Billable Hours

Still dominant

The billable hour bestrides the world of high-stakes litigation like a Colossus. Whatever its prospects,¹ today it continues to set the baseline for expectations about attorneys’ fees.

Big firms charge by the hour, class action lawyers detail “lodestars” in fee applications, flat fees aim to smooth out hypothetical hourly charges, and hybrid and contingent fees can trigger payment of a multiple of the lodestar. Though imperfect as a proxy for value, people use the billable hour — or hourly fee — for that purpose all the time.

Because we want to understand all the options that business clients have for paying lawyers, we need to understand the main traits of hourly (and all other) fees — control, risk, and upside — first. Let’s take a look.

Plusses and minuses — client perspective

Paying by the hour maximizes the control that the client has over its lawyers. Monthly invoices detail what the lawyers have done to earn a fee, and if the client doesn’t like what it sees, it can call for changes. Strategic choices may undergo a cost-benefit analysis by a client who is naturally skeptical of bold and expensive initiatives. Providing specifics to the client also enforces (some) discipline on the lawyers. And because the client doesn’t owe a fee that depends on the results of the engagement, the process of firing the law firm and replacing it with another one involves less difficulty.

But almost all of the risk — arising both from the merits and from the litigation process itself — remains with the client. A bad outcome on the merits generally won’t reduce the hourly fee that the client must pay the lawyers. And the out of pocket cost of discovery, expert witnesses, travel, trial preparation, and trial rests entirely on the client. Complexity, inefficiency, excessive discovery and motion practice, continuances, acts of God, and other slings and arrows of litigation come at the client’s sole expense.

The upside of litigating also stays with the client. It need not share with counsel the benefits of a quick or easy resolution of a case.

Plusses and minuses — lawyer’s view

A lawyer who works by the hour of course retains professional independence but submits to close monitoring by the client and cedes some control. The lawyer must justify every hourly fraction she bills for. She must overcome client skepticism about potentially risky or costly strategic and tactical choices. She may have to provide budgets and respond to auditor queries and nitpicking.

The low risk level that the lawyer faces compensates somewhat for her lack of control. Neither extraordinary expense of the process nor a surprisingly bad result affects the lawyer’s income. The lawyer’s risk consists mainly in the possibility of damage to reputation and the possibility that the client won’t or can’t pay what it owes.

The lawyer’s upside corresponds to her risk. She won’t reap the rewards of exceptionally favorable outcomes, either process-wise or merits-wise, and will benefit mainly from a reputational boost and from a greater likelihood that the client can and will pay the lawyer’s invoices.

The case for paying/working by the hour

The hourly fee represents the most conservative option for both clients and lawyers. It has the most appeal in situations where the client faces the potential for loss rather than a prospect of gain — where the client is a defendant.

That is because people will spend more to avoid loss than to secure gain. The typical defense client thus accepts the likelihood of high hourly fees for the sake of maximizing its ability to manage the downside risk of a loss on the merits, including harm to the client’s reputation.

Next time

I will explore in future posts the question of whether the extreme concentration of risk in the client makes sense or whether better alternatives exist. You will not be surprised to learn that I do believe better alternatives exist.

The next post will deal with one of them — an option that shares a modest amount of risk: flat fees.

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¹It may not last much longer. It may go the way of its forebears — “minimum fees”, which bar associations set in hopes of thwarting price competition, and “for services rendered” invoices, which reflected subjective, after-the-fact judgment about the legal services’ value. For more history, see Robert E. Hirshon, “The Billable Hour Is Dead. Long Live . . .“, GPSolo, Jan./Feb. 2013; “In the Beginning: Hourly fees are relatively new for lawyers“, Civilian’s Guide to Lawyers, Apr. 11, 2015.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

TRIAL COUNSEL
Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

COMPLETE PACKAGE
A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

HARD GRADERS
Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

CIVIC ENGAGEMENT
Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

KEEPING PERSPECTIVE
Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

PERSONAL
Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.