Sufficiency in a Billing Entry like Beauty Lies in the Eyes of the Beholder.

In going over all the posts I have written in the past 11 years of doing this blog, I was surprised to see that I had not written any posts on the top bill reduction categories of block billing, insufficient explanations, inappropriate staffing, and excessive time. While I have commented on each of these billing issues in different posts, I have never written a separate post on each of these issues. So in this post and in the course of the next several posts I will rectify that situation.

I will start with the issue of “insufficient explanation.” This is the issue that is most appropriate to start with because without a sufficient explanation, it is absolutely impossible to determine the reasonableness of the task or reasonableness of the person performing the task or the reasonableness of the time billed to perform the task.

You will note that I use the term “insufficient explanation” rather than “vague explanation.” This is because attorneys are ethically obligated to provide a “sufficient explanation in billing statements] so that the client may reasonably be expected to understand what fees and other charges the client is actually being billed.” See ABA Comm. on Ethics and Prof. Responsibility, Formal Op. 93-379 (Dec. 6, 1993) at p. 3.

This duty to provide a sufficient explanation of billing entries is part of a broader ethical duty an attorney has to properly communicate with clients on matters so that the client can make informed decisions on matters involved in the representation. See ABA Model 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.”).

And what constitutes an “insufficient” (or “vague”) explanation in a legal bill like beauty lies in the eyes of the beholder. Or with regard to legal bills, what constitutes sufficiency in billing entries lies in the eyes of the one paying the legal bills. And if the legal bill is to be paid solely by the client, it is the client who gets to say how much information is needed in a billing entry to make it sufficient. See The ABA Lawyer Task Force on Lawyer Business Ethics, (1996)(“Each invoice should clearly identify the legal services provided in such specificity as the client requests.”). And different types of clients require different levels of explanation. For example, an experienced corporate lawyer who is used to dealing with lawyers and their legal bills may require less detail in billing entries than an individual who has never worked with a lawyer.

But what if the client is not the one who is going to pay the attorney’s legal bills. What if the client’s legal bills are to be paid by a third party payor or the loser in a fee shifting case. In situations where the client is not paying the legal bills, does an attorney still have an obligation to provide a “sufficient explanation” of billing entries? The answer most definitely is “yes” and it covers two specific types of situations.

One situation is where the attorney’s client did not first review the legal bills before they are sent to someone else for payment. In those situations, the courts extend the rights of client with regard to determining reasonableness in legal bills to those paying the legal bills. 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).). Thus, if it was not reasonable to bill insufficiently explained entries to a client, it is not reasonable to bill insufficiently explained entries to a third party payor.

But what if the client did review the legal bill entries and did not raise any objections as to sufficiency or reasonableness of billed for fees and costs? Is a third party payor bound by the client’s determination of what was reasonable in the legal bills? The answer to this question is “no.” A third party payor (and a court) always have the right to review legal bills for reasonableness “no matter what the client has agreed to.” See ee ABA Annotated Model RPC (7th ed. 2011) at p. 74, Review for Reasonableness, Review Always Available. In other words, just because a client agreed to or did not object to something in a legal bill does not make it reasonable when a third party is paying the bill. See Halderman v. Pennhurst State School & Hosp., 49 F. 3d 939 (3rd Cir. 1995)(“The fact that a private client may accede to . . . pay the additional fees does not necessarily make them reasonable nor necessary when they are to be paid by the other party to the proceedings.”).

In sum on this point, attorneys have a duty to provide a “sufficient explanation” in all their billing entries. This duty not only applies to legal bills paid by the client but also to legal bills paid by someone other than the client.