For Attorneys Only! How to Avoid Legal Bill Disputes.

As all of my posts to date have been for the benefit of clients of lawyers, I thought it about time to write a post for the benefit of lawyers. And since lawyers like to get paid for their services, what better topic to write about than how to significantly reduce, it not totally avoid, the changes of becoming embroiled in a dispute over your legal bill.

In my CLE seminars on ethical billing practices for attorneys, I give 4 main tips on how to avoid disputes with clients over legal bills. These tips also mirror an attorney’s ethical obligations when it comes to dealing with clients on fee billing.

Tip no.1 is to provide an adequate disclosure up front to the client on how fees and expenses will be billed.  Not only is this also a good risk management policy to follow, it also is required by ABA Model RPC 1.5(a)(2). And while the RPC do not require written disclosure (except in certain situations), it is again a good risk management practice to always provide a written disclosure.

Often times what a client is complaining about in a bill is something that was set out in the disclosure and agreed to by the client. However – and this is an important however – this can only work to an attorney’s benefit in a fee bill dispute if the attorney can show that the client “fully understood” what was presented to him in the disclosure or fee agreement. See The ABA Task Force on Lawyer Business Ethics (2010) “Disclosure and Understanding.” Also see Marathon Oil, S.A. v. Morrissey, 982 F.2d 830, 838 (2nd Cir. 1993)(lawyer has burden to establish that fee agreements are “fully known and understood by their clients”).

So if you are trying to slip in some aggressive billing practices, you better have documented that you provided adequate disclosure to the client. And when I say “documented,” I mean that in addition to a written disclosure that you also verbally went over the terms with the client ensure that there were no misunderstandings.

Tip no. 2 to avoiding fee bill disputes is to engage in good billing practices. Now, if you are unsure what good billing practices to follow, I would suggest you read my previous blog posts. But if your time is limited then I would suggest you read my blog piece on what one legal malpractice insurer advised attorneys to do when it came to billing. Suffice it to say, if you bill accordingly to how your legal malpractice insurer says you should bill, you will be more likely to avoid fee bill disputes.

Tip no. 3 to avoiding fee bill disputes is always, always, always, read your pre-bills to eliminate any errors or remove or reduce excessive or inappropriate charges. Courts call this exercising “billing judgment.” See Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). In fee bill disputes, attorneys must provide evidence that they exercised billing judgment in the disputed fee bills. See, e.g., Green v. Adm’rs of Tulane Educ. Fund, 284 F.3d 642, 662 (5th Cir. 2002)(“The proper remedy for omitting evidence of billing judgment does not include a denial of fees but, rather, a reduction of the award by a percentage intended to substitute for the exercise of billing judgment.”).

While going over your bills before they are sent out may seem like a no-brainer, you would be surprised at the number of careless errors I see each month in legal bills I review. These errors include double entries, misspellings, and hard to understand jargon and abbreviations. Perhaps the most careless error observed is insufficiently explained entries such as billing for “research – 2 hours” but failing to state what was researched.

As I have told attorneys in past seminars, your client may not read the 50 page brief that you sweated bullets over and is error free, but they will read your legal bills! And if your legal bills have errors or are hard to understand or fail to properly state what it was you did, then clients are more likely out of frustration to turn to someone (like me) who can help them understand the legal bills.

Tip no. 4 is when you send out a (hopefully, error free) legal bill to a new client, do not just put the standard phrase “if you have any questions on my bill, please let me know,” in your cover letter, but also schedule a time to call the client up (at no charge) and go over the bill with the client. This is perhaps the most important piece of advice I can give. You may think the bill is error free and is clear as clear can be, but does the client think so? And how would you possibly know for sure if you do not ask the client?

Having this conversation with the client will help you know if you need to provide additional or different information in future bills. It will also demonstrate that you are adequately discharging your ethical duty to provide detail in your bills “in such specificity as the client requests.” The ABA Lawyer Task Force on Lawyer Business Ethics, (1996). Also see ABA Formal Op. 93-370 (1993) 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”).

So, there you have it. Just follow these 4 simple tips and you will significantly reduce, if not totally eliminate, your chances of becoming embroiled in a fee bill dispute with a client. Plus you will have the added satisfaction of knowing that you are putting me and the entire legal bill audit industry out of business!

 

 

 

 

 

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. Continue reading

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