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.

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. Continue reading

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.

Continue reading

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.

Continue reading

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.

Continue reading

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