think this detracts from point 1, where I'm sure that Posner's answer would be, "well, more than this!"

Third is the question of whether this sort of second-guessing is reasonable at all, or whether a judge ought to just say, "well, it's a free market," and ask how much money people usually pay for short memos like this. I don't know the answer to this, but I defer to Mr. Frank and Mr. Buck when they say this is a totally normal number of hours to spend on such a thing. Given the cartelization of the legal profession it's not obvious that market prices should be lionized here, but I do think that's a fair question and entirely separate from question 1 and question 2.

Now, I have a firm stance on question 1-- I do think I'm right about what Posner's doing here. My stances on question 2 and question 3 are pretty tenuous, precisely because I have never practiced law and am not really familiar with this application of the FRCP. But I don't think the fact that I've never practiced law, or that I don't have stances on Question 2 or Question 3, really affects the analysis of Question 1. Now if somebody thinks I'm just off my rocker on Question 1, that's fair enough.

Posted by: Will Baude | Nov 28, 2005 4:35:47 PM

As Mr. Frank suggests, the problem here is that law firms serve as the training ground for young lawyers, who have learned basically nothing about the actual practice of, e.g., appellate law before being hired. The result is that these lawyers are forced to "learn by doing" and therefore take longer than they otherwise would.

I'm not sure I understand this point. It is "inconceivable," to use Posner's term, that young lawyers (or experienced lawyers, for that matter) could know everything that there is to know about American law, which is what it would take for a lawyer to be able to write a motion off the top of his head without doing any research on a given court's 1) precedents, and 2) rules. Everybody learns by doing here, as even the most experienced lawyers will need to double-check the rules, shepardize the precedents, etc.

In fact, the experienced lawyer's knowledge might consist of being able to tell the young associate, "I think there was a case called A vs. B that is on point, so go see if you can find that. But just to be sure, we should look at every other Seventh Circuit case that has ever addressed that issue in the past 20 years. We don't want to get blindsided with a case that demolishes our position." In that situation, which happens all the time, there are only two options: 1) The cheaper associate does the research; or 2) the expensive partner does the research. There isn't any third option where an omniscient sage can recite every Seventh Circuit jurisdictional precedent from memory.

Posted by: Stuart Buck | Nov 28, 2005 4:27:00 PM

Now, it is my suspicion that Judge Posner, who is very smart, and who has clerks who are very smart ...

This case is a great example of how really smart people can reach really dumb conclusions when they assume that because they are so smart, they must therefore know it all.

Posted by: Mike | Nov 28, 2005 3:34:52 PM

10 associate hours on a four-page jurisdictional statement being submitted in the 7th Circuit does not seem "inconceivable" to me (I do not think that word means what Posner thinks it means). I suspect Posner complains when filings are not proofread, or copy-checked, or formatted correctly, or if they fail to follow some 7th Circuit rule. If he doesn't, then I know others on the 7th Circuit do. Given that fact, 10 hours for even the most meager non-form filing is by no means beyond the pale.

Posted by: Bruce | Nov 28, 2005 3:13:30 PM

Note that there's also a lock-in effect: the market is not "attorneys who are intimately familiar with 7th circuit filing rules + relevant law" but the subset of those attorneys who are also familiar with the underlying facts and posture of the case. Even if an attorney has two of these attributes, he or she will need additional time to be prepared on the third. Plus it's not always clear what the relevant law is ex ante; certainly Consolidated Equity's attorneys misunderstood the importance of considering appellate jurisdiction before filing their appeal.

Having read Posner opinions for more than a decade, I think what really gets to me about the opinion is the context of the number of other times Posner has singled out and criticized appellate attorneys for failing to spend enough time on their briefs or failing to anticipate a particular obscure argument he wanted the attorneys to address. To turn around and then criticize other attorneys for spending that additional time (even if hindsight shows they didn't need to) just makes my jaw drop. Though, actually, it sounds like another couple of affidavits would've changed the result of this opinion had the attorneys been able to anticipate that Posner would treat this filing different than other Rule 38 filings--the underlying problem here is that Posner is taking judicial notice of a proposition that probably wasn't briefed (alas, the briefs are not on-line) and definitely isn't true.

Posted by: Ted | Nov 28, 2005 12:55:13 PM

Will: that argument is silly. There is not a sufficient supply of attorneys who are intimately familar with 7th circuit filing rules + the relevant law in a given case. If there were sufficient supply of those attorneys, clients would presumably demand they be employed on any given case, as, in many (I suspect the vast majority) cases, there is no fee-shifting (plus a risk-averse client acting under the uncertainty of litigation would be unwise to rely on fee-shifting). Firms could compete on their low hours billed. (Indeed, some firms do just that.)

If his reasoning (to the extent he had any) was anything like yours, poor Posner's fotgotten how the free market works. If there is an undersupply of said intimately familiar lawyers, then either they'll ration their services with higher prices, or they'll have a jr. associate who takes more time on the question do it. Either way, the cost will increase. How is this a "subsidy?" It's just the price set by the market.

Posted by: Paul Gowder | Nov 28, 2005 12:25:02 PM

How charming that you label pro bono work as appealing to "left wing law students." I'm a right-wing law student and I think it's pretty important myself.

Posted by: anon | Nov 28, 2005 12:01:42 PM

You're reading too much into the opinion. Posner's argument is a positive one, not a normative one: "It is inconceivable that this is the going market price." The argument is not that BigLawFirm "shouldn't" charge this much, but that it doesn't charge that much, and worse, could never dream of charging that much and is trying to flim-flam the court. To that extent, it's fair to say Posner doesn't know what he's talking about if he finds such a bill inconceivable. I've seen far worse billing disasters from associates I've supervised who've required multiple drafts and rewriting on simpler and more straightforward briefs that didn't require knowledge of the arcane Seventh Circuit filing rules. It would've been cheaper if I had just written it myself, but then I wouldn't have had time to supervise the other associates on the case, much less do my own work on that case and several others.

For most tasks, there isn't a way to train except to learn by doing. It's one reason law firms push their pro bono, because they kill two birds with one stone, providing de facto training on non-paying guinea pigs along with the good PR appeal to left-wing law students.

As for the normative question, it's possible to structure billing rates so that "learning" is separate from "billing," but the Coase Theorem teaches us that that's not going to lower the market-clearing price, and that it'll just mean that partners charge more and associates charge less. It may (or may not) make a four-page brief cheaper, but it will make other legal tasks more expensive. For whatever reason, the market has (for the most part) decided that it prefers hours-based billing (accounting for these possible frictions) to task-based billing or flat-rate retainers. If the law firm is charging Budget these prices, who is Posner (of all people, Posner!) to claim that it's not market-based? Maybe dock the requested fees 25% for alleged padding (though on what grounds?). To rule it out entirely has made Budget worse off than if it didn't request fees at all, and that subverts FRAP 38.

And, realistically, the "general training" and "case-specific" are frequently indistinguishable. Knowing how to file a brief in the Northern District of Illinois doesn't help you much for the Northern District of California. Very little high-level litigation involves repeating the same task over and over. Most litigators have to be generalists; a law firm doesn't have a federal jurisdiction specialist, a specialist on motions to compel under Rule 37, a specialist in motions to dismiss antitrust claims, etc. Almost every brief requires new research and new learning; I can't assume that the sensible C.D. Cal. rules for discovery disputes apply to Minnesota state court.

I have no objection to the characterization of the $165 admission fee as unrecoverable as costs. But I do object to the attack on the attorneys for mistakenly adding that to the list of fees. How much research do you think it would've taken to learn the correct answer that you can't charge the $165 fee as costs? Is there any reason to believe it would be less than thirty minutes at $350/hour to learn this?

I'll be curious how you revisit this question after a summer of billing at a law firm. Seriously, I would like to hear your opinion after your first briefing assignment and you've submitted your time sheets. It's interesting that in the blogospheric debate, the bloggers with experience actually billing (me, Stuart Buck, Gail Heriot) are coming to conclusions different from the law students and law clerks without that experience ("S.Cotus", you). Are there any law firm attorneys with experience supervising a junior associate who thinks that the 13-hour figure is per se inconceivable?

Posted by: Ted | Nov 28, 2005 11:46:37 AM

What do you mean by "externalizing" the cost to their clients? The amount that firms charge their clients is not an externality, but rather a price that is subject to market competition. If there is a more efficient way to do complex legal work than by using sometimes-inexperienced associates, then some firm will find that way and charge a lower price. As you correctly point out, there is an externality problem when attorney fees are shifted, but that is what judges like Posner are there for: to police it. In making this decision, a judge like Posner, who nominally has an interest in markets and in statistics, should not refer to his personal opinion about whether the work was "insubstantial" (he is, after all, much smarter than your average associate), but should refer to some measure of the going rate for that kind of work.

Posted by: Anonymous | Nov 28, 2005 11:38:08 AM

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