Three Peas in the Same Pod: Minimum Incremental Billing, Task Oriented Billing, and Rounding Up of Time

Minimum Incremental Billing, Task Oriented Billing, and Rounding Up of Time are among the more common billing schemes I run across in my legal bill reviews. While each of these billing schemes is different, they all are related in that they involve adding in more time than an attorney actually works. And billing more time than actually spent on a task is unethical. See ABA Formal Op. 93-379 (1993)(“[a] lawyer may not bill for more time than she actually spends on the matter”).

Minimum incremental billing occurs when any task is billed at a minimum amount of time such as .2 hour. Thus emails, telephone calls, and letters or other tasks that may take .1 hour or less to complete are billed at a minimum of .2 hour.  Minimum incremental billing is pretty easy to spot. It can be shown in legal bills by a lack of tasks that are billed at .1 hour. Of course, an attorney may just be writing off the time taken to complete small tasks which is commendable. However, a close examination of all the tasks billed at .2 hour may lead to the conclusion that small amounts of time are being rounded up rather than written off.

Task oriented billing occurs when certain tasks are billed at a minimum amount of time. It is really just minimum incremental billing applied to tasks. For example, a minimum of .2 hour is billed for any phone call or .5 hour is billed for the preparation of any letter or other document.

Task oriented billing can be fairly easy to spot by looking at the time billed for phone calls and document preparation. For example, if .5 hour is billed for the preparation of simple form documents that should take only a few minutes (at most) to prepare such as a Notice of Deposition or a Notice of Appearance, then task oriented billing is likely occurring. Similarly, if no phone calls or letters are billed at less than .2 hour (or more), then task oriented billing is likely occurring.  See In re Tom Carter Enterprises, Inc., 55 B.R. 548 (Bankr. C.D. Cal. 1985)(“Very few phone calls last more than one-tenth of an hour, and . . . It rarely takes more than one-tenth of an hour to read an incoming letter or write a short letter . . .”)

Rounding up of time is what the term implies. It is adding in more time or rounding up of time for all tasks usually to the next even hour increments such as .4 hour, .6 hour, .8 hour or 1 hour.  It is perhaps the easiest time enhancer to spot as it can be spotted by the prevalence of time being billed in even hour increments.

Rounding up of time time billed also can be spotted by plotting the time entries on a scattergraph. Time entries plotted should appear in a random pattern on the graph. If there are concentrations of time in certain billing increments, this could be a sign of the rounding up of time. This is because an attorney “does not work more often for a half-hour than for 20 or 40 minutes.  Only if there were rounding up would there be a concentration of half or full hour billings.” See Gerald Phillips, Reviewing a Law Firm’s Billing Practices, ABA Prof. Lawyer (Fall 2001). In other words, there should be just as many billing entries for .1 hour as for .2 hour or .3 hour and so on.

Of course, impermissible rounding up of time may not always be the attorney’s fault (except in the failure to proofread bills before being sent out). In some law firms the billing programs are programmed to impermissibly round up time when the timekeeper records time in minutes rather than tenths of an hour.  For example, a task that the timekeeper records as having taken 7 minutes to complete may be rounded up to 0.2 hour rather than rounded down to .1 hour by the law firm’s computerized billing program.

I know that errors in computerized billing programs do occur because I will often divide the number of hours billed by an attorney into the total time billed and get a number that is not the attorney’s hourly rate.  I have also talked to e-billing program vendors who state that their e-billing systems regularly catch between 1% and 2% in law firm “math” errors.

But while these billing schemes as played out often do involve small increments of time, cumulatively they can add up to significant amounts. See William G. Ross, The Honest Hour, Carolina Academic Press, at p. 166 (“the combination of large billing increments and liberal rounding techniques costs clients untold millions of dollars every year”).  Also see Leigh, Schroeder, Wolf, U.S. Business Litigation, p. 16 (Nov. 1997)(“Rounding up can easily inflate a legal bill by 15% to 30%, if not more, depending upon how frequently and to what extent it is used.”).

Unfortunately, my experience is that impermissible billing schemes usually do not occur in isolation. If an attorney is purposefully impermissively rounding up time on small tasks, why would the attorney stop there? If impermissible rounding up is occurring on small increments, you can presume that it is likely  being done in larger time charges.

And even more troubling. If an attorney would lie to a client on a legal bill, what else would the attorney lie to the client about? Is deliberately overbilling a client a symptom of an even greater problem involving trust which should be at the very heart of an attorney-client relationship? Many legal and ethical scholars think that it is. More on this in a future post.

Does your company have litigation and billing guidelines that mirror an attorney’s ethical obligations under the ABA Model Rules of Prof. Conduct?  As the only legal billing auditor in the U.S. who has served as a state bar association Legal Ethics Committee Chair, I truly have a unique insight into legal billing and ethical issues.  This is why I specialize in drafting litigation and billing guidelines that are not in conflict with an attorney’s ethical obligations under the Model Rules. For more information, please contact me at jconlon@legalpointsllc.com

Increasing Hourly Rates During the Course of A Representation

[Note: This is the time of year that many clients will be getting notices or requests from their attorneys that their hourly rates will be increasing. Thus, I thought it would be a good idea to re-post something I did four years ago on the subject of increasing hourly rates during the course of a representation.]

If you recently have had any of your attorneys ask for a 5% increase in their billing rates you might want to refer them to Judge Richard Posner’s recent decision in Prather v. Sun Life . In that case, he found a 5% increase in billing rate to be “excessive!”

Just for kicks, I encourage you to read Judge Posner’s entire opinion in the Prather case. The Judge is well known for his often thought provoking opinions and statements on a wide variety of subjects. He also sometimes has an entertaining tongue-in-cheek way of presenting his opinions and Prather is an example of this.

But back to the subject of increases in billing rates. I often come across this issue in reviewing legal bills in cases or other legal matters which drag on for years. So I thought it time to set out some basic facts on the subject.

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The Importance of “Sufficiently Explained” Billing Entries

All attorneys have an ethical obligation to provide a “sufficient explanation” in their billing entries. See ABA Formal Op. 93-370 (1993) at p. 3 (attorney must provide a “sufficient explanation in the statement so that the client may reasonably be expected to understand what fees and other charges the client is actually being billed”). This ethical  obligation to provide sufficient explanations of billing entries is a part of an attorney’s ethical duty as found in RPC 1.4(b) (“A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”).

Without sufficiently explained entries, courts have held that it is impossible for any fee bill to be reviewed for reasonableness. See Daniel Orme v. Burlington Coat Factory of Oregon, LLC, 2010 WL 1838740 (D. Or. 2010)(attorney “must provide enough detail for the court to determine whether the time spent on a task was reasonable.”). As a result, courts are uniform in denying payment for legal work that is not sufficiently explained. See Grievson v. Rochester Psychiatric Center, 2010 WL 3894983 at *8 (W.D.N.Y. 2010)(“Individual entries that include only vague and generic descriptions of the work performed do not provide an adequate basis upon which to evaluate the reasonableness of the time spent.”).

Since the providing a sufficient explanation of billing entries may mean the difference in getting paid or not, an attorney rightly may ask what exactly constitutes a “sufficient explanation?” Or stated another way, how much detail should be provided in a billing entry?

[For a complete copy of this blog post, contact clientservices@legalbillaudit.com]

Avoiding Getting Caught Up in a Law Firm’s Protocols – II

In my last post entitled Avoiding Getting Caught Up in a Law Firm’s Protocols, I discussed how getting caught up in a law firm’s protocols on approaching even the smallest of matters often leads to overbilling and more importantly, overlooking any real opportunities to quickly and efficiently resolve a matter for a client. To avoid getting caught up in a law firm’s standard protocols on how they approach most all legal matters, I ended my prior post with three important steps to take. In this post I will discuss each one of those steps.

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How to Avoid Getting Caught Up in a Law Firm’s Protocol

Some time ago, I had a doctor come to me for help sorting out a large legal bill he had incurred with a large law firm.  He had a Medicare billing problem and had gotten into some trouble with the feds.  Although he incurred several hundred thousand in legal fees from this law firm, the firm did little to resolve his Medicare billing problems.  So the cardiologist went to an attorney at a small firm who was able to quickly and satisfactorily the Medicare billing issues.  The total bill from the new attorney at the small firm was less than $10,000.

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A Good Tip to Save on Legal Costs & Get Better Results

Here’s a tip for small to mid-sized insurers that will not only save on legal costs, but will lead to improved indemnity results as well. I say it’s a tip for small to mid-sized insurers because it’s a tip about something that large insurers already know. And the tip is to use coordinating counsel to oversee or coordinate like or similar litigation that occurs in different jurisdictions.

Coordinating counsel are often used by larger insurers to coordinate product liability cases in which the a manufacturer’s product has led to numerous suits on the same issues in different jurisdictions.  Of course, most small to mid-sized insurers do not ordinarily insure large manufacturers. But they do get sued for coverage (some on a more frequent basis than do larger insurers!). So whether it is product liability cases or coverage cases or just about any other types of cases that are similar, but occurring in different jurisdictions, consideration should be given to hiring coordinating counsel.

[For a complete copy of this blog post, contact clientservices@legalbillaudit.com]

Why Use of “Blended Rates” May Actually Increase Legal Costs

For the non-business readers of this blog, “blended rates” are negotiated rates with a law firm that involve blending or averaging partner and associate hourly billing rates of a law firm.  Insurance companies are big users of blended rates.

The way blended rats work is simple. If the partner’s hourly rate is $400 an hour and the associate’s hourly rate is $300, a blended rate might be $350. But whether you can save by using blended rates in a particular case actually will depend on the type of case.  For example, if the case is complex and heavy partner involvement is anticipated, you can save on legal costs. Continue reading

COVID-19 Insurance Coverage Update

In a prior post, I predicted that “if history is any guide, policyholders may win most of the coverage cases” for COVID-19 related claims. I stated that my “prediction is based on the insurance industry’s experience in litigating various policy issues for environmental claims coverage 30 years ago.”

Apparently, I was prescient in my likening the COVID coverage claims wars to the environmental coverage claims wars. For in reading news accounts, it appears that policyholder coverage attorneys are doing their best to link COIV-19 claims to environmental claims by likening COVID-19 clean-up or property damage claims to pollution clean-up or property damage claims or COVID-19 exposure claims to exposures to asbestos fibers or exposure to toxic vapors or fumes. Continue reading

Whether a $1,000 an Hour for a Lawyer is Reasonable Depends on Whether You Need a Cadillac Escalade or a Honda Civic

“[T]he Court’s review of Sheppard Mullin’s bills suggests that the Beastie Boys opted to pay for, and received, the Cadillac Escalade, not the Honda Civic.” Beastie Boys v. Monster Energy Co., 112 F. Supp. 3d 31  (Dist. Court, SD New York 2015).

A D.C. lawyer recently asked me if I thought $1,000 an hour for a lawyer was reasonable. Being a lawyer myself, I gave him a lawyerly answer that “it depends.”

I’ve written posts before in this blog about $1,000 and even $2,000 an hour lawyers.  As I stated in one of those prior posts, an “expert” who consults on litigation management issues with corporations (who are the ones who mainly hire the $1,000 and $2,000 an hour lawyers) told me that lower rates are actually viewed as a negative by large corporations. Apparently very good $500 an hour lawyers are not looked at in the same favorable way that mediocre $1,000 lawyers are simply based upon their hourly billing rates. Continue reading

Why Insureds May Win COVID-19 Claims Coverage Cases.

Media reports are that many businesses and non-profits are looking to their insurers for “business interruption” and other coverages due to the COVID-19 pandemic. At first blush, it would appear that these claims for coverage face an uphill battle based upon what might be termed clear policy language (specially manuscripted policies notwithstanding).

But it would be premature for the insurance industry to declare victory on the coverage issues. For if history is any guide, policyholders may win most of the coverage cases.

Mr prediction is based on the insurance industry’s experience in litigating various policy issues for environmental claims coverage 30 years ago. As a former Director of Environmental Claim for two insurers during the environmental claims coverage wars, I witnessed first hand how clear and otherwise unambiguous policy language did not save the insurance industry by and large from having to provide coverage for environmental claims and their massive clean-up costs. Continue reading