And, just to be clear, lawyers' fees are reasonable because lawyers have a duty to report fraudulent billing practices. If they don't, they can be disbarred. That duty to report covers all of the rules (excluding Rule 1.6 and information gained by lawyers participating in approved lawyers' assistance programs), and the reasonableness of fees absolutely includes consideration for this duty.
What about law firms with a single lawyer and the rest associates. Nobody reports anything. Lawyers round billing, type 5 words per minute, templatize their documents but charge as if writing from scratch, and play the system in many ways, double bill for multitasking status hearings, and so on. I would be more than happy to pay the billing rate if they actually worked those hours.
What do you mean by associates? Do you mean non-lawyers engaging in document preparation? If so, they might be criminally liable for the unlicensed practice of law. If they're also licensed attorneys, then again, you're paying for the firm's time, not a single lawyer's time. If a partner tells an associate to do something against the rules (i.e., superior tells subordinate to act illegally), "the subordinate is bound by the Rules of Professional Conduct notwithstanding that the lawyer acted at the direction of another person." (Rule 5.2(a)). The only exception is if it's an "arguable" question and the superior's instructions were reasonable in light of this.
For non-lawyer assistants, (see Rule 5.3), the lawyer must make reasonable efforts to ensure that the non-lawyer's work complies with the professional obligations of the lawyer. This mostly applies to cases when a non-lawyer assistant is sorting through documents and accidentally loses one that's later found by the media. Again, if they're doing anything that's the practice of law, they're committing a crime. The subordinate would be criminally liable, and the supervising lawyer would be professionally liable under Rule 5.3.
Associates are lawyers. The difference between an associate and a partner is the same as the difference between an employee and a founder in a startup: the employee gets paid a salary, the founder might get a salary but primarily draws his income from the success of the business.
Paralegals and office staff are not lawyers. Paralegals are allowed, by law, to draft legal documents. However, they cannot offer legal advice, and any documents they draft must be reviewed by a practicing lawyer.
Your opinion that a Wachtell attorney isn't worth >$1,000/hour is immaterial. As a matter of law, what they're charging is not unreasonable, because you're paying for more than the amount of time an attorney spends typing on a word processor. You're paying for the firm's experience and reputation. Moreover, many lawyers would have actual knowledge of the firm's fraud, were it to occur. By not reporting this information, they risk being disbarred and losing their livelihood. I don't generally like to endorse the efficient-market hypothesis, but it appears highly unlikely that there's a giant conspiracy that results in systemic under-reporting and non-enforcement of the rules...
I'm not buying it. There are a lot of reasons that reporting could be just as devastating as not reporting, except it's more likely to happen.
Imagine a James Lawyer at your prestigious $1000/hour partnership. He finds out Joe Partner is up to no good. What are his options?
Blow the whistle, get Joe Partner in trouble, get black-balled (if not outright fired [but, of course, not for whistle blowing]) and eventually (or immediately) have to find a new job. In trying to find other jobs, James finds nobody is interested in him in any capacity remotely near his previous level of employment, because, like any close professional community, everybody knows James is a whistle blower. He eventually has to settle for a position in a local law firm, make 1/3 what he was making before.
Or, don't blow the whistle. If Joe Partner eventually gets caught, James might get caught up in it, or he might be able to skate around it.
Do you really think no lawyers knew about Bernie Madhoff or World Comm or Enron? To say this ethical code of conduct justifies the high prices is laughable.
Lawyers regularly get in very severe trouble for breaches of legal ethics. The Enron, etc, examples aren't availing. Lawyers are required, legally, to rat out other lawyers for violations of legal ethics. They are not required to rat out their clients (and indeed are ethically prohibited from doing so). I'm sure lots of lawyers knew about Bernie Madoff and Enron, etc. But they were legally obligated not to disclose their clients' crimes.
Moreover, in your hypothetical, it's not just James Lawyer who can report the business practice. A judge reviewing a claim of attorneys fees could find something suspicious. An in-house guy reviewing bills could find something suspicious. Somebody at another law firm working jointly on a case could find something suspicious. Those people have no disincentive to report that conduct, and indeed their ass is on the line if they do not.
Do lawyers charge you for time while thinking about your case in the shower? Probably. Like any contractor, there is some margin for estimation while remaining ethical. But is there some grand conspiracy to systematically over-bill clients? There are just too many people who would have access to that knowledge, and who could only get in trouble for not ratting it out for that to be likely.
@SoftwareMaven: I never said "justifies," but I did say it's one factor that contributes to the inherent reasonableness of the fees. My argument is based on the law and professional practice, while your counter-argument is based on a hypothetical, conspiracy theory.
