Year End Legal Bills Should be Even More Closely Scrutinized as Lawyers & Paralegals Scramble to Meet Yearly Billing Targets

January 16, 2018

[The following is an update of a piece I wrote three years ago. Because of its importance  at this time of year I think the message bears repeating.]

It’s been said with good justification that “a lawyer’s pen gets heavier during the fourth quarter.”

Invariably, as the year nears an end, lawyers (and paralegals) scramble to find things to do in their files in order to make their firm’s hourly billing “targets” (i.e., goals) for the year. This invariably results in task padding as well as time padding.

Invariably I see more “drop-in” or “transient” billers show up in files during the last two months of the year than at any other time in the year. This if often caused by lawyers and paralegals begging their colleagues for work to do in order to reach their yearly billing targets.

You see a lot depends upon meeting law firm billing targets including firm bonuses and partners’ shares of the profits.  It sometimes may also mean whether or not you will have a job for the next year.   This was the situation apparently facing a Denver attorney that I recently blogged about. Afraid that she would  not make her yearly billing targets, she inflated some of her year end time sheets and lied about it when caught. The result was a 9 month suspension for the lawyer.

The pressures to make bonus or even keep your job are real. Thus, it is no wonder that more make-work projects and task padding occurrs during the final two months of a year that at any other time in the year.

But apart from concerns about the make-work projects and even making up tasks that invariably go on in the fourth quarter, there is something else that goes on in the fourth quarter: time padding.  Time padding occurs when lawyers and paralegals add time to legitimate tasks to try to make yearly billing goals.

Apart from the deliberate instances of time padding, time padding can also occur inadvertently when lawyers go back through all their files toward the end of the year looking to see if they recorded their time for tasks that might have been completed months ago.  In fact, I have reviewed bills in which the lawyer had included time for tasks from over a year ago.

When lawyers and paralegals do this, it is called “reconstructing” their time. And  when lawyers and paralegals do try to reconstruct their time, they invariably rely upon a faulty memory which, in turn, invariably leads more often than not to recording more time rather than less time.

But don’t take just my word for this. Prof. William Ross, considered the leading academic authority on attorney fee billing issues, believes that,“[a]lthough some attorneys lose money by forgetting to bill for various tasks that they performed, it is perhaps more common for attorneys to overestimate their time.” Wm. Ross, The Honest Hour – The Ethics of Time Based Billing (Carolina Press 1997) at p. 63.

Courts are also skeptical of the vagaries of reconstructed time. See Ramos v. Lamm, 713 F.2d 546, 553 n.2 (10th Cir. 1983)(“[R]econstructed records generally represent an overstatement or understatement of time actually expended . . . lawyers who remember spending the entire day working on a case are likely to overstate the hours worked by forgetting interruptions and intrustions unrelated to the case.”).

To limit the billing errors invariably caused by reconstructing time, billing guidelines should specify a maximum time limit in which the lawyer may bill for services.

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Why not start the new year off right with a review of your present billing guidelines by someone who has assisted corporations and insurers with updating or drafting their billing guidelines.  For more information, email John Conlon at jconlon@legalpointsllc.com.

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The Consequences for Attorneys Who “Knowingly” or “Negligently” Engage in Improper Billing

December 13, 2017

[Editor’s note: this is another in a series of blog posts addressing specific ABA Model Rules of Prof. Conduct (RPC) that impact how lawyers can and cannot bill clients.]

In my last blog post, I discussed the case of People v. Mary Jaclyn Cook, 17 PDJ 051(Colo. August 10, 2017) in which a lawyer got suspended from the practice of law for just preparing to send out legal bills with false billing entries and then initially lying about it to her supervisors. The case opinion noted that the lawyer had violated several of the RPC.

Before continuing with my series of posts on how the RPC impact how lawyers can and cannot bill clients, I thought that in light of the Cook   case it might be good to pause and discuss the consequences to attorneys for violating the RPC when it comes to billing for fees and costs.

But before discussing consequences, let’s discuss a misconception of many attorneys that the RPC only apply to how they bill their clients. No less an authority than the U.S. Supreme Court has held that ethics in fee billing apply not only in situations involving the client, but also in situations involving the client’s adversary. See Hensley v. Eckerhart, 461 U.S. 424 (1983)(“Hours that are not properly billed to one’s client also are not properly billed to one’s adversary.” citing Copeland v. Marshall, 205 U. S. App. D. C. 390, 401, 641 F. 2d 880, 891 (1980) (en banc) (emphasis in original).).

And for those Cumis or Peppers or independent counsel do not think that the same ethics they must follow when billing clients do not apply or apply differently when they bill insurers, they may want to read Center Foundation v. Chicago Insurance Co., 227 Cal.App. 3d 547, 560 (2nd Dist. 1991)(court holding that Cumis counsel must engage in “… ethical billing practices susceptible to review at a standard stricter than that of the marketplace.”). They may also want to read In Re Jerome Berg, 3 State Bar Ct. Rptr. 725 (Rev. Dept. 1997) (attorney disbarment wherein independent counsel held responsible for unethical billing to insurance companies).

In short, the RPC apply all the time to all situations in which an attorney may bill fees and costs.  Also, nowhere in the  RPC does it say that the rules are different for patent lawyers or real estate lawyers or environmental lawyers. The RPC apply with equal force in all types of billing situations.

And now for the consequences of improper billing.

Whenever I do a seminar for attorneys on ethics, I always tell them that there are three things they should especially avoid doing: drugs, sex with a client, and messing with a client’s money.  I tell them that if they are caught doing one of these three things, they will find that harsher discipline will be imposed on them.

I know harsher discipline is meted out to attorneys who improperly bill from following lawyer disciplinary cases and from reading the ABA Standards of Imposing Lawyer Sanctions. These ABA Standards are what state disciplinary authorities tend to follow when meting out lawyer discipline for violating the RPC. Think of the ABA Standards as being like the Federal sentencing guidelines which Federal judges following when imposing sentences in Federal court.

If you read the ABA Standards, you will see that harsher penalties, such as disbarment or suspension, are called for when an attorney “knowingly” improperly bills a client. See, e.g., In re Disciplinary Proceeding against Vanderbeek, 101P.3d 88 (Wash. 2004)(disbarment for bill padding).

Note that the higher standard of discipline applies not only to how attorneys bill fees, but can also apply to how they bill for expenses. Recall that Clinton pal and former Deputy Attorney General Webster Hubbell was permanently disbarred in Arkansas for overbilling both his clients and his law firm for expenses. Also see In re Mitchell, 2014 WL 1800065, (La., 2014)(attorney permanently disbarred with no opportunity for reinstatement for billing both client and law firm for expenses).

But what if an attorney is only “negligent” in improperly billing a client? Even if the attorney is only negligent, the ABA Standards still provide that discipline in the form of a reprimand or admonition is appropriate.

Although a reprimand sounds like a benign “once and done” type of a discipline, it could have long lasting adverse consequences. This is because public reprimands are reported as cases just like other types of judicial cases.  See, e.g., In Re Daniel G. Areaux, 823 N.E.2d 1192, 1193 (Ind. 2005)(“The respondent violated Indiana Professional Conduct Rules 1.4(a) and 1.4(b) by failing to keep his client reasonably informed of her escalating attorney fees owed to respondent and Baker & Daniels.”).

Since disciplinary cases are reported cases, this means that for years to come,  prospective clients who Google the attorney’s name will discover that the attorney has been disciplined in a case involving legal fee billing. This certainly cannot be good for business. As I tell attorneys in my ethics seminars, “you never want to see an ‘In re’ before your name in a case unless you are dead and the case is about your estate.”

In my next blog piece, I will resume my discussion of the different RPC that affect how attorneys can and cannot bill for fees and expenses.

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Have questions about whether an attorney is engaging in unethical billing practices? If so, contact the only fee bill expert in the U.S. who has served as a state bar Legal Ethics Committee Chair and has qualified in court as an expert on legal ethics and the ABA Model Rules of Professional Conduct.


Lawyer Who Prepared Legal Bills With Fake Hours Loses Job & Is Suspended From Practice of Law

October 11, 2017

[Editor’s note: this is another in a series of blog posts addressing specific ABA Model Rules of Prof. Conduct (RPC) that impact how lawyers can and cannot bill clients.]

In my previous blog post, I covered RPC 1.4 Communications. This is the RPC governing how lawyers communicate their fees and costs through their billing statements to clients.

Normally lawyers run afoul of RPC 1.4 (and other RPCs) by sending out legal bills with false billing entries. But as is illustrated in the case of People v. Mary Jaclyn Cook, 17 PDJ 051(Colo. August 10, 2017), lawyers also can get into trouble for just preparing to send out legal bills with false billing entries.

The facts as reported in the Cook case are that attorney Cook returned from a two-week honeymoon in late 2016 and discovered that she would be unable to meet her firm’s minimum hourly billing “expectation” for the year. Thereupon Cook decided the way to meet her firm’s annual billing expectation was to pad her year end bills with fake time which totaled almost $40,000 in time that she did not work.

When confronted by her supervising partners, attorney Cook initially maintained that the billing entries were legitimate. Later that same day she confessed that she had fabricated and inflated time entries.

Unfortunately for attorney Cook, her decision wound up not only costing her a job, but also a nine month suspension from the practice of law for violating the RPC. Read the rest of this entry »


How ABA Model Rule 1.4 on Communication Impacts How Lawyers Can Bill For Their Fees and Costs

September 11, 2017

[Editor’s note: this is another in a series of blog posts discussing how specific ABA Model Rules of Prof. Conduct that all lawyers must follow impacts how lawyers can and cannot bill clients.]

Rule 1.4(b) Communication provides that “[a] lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”

In interpreting an attorney’s duty of “communication” pursuant to RPC 1.4, courts have held that an attorney has a mandatory ethical duty to “clearly explain” fees and costs to clients. See, e.g., Board of Prof. Resp., Wyoming State Bar v. Bruce S. Asay, WSB #5-1739, 2016 WY 47 (WY 2016)(court found that attorney violated rule 1.4 by failing to “clearly explain” to client the charges).

Providing a “clear explanation” has been interpreted to mean that each billing entry in a fee bill must be sufficiently explained. See ABA Formal Op. 93-370 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”). Courts deny compensation for billing entries that are not sufficiently explained as they do not provide a basis for determining the reasonableness of the billed for fee or cost. See, e.g., 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.”). Read the rest of this entry »


How ABA Model Rule 1.2 on Client-Lawyer Relationship Impacts What Lawyers Can Charge

July 31, 2017

[Editor’s note: this is another in a series of blog posts discussing how specific ABA Model Prof. Conduct Rules that all lawyers must follow impacts how lawyers can and cannot bill clients.]

In this blog piece, I will discuss how Rule 1.2 Scope of Representation and Allocation of Authority between Client and Lawyer affects how lawyers ethically can bill for their services.

In setting out the allocation of authority between the client and lawyer, Rule 1.2 provides that the big picture items in a representation such as deciding on the “objectives” of the representation including whether to settle or arbitrate or go to trial are the client’s responsibility whereas the details in a representation such as deciding upon the “means” or the steps that need to be taken to carry out the strategy to achieve the objective are the lawyer’s responsibility.

But in deciding upon the steps involved to carry out the objectives of the representation, Rule 1.2 at Comment [2] provides that “lawyers usually defer to the client regarding such questions as the expense to be incurred.”  As a result, lawyers have a duty to discuss the costs of carrying out any proposed strategy with the client and get the client’s consent to the proposed costs.

In an “independent counsel” situation in an insurance context, a lawyer’s statement to a client that the “insurance company will pay my fees and costs” may not be an accurate statement. This would especially be the case if the lawyer has not actually reached an agreement with the insurance company as to the costs of the planned defense. Read the rest of this entry »


How ABA Model Rule 1.1 on Competence Impacts How Lawyers Can Ethically Bill

June 21, 2017

[Editor’s note: this is another in a series of blog posts discussing how specific ABA Model Prof. Conduct Rules that all lawyers must follow impacts how lawyers can and cannot bill clients.]

In this blog piece, I will discuss how Rule 1.1 Competence affects how lawyers ethically can bill clients.

Rule 1.1 specifically states that “A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”  What Rule 1.1 means in essence is that when agreeing to take on a representation, a lawyer is impliedly – if not actually – making a representation to the client that the lawyer has the basic “legal knowledge” and “skill” necessary to handle the matter.

While issues related to competency can arise in any type of case, they most often arise in non-routine cases. Knowing as I do that most all lawyers hate to turn down business, lawyers often will say that they are competent to take on a case even though they have not handled that specific type of case before.  But if being fully truthful, what they are really saying is that while they believe that they have the “legal skill” to take on the case, they actually lack the “legal knowledge” on the types of issues involved in the case. Read the rest of this entry »


What Clients Should Know About How Attorney Ethical Rules Impact Billing for Legal Fees & Costs

May 4, 2017

If you were to ask a group of lawyers to name an ethical rule that applies to billing for fees, I would suspect at least 90% would name Rule 1.5 Fees – probably because it is the only ethical rule that has the word “fees” in the title!

Now ask those same lawyers to name other ethical rules that may also apply to fee billing and you would probably get mostly puzzled looks. For based upon my own experience in counseling scores of lawyers over the years on ethical issues involved in fee billing, I doubt that 1 in 100 lawyers could correctly name  another ethical rule, let alone several other ethical rules, that might also apply to their billing for fees and costs.

So what are the other attorney ethical rules that apply to billing for fees and costs? Most can be found in ABA Standing Comm. On Ethics and Prof. Resp., Formal Op. 93-379 (1993) “Billing for Professional Fees, Disbursements and Other Costs.” The Opinion discusses the various Rules of Prof. Conduct (RPC) that govern all attorney conduct and may be implicated in legal billing. They include among others, Read the rest of this entry »