How To Discuss Fee Bill Issues With Your Lawyer – Part III

[This is the third post in a series on how to discuss fee bill disputes with your lawyer. If you have not done so already, it is a good idea to read the first two posts in this series as they detail steps that should be taken before getting to the point where the additional steps outlined in the post should be considered.]

In my last post in this series, I ended with the assumption that communications with your lawyer and/or the firm’s managing partner or other partners in the firm failed to resolve the billing issues.  In this post I will discuss what additional steps may be taken to resolve the billing issues once direct communication has not worked or has broken down.

Mediation or Arbitration 

One step you may may want to consider is mediation or arbitration of the dispute.  The ABA Model Rules of Prof. Conduct encourage lawyers to resolve client disputes with through mediation or arbitration and many state and local bar associations have fee dispute mediation or arbitration programs.  Some mediation or arbitration programs may be free or the they may charge only a nominal fee. It is also important to note that in some states, mediation or arbitration is mandatory for the lawyer if the lawyer’s client requests it.

If your county or city bar association does not have a fee bill dispute program, there may be such a program available through the state bar association.  You can contact your state’s bar association for information.* Notwithstanding whether a bar association has a fee bill dispute mediation or arbitration program, many bar associations may still provide publications to the public on how to work with an attorney to resolve a fee billing dispute.

  • Mediating a Fee Bill Dispute

Mediation programs are often favored in dispute resolution because they generally are informal and non-binding. One important thing to keep in mind is that a mediator does not make a final decision as an arbitrator or judge would do in a case. Rather, a mediator just helps you and the lawyer come to a mutually agreeable solution.

As mediations do tend to be informal, the rules of evidence and other legal procedures that apply in a court of law are usually not applicable in a mediation. However, this does not mean that mediation programs will not have some rules or procedures that must be followed. But the rules or procedures usually will be less formal than found in arbitrations or court proceedings. And because of the overall informal nature of mediations, they can be less stressful than arbitrations.

You can hire a lawyer to represent you in a mediation. But because of the informality of a mediation, you usually can represent yourself in a mediation.  And perhaps best of all, if you do not like the outcome of the mediation, you are not obligated to sign any agreement and thus you are not bound by the results of the mediation.

  • Arbitrating a Fee Bill Dispute

While mediations then to be more informal, arbitrations are more formal and can be more like a trial. In an arbitration, the arbitrator or arbitration panel will act like a judge in a civil trial. And while some arbitrations can be non-binding, most of the time they are binding.

Many fee or retainer agreements contain a clause providing that a dispute or claim against the lawyer including a fee bill dispute or a malpractice claim must be submitted to binding arbitration. For such a clause to be valid, however, the lawyer should separately explain the effects and ramifications of arbitration to the client so that the client can make an “informed decision.” See ABA Formal Op. 02-245 (2002) Retainer Agreement Requiring the Arbitration of Fee Disputes and Malpractice Claims at p. 7.

Also note that a binding arbitration clause in a fee agreement may not necessarily trump a client’s right to seek non-binding arbitration or mediation. See, e.g., Calif. State Bar Arbitration Advisory 2012-02 (Mar. 16, 2012) Arbitration Agreements at p. 1 (“[B]inding arbitrations agreements do not extinguish a client’s right to non-binding MFA under Business & Professions Code § 6200.” citing Benjamin, Weill & Mazer v. Kors (2011) 195 CA4th 40, 53.).

As noted, while some arbitrations can be non-binding, most arbitrations are binding. This means that once you arbitrate the dispute, you are bound by the outcome.  And while arbitrations may not have all of the same rules that a regular court would have, certain rules of evidence may still apply.  Because of this and if the arbitration is to be binding, you definitely should consider having an experienced attorney represent you at an arbitration.

Filing a Suit

In more serious instances of overcharge – especially where you may have paid the lawyer a substantial amount of money and where the lawyer or his partners have refused to discuss the matter with you or agree to mediate or arbitrate the dispute – you may have no choice but to file a suit.

To determine whether or not you have adequate grounds to file a suit, I would refer you to a local attorney who specializes in attorney malpractice or professional responsibility. Many city and county bar associations have referral services that can direct you to a  attorney who is qualified in these areas of practice.

One thing to emphasize is that even though a court may find that your lawyer overcharged you and you are entitled to a refund, this may not mean that you will get all your money back. You will likely still owe the lawyer a “reasonable” fee for her services.  On the other hand, some  courts  have  held  that  lawyers  who  have committed  serious  breaches  of  their  fiduciary  or  ethical  duties  owed  to  clients have forfeited their right to any compensation and cannot recover even on the basis of quantum merit. See, e.g., Lance Holding Co. v. Ashe, 533 So. 2d 929 (Fla. Dis. Ct. App. 1988)(“An attorney displaying conduct sufficient to void an agreement in law should  not  be  allowed  to  profit  from  his  blatantly  unprofessional  conduct  in equity.”). Again, a local lawyer who specializes in attorney malpractice or professional responsibility can advise you on this point.

The Nuclear Option: Filing a Disciplinary Complaint

Another option to consider in resolving a billing dispute with a lawyer is filing a disciplinary complaint. This would be an option if the lawyer has violated one or more of the ethical rules that apply to lawyers when billing for fees and costs. But while I label this as an “option,” it is really not so much an option as you might think it is especially if your main objective is to successfully resolve the billing dispute with your lawyer. I will go over what I mean by this statement as well as cover all the other issues involved in filing a disciplinary complaint against a lawyer over a billing dispute in my fourth and final post in this series.

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* There is no link that I can provide you with to find out contact information on state bar mediation/arbitration programs. However, I do have a PDF document put out by the ABA that provides this information. If you would like a copy, please contact clientservices@legalbillaudit.com and request a copy of “Directory of Fee Arbitration Committees.”

 

Overbilling Lawyer Gets Support From Her Overbilled Clients

Making the rounds of legal publications last month was a story about an attorney in MA who was suspended for 6 months for overbilling her clients by 450 hours. According to the facts set out in IN RE: DOREEN ZANKOWSKI , the attorney claimed to have worked an incredible 3,893 hours in one year. This included 3,173 billable and 720 non-billable hours.

And according the Opinion, in addition to inflating her own hours, the time billed to clients by associates who worked under her was also inflated. However, there was no word in the Opinion as to what was done with the associates who were aware that their time was being inflated.

In reading the unusually long 42 page Opinion, something strange caught my eye.

Rather than being outraged at being overbilled, some of the attorney’s overbilled clients actually testified on her behalf.  Among the supporting clients who testified was one who stated that they were very satisfied with her work and never questioned her bills “since they were so much lower than prior counsel’s.”  Another client testifying on the attorney’s behalf stated that he always reviewed the attorney’s bills and had never found anything wrong.  (Memo to self: find out who these clients are and contact their CEO’s about the need for fee bill auditing.)

Unfortunately for the attorney, the Hearing Committee of the MA Board of Bar Overseers didn’t credit the testimony of the attorney’s client witnesses. As the Committee noted, most of the fees were being paid by insurers and they therefore inferred that the clients likely “paid scant attention to the bills.” (Memo to self: find out who these insurers are and contact their CEO’s about the need for a fee bill auditing program or an outside audit of their existing fee bill auditing program.)

Initially I thought the attitude by these supporting clients to be a variant of the Stockholm Syndrome. That is, these clients were likely so captivated by the attorney’s  good works to the point that they were not only willing to overlook her obvious overbilling, but were also willing to come to her defense to avoid punishment for overbilling them.

But then I realized that is likely that at least some of the individuals who testified on behalf of the unnamed clients were probably General Counsels.  As such, they could be generous in that it was not their money, it was someone else’s money. But even where a company’s own money is involved, it has been been my observation and experience over the years that many GCs rarely complain about the size of their company’s legal bills.  

The reason that many GCs rarely complain about their legal bills is two-fold. Either they likely  “have a personal relationship with outside counsel or because they don’t want it known that they have been overbilled.” Margaret A. Jacob, Overbilling Is Widely Known at Major U.S. Law Firms,WSJ (Sept. 17, 1997).  With regard to the latter point, isn’t a good offense always better than a good defense? So much better to pound the table and emphasize the good works that occurred on their watch hoping that this misdirection will turn attention from the bad deeds that also occurred on their watch.

But I don’t want to pick solely on GCs. Over the years, I also have found that many non-attorney clients also will often turn a blind eye to obvious attorney overbilling.  Just as some GCs so often do, non-attorney clients often “do not care whether attorneys bill their time ethically if they receive satisfactory services.” Carl Selinger, “Inventing Billable Hours: Contract v. Fairness in Charging Attorney’s Fees,” 22 Hofstra L. Rev. 671 (Spring 1994).

But providing satisfactory services and good works should never be used as reasons to excuse attorneys who pad their bills and bill clients for more time than actually worked. It is wrong as wrong can be and shame on any GC or any non-attorney client who tries to use these reasons as an excuse for looking past an attorney’s ethical lapses in overbilling.

If there is a good actor in this story it is the attorney’s law firm management. For it was the firm, rather than the clients, who filed the disciplinary complaint against the attorney. The firm also made restitution to the overbilled clients as well as separated the firm from the attorney.  But at what particular point the firm’s internal mechanisms for identifying overbilling kicked in was not made clear in the Opinion.

Surely billing over 3,000 hours a year should raise a red flag at any law firm. But should the flag be raised for lesser amounts of billable hours? At least one very influential leader in the legal profession once stated that billing over 2,000 a year should be a cause for concern.  See William H. Renquist, Dedicatory Address:  The Legal Profession Today, 62 Ind. L. J. 151, 155 (1987)(“If one is expected to bill more than two thousand hours per year, there are bound to be temptations to exaggerate the hours actually put in.”).

Of course, a client can protect itself from overbilling attorneys by setting up a robust legal bill review program. But that will invariably identify the overbilling after the fact.  To deal with the issue before the fact, clients should quiz their law firms on what mechanisms they employ to detect overbilling and at what point do these mechanisms kick in. Law firms that do not have a defined mechanism to spot overbilling or set the point too high at which the mechanism kicks in should be avoided.

Finally, a word to lawyers about the long term effects of overbilling your clients. Remember that your name can live forever on the Internet. If you Google this attorney’s name, the listed results on her overbilling take up an entire page. Many of these will drop off with time, but not all of them. So if you have been caught overbilling, prospective clients will likely find this out well into the future if they Google your name.

Also, a six months suspension without automatic reinstatement can sometimes mean that the actual down time is much longer. In some states, the process for reinstatement can take a year or longer. And a suspension means just that and nothing else. It cannot be termed as a sabbatical or an extended vacation. An attorney can be subject to further discipline by not stating the real reason for an extended absence from practice. See, e.g.,  In re Sniadecki, 924 N.E.2d 109 (Ind. 2010)(attorney disciplined for telling clients he was just “stepping away from my practice for six months” rather than saying he had been suspended for 6 months).

The overall takeaways from IN RE: DOREEN ZANKOWSKI are these.  Lawyers have an ethical duty to truthfully bill their clients and law firms have an ethical duty to set up mechanisms to ensure that this is happening.  Clients can help in this effort in many ways including setting up a robust bill review program that can spot overbilling early on before it gets to the point of becoming a real ethical issue for a lawyer. But one way that is definitely not helpful is for clients to offer lame excuses for the lawyer’s unethical overbilling.

Googling To Find Out If Your Attorney Uses Form Documents

In a prior blog post entitled “The ‘Does Anyone Have A Form That I Could Use’ Practice Section,” I poked gentle fun at a state bar practice section I belong to because most of the posts on the section listserve were from attorneys asking other attorneys if anyone had a particular form document that the inquiring attorney could use. Due to the volume of such requests, I had found it both amusing as well as telling that an awful lot of what attorneys do in most any practice area has to do with using forms.

And it seems that you no longer have to ask a fellow attorney for a form. You can just Google the name of a Motion or other type of legal document and you often will find a form. I have done this countless number times when reviewing legal bills from attorneys throughout the U.S.

Recently I had occasion to look up a Notice of Motion and Motion to Compel Testimony and Production of Documents in California. I suspected that the document the attorney billed 2 hours to prepare was a form document. So I Googled it, and sure enough I was taken to a form document. This form document not only had the basic form Notice and Motion, but it also had the argument for the attorney to use in support of the Motion including the supporting case authority. Comparing the attorney’s Motion with the form Motion, I could see that 90% of what was in the attorney’s Motion was in the form Motion. And the 10% the attorney had added did not take 2 hours. Continue reading

E-billing “Rules Engines:” They Work All of the Time Some of the Time

I’m going to write about something that many attorneys whose clients require them to submit their legal bills through e-billing programs already know. E-billing rules engines supposedly programmed to automatically spot and take deductions in legal invoices for violations of a company’s billing guidelines often do not work as advertised.

And when I say e-billing rules engines do not often work “as advertised,” I am talking about how e-billing companies promote the use of their rules engines.  As one e-billing company puts it on their website, “[Name of rules engine] automatically reviews, validates, flags, and adjusts line-item invoice charges to comply with billing guidelines.”

Wow! No human involvement needed. Just push a few buttons and sit back and reap the savings. Sounds incredible doesn’t it? Continue reading

The Lowdown on How To Discuss Fee Bill Issues With Your Lawyer

While most all of my blog posts have been directed to the corporate world and to lawyers, I thought it about time to write something for those individuals who have incurred large legal bills. For, in addition to doing fee bill reviews for corporations and governmental entities, I also do fee bill reviews for individuals.

Legal fees that individuals incur are usually much more modest than those incurred by large corporations. Nevertheless, I have reviewed legal bills for individuals who have incurred in excess of $1 Million in legal fees for probate and estate matters, real property disputes, business deals gone bad and yes, even for divorces. Continue reading