Why the Billable Hour Persists and How Litix Is Changing It

In our last post, we looked at the unsustainable trends in legal services: since 1977, legal costs have outpaced inflation by 4.5x, public trust in lawyers has dropped by half, and access to justice has collapsed. To reverse this trend, the traditional hourly billing business model needs to evolve, and for this to happen we need to understand where this model came from, why it persists, and how can we start offering alternatives.

For most of modern history, lawyers charged flat fees—$100 for a will, $500 for an adoption. But in 1975, Ruth and Lewis Goldfarb needed an attorney for a real estate purchase and discovered that not a single attorney in the entire state of Virgina was willing to go below the minimum fee in the State Bar guide. The Goldfarbs sued saying this was illegal price fixing, and the US Supreme Court unanimously agreed thus eliminating the standard business model of lawyers overnight. The billable hour was already being championed by some as a more fair and transparent way to value legal services, but after Goldfarb it quickly became the dominant model. If the Goldfarbs had known the resulting irony of their well-intentioned lawsuit, I bet they would have reconsidered!

But 50 years have passed since then, and technological advancements have made things much more efficient. So, if the billable hour is so problematic, why hasn't it died already? 

1. Some Cases Require It - Some types of cases (e.g. litigation) are impossible to predict and highly variable. The billable hour is often the only fair and reasonable way to charge for these cases.

   
   

2. It's Built Into Everything - The entire law firm infrastructure—associate performance reviews, partner compensation formulas, profitability calculations—is organized around billable hours. Changing it means reconsidering everything and this is deeply problematic for those attorneys at the top of the chain that benefit greatly.

   
   

3. Sustaining It Requires Doubling Down - Because it's built into everything, the only way to sustain it is to commit deeper. This is why rates we continue to see rates and billable hour requirements increase despite increases in efficiencies. And now that AI threatens to collapse the whole model, sustaining it will require further entrenchment.

   
   

So how can Litix change this? First, the Arizona Bar adopted a new rule that allows us to change the business organization model (Reimagining Legal Services: How Litix Is Changing the Legal Business Model). Next, we match this new organizational model with technology and processes designed specifically for efficiency and client outcomes, not hour extraction (AI in Law: Leveling the Playing Field; Reducing Client Costs). And finally, we measure success differently - Our lawyers are evaluated on client outcomes and quality, not billable hours (Reimagining the Lawyer Experience: How Litix Is Building a Better Place to Practice Law).

For traditional firms, efficiency reduces billable hours and revenue and threatens the existing business model. For us, it's the opposite: efficiency and cost reductions benefit our clients and our business!  

The tools to change the billable hour model are finally here, and the firms that will thrive in the future are those willing to break free. At Litix Legal, we're not waiting for the revolution—we're leading it.