Why are litigation costs so high?

Or the scourge of the six-minute unit.

Litigation costs have become so high that most of us can only afford to take our case to court if we have insurance – only available in cases with obviously rock-solid merits – or are so ridiculously wealthy that exorbitant legal costs are merely incidental.

How has this happened?

There are three reasons.

Firstly, reforms to the civil procedure rules in the1990s added complexity and therefore cost. The intention was to make cases easier for judges to manage while promoting access to justice; worthy aims the reforms arguably didn’t achieve.

Secondly, mainly because of email, there is much more disclosure to deal with nowadays. This generates huge volumes of material, which is time-consuming to analyse and process and so adds to cost.

Thirdly, and more prosaically, legal costs are nearly always higher than they need to be. This is due to a combination of law firms imposing high billing targets in an effort to maximise efficiency and profit, and the tyranny of the six-minute unit.

I’m raising this now because lawyers could do something about if they wanted to – although they probably don’t.


What is a six-minute unit, and why is it tyrannical?

Accountants long ago worked out that they could wring more fees from their clients if they divided each hour into ten six-minute units. They told their staff to record what they did in each unit on time sheets, then used these time sheets to calculate bills with (often spurious) accuracy.

Next, they set fee earning targets for each day. Ambitious accountants competed to set higher and higher targets and rewarded their staff when they hit them.

They prospered and, noticing this, lawyers adopted time-recording processes too.

And lo, legal costs escalated.


Why is this a problem?

Two reasons.

Time recording and ambitious target-setting sometimes lead to the phenomenon of ‘bill padding’. This is where units are surreptitiously added to bills to avoid targets being missed. Because time sheets are long and full of detail, such padding is hard to spot. So it is hard to believe that with the incentive to meet targets and the unlikelihood of detection, lawyers will always resist the temptation to pad.

Further, there is unavoidable inflation built into the system because every client-related activity, no matter how trivial and brief, is recorded in six-minute units. So, a 20-second call will be recorded as being worth six minutes, and the lawyer will be unfairly credited with 5 minutes and 40 seconds of fees for work they didn’t do.

This grossly inflates the amount a client has to pay. And leads to wry jokes about there being more than 24 hours in a lawyer’s day if it’s measured by their time sheets.

Everyone knows about and accepts time-recording. After all, nearly all lawyers, management consultants and accountants use it. So it has proved difficult to wean professions away from what is, by any standards, an effective way to turn a profit.


Are there any checks and balances?

Costs in litigation are controlled, in theory at least, by the court setting budgets for the work that needs to be done. But that doesn’t do much to suppress the unnecessary costs generated by time recording systems and billing targets.

Clients should ask their solicitor, “What, in terms I will understand, have you actually done for me? And is what you have done really worth what you are trying to charge me?”

I suspect the answer will often be that little activity of note can be reported for the period in question. Many bills cover periods of relative inactivity, comprising multiple instances of trivia (for example writing brief emails and making short telephone calls), each taking a few seconds that have cumulatively been bloated by the wretched six-minute unit to produce a surprisingly large total.

Should clients have to pay for all the dead time that gets swept up into bills produced by time recording systems?

I don’t think so.

The tyranny of the six-minute unit should end.

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