So a law firm hires a contract attorney to do document review in a big securities case. They pay the contract lawyer $50 an hour and bill their client $550 for that hour. Is that fair? One lawyer says, “Contract lawyers feel more like a cost that should be simply passed through to the client.”
What say you?
Me? I say that asking if it’s fair is asking the wrong question. Fairness is not the issue. The issue is, “What is the client willing to pay?” Isn’t that the basis of capitalism? Willing buyer and willing seller at arm’s length?
If the client agreed to pay $550 an hour and the work performed by the contract lawyer is of no lesser quality than expected, then who’s to say the client didn’t get its money’s worth? And who’s to say the firm isn’t entitled to make a profit on what they pay outside attorneys? Don’t they earn a profit on work performed by their employees?
Since this was a class action, a judge is being asked to approve legal fees. I’m sure he or she will consider many factors in making that determination. The mark up on contract lawyers shouldn’t be one of them.
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The key to this issue is the disproportionate premium placed on top of the fee of the service provider, which itself has some margin for profit. The disproportionate premium is a failing of ethics. It is taking advantage. It puts capitalism in a bad light, just like a mass shooting puts guns in a bad light. The real issue is the moral agent who failed to act ethically. What is the answer to this? I do not believe in legislating morality, particularly when the lobbyists are largely lawyer, mainly the type that charge disproportionate premiums. But if the market favors crooks, you will get more crooks. So laws that open up the market, encourages competition, is the answer. Put another way, laws that narrow access to the market are the problem.
My recommendation would be to require a) transparency in billing, b) more data presented to the public so they are informed consumers (i.e., no one knows what is a “normal” fee), and c) a simplified consumer tribunal rather than the totally corrupt bar or zoo-like small claims–both who are the fox guarding the hen house.