Be Wary of First-of-the-Year Requests for Rate Increases . . . The Rest of the Story

In my previous post, I left hanging the question of how a firm’s charges for fees could increase if you denied the firm’s request to raise their hourly billing rates?  In one word – promotions.

That is, the first of the year is when many associates are promoted to partners. Thus it is that although the associate who was assisting the partner on a matter may still be assisting the same partner in the same manner, he now will do so a much higher billing rate due to the fact that the associate is now a partner.

Of course, who is promoted and when are internal law firm matters that are not subject to discussion with the client, let alone client approval. And that is the way it should be. But what is subject to client discussion as well as approval is how the client’s matter is to be staffed, specifically with regard to the appropriate mix of staff.

As I have written about before in several blog posts, “inappropriate staffing” is one of the biggest billing issues I come across in my legal bill reviews. A big part of this is partners billing for things that could have been done by lower billing associates.

And it does not matter if it a very large and very complex case or a small case, the principles of appropriate staffing apply across the board. For example, lower billing associates (and even paralegals) should be doing all the “grunt” work in cases. This includes such things as the basic research and first pass review and summary of discovery documents. In fact, this is just way courts will look at when asked to sort out fee bill disputes. See, e.g., Beastie Boys v. Monster Energy Co., 112 F. Supp. 3d 31  (Dist. Court, SD New York 2015).

So, if the associate who has been working on your matter has been promoted to partner, good for her! And if the scope of the work in the matter has not changed and the newly minted partner would still be doing the same types of things she had been doing as an associate, the discussion with the firm now should be what associate will be taking her place?

If the firm balks by saying that there will be costs for a new associate to “get up to speed” in the case, the costs of doing so should be on the firm. This is because most major insurers and corporations have this firmly in their billing guidelines. (Also the CLM Model Litigation Guidelines provide that the costs for getting a new attorney up to speed in the case are on the firm.)

But even if there are no billing guidelines in place, there is still the fact that the need for changing attorneys is for the “convenience of the firm.”  That is it is for the convenience of the firm which attorneys gets fired, promoted, go on vacation, or reassigned to work on more lucrative matters. When a law firm makes decisions for its convenience rather than for the client in a matter, clients should not have to bear the costs of those decisions.

Be Wary of First-of-the-Year Requests for Rate Increases

Ah, the start of  a new year.  Out with the old and in with the new. And some of the new things you often get at the the start of a year are requests from your attorneys for hourly rate increases.

In a prior blog piece, “A Primer on Increasing Hourly Billing Rates During the Course of a Representation,” I discussed applicable factors that should apply when an attorney notifies a client of a rate increase. Simply put, case law and the ethics of the legal profession dictate that timing of the notice to the client of a rate increase as well as the rate increase itself must be “reasonable.” However, this mainly address those types of situations in which the attorney and client have a written fee agreement whereby the attorney may have a contractual right to increase billing rates from time to time during the course of the representation.

But what about those situations where there is no contractual right to a rate increase such as where an attorney takes on a matter subject to a client’s billing guidelines which merely set out a process by which the attorney may request a billing rate increase? In those types of situations, the attorney is entirely at the mercy of the client as to whether a rate increase will be approved. So as a client, what are some of the factors that you should consider in determining whether to grant a fee increase request?

The first thing to consider is whether or not you want to continue to do business with the attorney or law firm. Hopefully, you have some kind of a scorecard you use with all your attorneys that provide you with data on how well they have been doing in the key areas. If the attorney or law firm has not done well (or your legal needs have changed), this may be as good a time as any to make a break. (If you want to know more on the ins and outs of breaking with a law firm, I wrote a series of blog pieces about breaking up with a law firm entitled “Cutting the Ties That Bind.”)

So if you have checked the box that you want to continue on with the firm, the next step is to examine the reason for the increase. Many rate increase requests will come with the reason that “our costs have increased.” To which the appropriate response to start a conversation is always, “Oh, really? What costs have increased?”

If the response is that staffing costs have increased, it might be good to drill down on that reason to have a discussion about just how the firm is deploying its staff. Perhaps it is that the firm is still using higher billing attorneys to do things that lower billing paralegals or even non-billing legal secretaries can do. If so, getting by with a few less higher priced attorneys and hiring a few more lower cost paralegals would save costs for the firm as well as for its clients.

What if the reason stated for the need for a rate increase is that other non-staff cost have increased? If so, this could be a good time to start a conversation on whether the firm fully leveraged technology to save on its costs. With regard to cost saving technological improvements, you will find that it is typical in many firms older partners near retirement do not want to spend firm money to make cost saving technology improvements.

In any event, if the firm has not convinced you that it is doing all that can reasonably be done to save on staff and non-staff costs, consideration should be given to whether you want to continue to subsidize the ever increasing costs of an inefficient law office model.

Finally, the most often reason often given for a rate increase is “we have not had a rate increase in x years.” This blunt straight up reason conveniently sidesteps the excuses of staff and non-staff costs increase and takes you to the real deciding factor to use in deciding whether to grant a rate increase. That is where the proposed increase stands in relation to what you pay other attorneys for the same type of legal services.

Remember, business is business and you have to always keep an eye on your bottom line including what it is you are paying (or should pay) for the legal services. In this regard, I have blogged many times in the past about the fact that the legal profession is not just an overcrowded field, but that it is a vastly overcrowded field. (See, e.g.,  “Billing Guidelines need to Take Full Advantage of Vastly Overcrowded Legal Profession.“) Thus, as sympathetic as you may be to pleas for rate increases, you should always keep in mind that it is truly a buyer’s market when it comes to hiring attorneys in most any field and will continue to be for the foreseeable future.

In summary, if the attorney and/or law firm has done well in key metric areas, has provided an acceptable reason for the proposed rate increase, and the proposed rate increase is “reasonable” in that it fits in with what you may already be paying for legal services, then the proposed rate increase can be accepted.

But even if you decide to not grant a law firm a rate increase, your costs with the firm could still increase in the coming year. How could that be even if the same amount of legal work will be done on a matter? More importantly,  what can you you do about that? I’ll take these questions up in my next blog piece.

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If you need assistance with developing with a program to measure attorneys in key performance areas or assistance in developing a Request for Proposal (RFP) to ensure that prospective attorneys or law firms match up with company expectations in key performance areas, contact John Conlon at jconlon@legalbillaudit.com.

Wrap-Up of Series on How RPC Affects Lawyer Billings for Fees

This is my last post in a series of posts on how the how the ABA Model Rule of Prof. Responsibility (RPC) affect what lawyers can and cannot bill for fees. In my first post on the subject, I noted the implicated RPC that are set out in the ABA Ethics Opinion 93-379 (1993) on “Billing for Professional Fees, Disbursements and Other Costs.”  The PRC impacting how lawyers bill include: Continue reading

Liability of Subordinate Attorneys for Supervising Attorneys’ Ethics Violation on Billing

[This is another in a series of blog posts discussing how specific ABA Model Prof. Conduct Rules (RPC) impacts how lawyers can and cannot bill their fees and costs.]

In my last blog post, I discussed the liability of supervising attorneys including managing attorneys and those attorneys on a firm’s management committee for ethics violations of another attorney in the same firm.  In that blog post, I noted that the duty to report the misconduct of another lawyer is set out in RPC 8.3.

Failure to report misconduct of another lawyer can have severe consequences for the non-reporting lawyer who has actual knowledge of the misconduct. See  In re Himmel, 533 N.E.2d 790 (Ill. 1998)(lawyer disbarred for failing to report misconduct of another lawyer). The consequences may seem severe in a different sort of way for associates who work under a supervising lawyer who is ethically challenged when it comes to billing.

When I served on my state’s legal ethics hotline, I often fielded questions from subordinate staff including legal secretaries, paralegals, and associate attorneys who were wondering what to do when their supervising attorney was engaged in deceptive billing practices. If the callers were non-lawyers, the answer was simple. I told them that the RPC only apply to lawyers.  But note that paralegals who are certified or registered are subject to their own set of ethics rules and discipline. See, e.g., The National Federation of Paralegal Associations, Inc. Model Code of Ethics and Prof. Responsibility and Guidelines for Enforcement.

However, the RPC do squarely apply to attorneys. And subordinate associates have a duty to report the misconduct of their supervising attorney just as other partners and managing attorneys do as I noted in my previous post.

A slightly different ethical issue arises when the subordinate attorney is directed by the supervising attorney to engage in deceptive billing.   I once fielded a question from a subordinate attorney who was concerned because his supervising partner kept asking him to increase the time the associate was billing each month for “strategy” conferences with his supervisor in order to match the time the supervising attorney was billing. That the associate knew the time the supervising attorney was billing was inflated was one thing, but now the associate was being directed by his supervisor to also inflate his time entries. (He also suspected that his supervisor was inflating his time spent on other tasks.)

Ordinarily, subordinate attorneys are given a pass on doing something that might be considered an ethics violations when they are just following the directions of their supervising attorneys. See RPC 5.2(b)(“A subordinate lawyer does not violate the Rules of Professional Conduct if that lawyer acts in accordance with a supervisory lawyer’s reasonable resolution of an arguable question of professional duty.”).

Note however, for this “safe harbor” provision of RPC 5.2(b) to apply, there must be an “arguable question of professional duty.”  It should go without saying that the question of billing fake time is not “arguable question of professional duty.”  Thus, the associate would not protected from an RPC violation under RPC 52(b) if he complied with the supervisor’s directive and billed fake time.  Moreover, he had an affirmative duty to take action to try “mitigate” the potential RPC violation (e.g., report it to the managing partner).

In my next post, I will wrap up this series of posts on how the RPC impact how attorneys can bill for fees and costs.

 

 

How One Lawyer’s Violation of the Ethical Rules on Fee Billing Can Affect Others in the Firm

[This is another post in a series of blog posts discussing how specific ABA Model Prof. Conduct Rules (RPC) impacts how lawyers can and cannot bill their fees and costs.]

In all prior posts, I pointed out that violations of the RPC with regard to billing can have consequences for the billing lawyer ranging from a reprimand to disbarment.  See, e.g.,  In re Disciplinary Proceeding against Vanderbeek, 101P.3d 88 (Wash. 2004)(disbarment for bill padding); In the Matter of Jerome Berg, 3 State Bar Ct. Rptr. 725 (Rev. Dept. 1997) (attorney disbarment for unethical billing).

In this blog post,  I wanted to note that RPC violations can also have consequences for supervising attorneys including managing partners, “innocent” partners, and even subordinate attorneys. In my prior on an attorney who billed fake hours, I reported on the case of People v. Mary Jaclyn Cook, 17 PDJ 051(Colo. August 10, 2017). Cook was suspended from the practice of law for, inter alia, preparing to bill time she did not work. Continue reading

The Three R’s of Reasonableness of Legal Bill Review

In my last blog post on how the ABA Model Rules of Prof. Conduct (RPC) affect how lawyers can bill for their fees and costs, I noted that RPC 1.5 mandates that fees and costs be “reasonable.” I also noted my belief that all different factors courts use to determine reasonableness can be put into three categories.

Those three categories are:

  • The reasonableness of the “task” performed
  • The reasonableness of the ”person” performing the task
  • The reasonableness of the ”time” spent performing the task

In my seminars on How to Review Legal Bills Like a Pro©, I often ask participants what do they look for first when they review a legal bill. Many times the answer back is they look first at the time billed for the tasks. However, that is the last thing that should be looked at when reviewing a legal bill. Continue reading

How ABA Model Rule 1.5 on “Fees” Impacts How Lawyers Can Bill for Their Fees and Costs

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

If you read my first blog piece in this series, you will recall that I noted ABA Ethics Committee Formal Opn. 93-379 (1993) on Billing for Professional Fees, Costs,  Disbursements, and Other Expenses stated that several RPC affect how lawyers ethically can bill for their services. The Opinion specifically mentions RPC 1.1, 1.4, 1.5, 3.2, and 7.1 but notes that other Rules may also be implicated. So far, I have covered each of these RPC (and others) but for RPC 1.5 Fees.

As the name of the rule indicates, RPC 1.5 is all about fees.  RPC 1.5 is broken down in three parts. RPC 1.5(a) provides that a lawyer’s fees and expenses must not be “unreasonable,” RPC 1.5(b) is about a lawyer’s duty to communicate to the client the “scope of the representation and the basis or rate of the fee and expenses,” and RPC 1.5(c) addresses “contingent fee” situations.

I have already covered the duty of communication about fees in my post on RPC 1.4 on “communications.” And as contingent fees are not applicable in fee billing situations, I will devote this post to discussing just RPC 1.5(a).

The term used in RPC 1.5(a) that a lawyer’s fee and expenses not be “unreasonable” has been generally flipped in fee billing cases by courts which always discuss a lawyer’s fee and expenses in terms of whether or not they were “reasonable” rather than unreasonable.

Part RPC 1.5(a) lists 8 factors “to be considered in determining the reasonableness of a fee.” They are: Continue reading