In Defense of the Billable Hour: A Monitoring Theory of Law Firm Fees

Posted: 18 Oct 2014  

Jonathan H. Choi

Wachtell, Lipton, Rosen & Katz; Yale Law School

Date Written: October 16, 2014

Abstract

Critics often deride the billable hour as oppressive and inefficient. This Article presents a novel argument in the billable hour’s favor: clients use it to monitor their lawyers’ efforts, thereby mitigating the incentive problems that plague alternative fee arrangements. Prior literature has suggested that law firms use billable hours because they cannot bear the risk of cost overruns. I argue that this perspective is theoretically shaky, and I demonstrate through both historical and empirical evidence that monitoring best explains the popularity of the billable hour.

Keywords: Billable hour, alternative fees, law firms, legal profession, agency theory, law & history, law & economics

Suggested Citation

Choi, Jonathan H., In Defense of the Billable Hour: A Monitoring Theory of Law Firm Fees (October 16, 2014). Journal of the Legal Profession, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2504577

Jonathan H. Choi (Contact Author)

Wachtell, Lipton, Rosen & Katz ( email )

51 West 52nd Street
New York, NY 10019
United States

Yale Law School ( email )

New Haven, CT 06520
United States

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