legal-bills

Red Flags In Legal Bills: Long Work Days

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[The following is an excerpt from my book Red Flags In Legal Bill: What Warning Signals Are Attorneys Sending?]

When discussing larger time charges, there is perhaps no larger time charge that can be made in a legal bill than the total amount of time charged in one 24-hour day. However, believe it or not, I have found some attorneys who have billed for more than 24 hours in one day!

Billing for long work days can be expected in some cases. For example, attorneys occasionally do need to put in long days to prepare properly for a trial or for an arbitration or to respond to some type of emergency situation.  But if an attorney (or paralegal) is billing 8 to 10+ hours a day just doing routine work on a file, this should raise a red flag. 

For one thing, consider that few people can do their best job working 10 to 12 hours a day, day in and day out.  Attorneys and paralegals are no different than anyone else in that regard.  Don’t forget that in addition to billing for 10 to 12 hours, attorneys and paralegals also have to eat, go to the bathroom, answer phone calls, communicate with other staff, and in short, do all the other things that office workers normally do while at the office.  In fact, as I have noted, to generate 8 hours in billing, legal ethicists who have studied the issue say that an attorney or paralegal must spend at least 12 hours or more in the office.

Thus, it is that billing 8 to 10+ hours a day for “routine” work should raise a red flag as it could be a sign of possible bill padding.  This is why whenever I encounter 6 hours or more billed in a day when reviewing a legal bill, my antennae automatically goes up, and I tend to scrutinize the billing entries for that day even more closely, just as courts will do.[1]

But, even if there is no bill padding going on, billing for long work days on routine matters could also point to some other red flag issues.  For example, it could be a sign that the attorney does not have adequate support staff.  In this regard, note that the trend among law firms for some time has been to eliminate support staff.[2] 

Technological advances accounted for the need for less support staff at law firms as well as at many other types of businesses. But some of the work previously done by law firm support staff does not go away because of technological advances. This leaves many attorneys (and paralegals) no choice but to undertake work that was previously done by non-billing support staff, such as copying documents, Bates stamping documents, or making arrangements for a meeting room.  These types of activities still need to be done by someone, and when attorneys or paralegals do the work, they oftentimes try to disguise it as attorney work on the legal bill. For example, an entry by an attorney for “working on exhibits” (without stating what specifically is being done) could mean that the attorney was carefully going through the file to determine which exhibits or use (which would be considered as attorney work), or it could mean that the attorney was Bates stamping or lettering the exhibits (which would be a non-billable clerical task).[3] This is why it is important for every legal bill entry to provide a “sufficient explanation” of what specifically is being done.[4]

Another red flagissue raised by billing for 8 to 10 hours (or in reality, for a 12 to 15-hour work day) is that it could be a sign that the attorney has taken on too much work.  In addition to laying off support staff to increase their profits, many law firms have also laid off marginally productive attorneys as well. So, it could well be that an attorney has taken on the work of departed attorneys forcing the attorney to cram all of his work into long work days.

But for whatever the cause or reason, working long work days on routine matters is not an efficient way to work and could likely lead to mistakes.  For even if an attorney is actually working a 12-hour day (to able to generate 8 hours worth of billing time), do you really think the attorney is doing his best work on a matter at 8:30 p.m. at the end of a very long work day?  Thus, if you encounter an attorney billing for 8 to 10 hours a day on a regular basis, it might be time to have a heart-to-heart talk with the attorney or consider whether your matter needs to be transferred to another attorney.

[1] See, e.g., Ramos v. Lamm, 713 S.2d 546 (10th Cir. 1983)(Court agreed with studies that show that normally there are “six to seven billable hours per day for a five day week.  . . . The court should question reported time significantly in excess of the norm.”).

[2] See ALM LAW.com, Jan. 22, 2009 (reporting on support staff cuts at Ice Miller, “Ice Miller is hardly the only firm trimming support staff in recent months.  Last week, Akin Gump Strauss Hauer & Feld slashed 65 support staff positions across its U.S. offices, and Dechert, Reed Smith and White & Case are among the law firms that have cut a significant number of staffers in recent months.”).

[3] See Ceres Envtl. Servs. v. Colonel McCrary Trucking, LLC, No. 11-12787, 2012 U.S. App. LEXIS 8271, at *11 (11th Cir. Apr. 25, 2012)(court finding “purely clerical tasks” such tasks as “bates labeling of documents”).

[4] I devote a chapter to the importance of sufficiently explained legal bill entries in my book, How to Review Legal Bills Like a Pro.

Can A Lawyer Be Held to His Estimate of Costs?

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[The following isn an excerpt from my book, The Definitive Guide To Resolving A Legal Bill Dispute. Information on obtaining a copy of this book can be found at https://legalbillaudit.com/available-books/]

Many times, what triggers a fee bill dispute in the first place is that the total amount of the fee bills has exceeded the lawyer’s estimate of what the legal costs would be in the matter.  Although not technically a billing issue, it is nevertheless a common issue I have come across in many fee bill disputes.

It has always been a mystery to me why lawyers provide estimates of costs. For providing an estimate of costs is not at all something that a lawyer is required to do. Also, it may be that the lawyer really does not have that much experience in handling a particular type of matter to be able to provide a meaningful estimate. Moreover, my experience and observation over the years has been that most lawyers, even if they are experienced in handling certain types of matters, really do not have a good handle on their costs. (This is one reason why lawyers hire administrators to run the business side of their firms!)

Despite their lack of knowledge, lawyers often do provide an estimate of costs when asked to do so by a client. In fact, many corporate clients – particularly insurance companies – actually require that their attorneys submit case “budgets” at the outset of a matter. And case budgets are, in reality, estimates of how much in legal fees a case will cost.

To be sure, large corporations and insurance companies have a lot of bargaining power with attorneys.  As such, they can require cost estimates from attorneys handling their cases. But for an individual client, unless the case is significant, there really is not much incentive for lawyers to provide cost estimates. And as there is so much danger for the lawyer in doing this, I am not sure why a lawyer would voluntarily do this.

And when the actual case costs do exceed the lawyer’s original estimate, even by a large amount, there may be legitimate reasons why this occurred. But for whatever reason or reasons the cost overruns occurred, the client is entitled to know in detail those reasons. Moreover, the lawyer has an ethical duty to tell this to the client and to explain it to the client’s satisfaction.[1]

One legitimate reason for the cost overrun could be that the client changed the scope of the work or otherwise asked the lawyer to do more work than was originally agreed to at the time of the initial engagement. And don’t forget, all those numerous and lengthy emails and phone calls that clients make to their lawyers. They can often add up to a considerable amount!  So, a client should first consider whether he contributed to the costs exceeding the original estimate.

Another legitimate reason for the cost overrun could be that the lawyer ran into some “unforeseen” difficulties.  This sort of explanation should begin with the lawyer detailing exactly what the initial estimate was based upon if this was not done at the beginning of the representation.   

A statement that the estimate was just based upon his “experience” in such matters is not good enough. The lawyer needs to break down the estimate and provide specific detail on how the estimate was determined. Then, the lawyer should provide the specific details of how the estimate was in error or otherwise identify the specific reasons for the cost overrun. This is because the client has a right to know exactly what these unforeseen or unexpected circumstances were and more importantly, why it was that the lawyer considered them to be truly unforeseen or unexpected.  

In considering the lawyer’s response, keep in mind that experienced attorneys who claim the expertise to take on a certain type of matter are presumed to have the required knowledge to actually handle the matter competently.  This knowledge would include knowing what types of things might occur in a matter that could increase costs. If not included in the original case estimate, they should at least have been identified as possibilities that could contribute to the increased costs.

But if there were no truly “unforeseen” difficulties (or at least none that were identified by the lawyer as the matter progressed) or the client did not change or add to the scope of the original agreement about what the lawyer was to do, then the lawyer could be bound by his original estimate.  This is because the law does not allow an attorney to simply walk away from a lowball or inaccurately prepared estimate – especially if the estimate was a critical part of why the client decided to employ the attorney.[2]

Also, the cost overrun issue may turn on how large the variance is between the original cost estimate and the final costs.   Giving the lawyer the benefit of the doubt, consider that estimating is not an exact science.  And if the final costs in a matter are somewhat “close” to the original estimate, this may not be sufficient grounds for a refund or to refuse to pay the final amount.

However, if the variance is large, and the matter did not involve anything truly “unforeseen” or result from the client changing the scope of work, then the client may have a right to hold the attorney to his original estimate.[3]

Also, even if a lawyer gives the client a reasonable explanation for the cost overruns, this may not be good enough if the cost overruns have been going on for some time.  This is because of a lawyer’s ethical duty to keep a client timely informed of mounting legal costs before they become cost overruns.[4]  Lawyers who do not keep their clients properly informed of mounting legal Information costs have been subject to lawyer discipline.[5]

[1] See RPC 1.4(b).

[2] See In re Crown Orthodontic Dental Group, 159 B.R. 307 (Bankr. C.D. Cal.1993)(“If an attorney estimates the cost of his or her services and that esti mate is a critical part of the negotiations upon in employing the attorney, unless there are some real, unexpected changes of circumstances, the attorney should be bound by that estimate”).

[3] See In re Chas. A. Stevens & Co., 105 B.R. 866 (Bankr. N.D. Ill. 1989) (“The court holds that when professionals . . . project estimated fees or budgets to a client, they should expect to be held to the same or some reasonable variation thereon.  For (the applicant) . . . to apply to this court after such enormous overruns and expect payment in full is unrealistic and unreasonable.”).

[4] See RPC 1.4(a) and (b); ABA Annotated Model Rules of Prof. Conduct (6th ed.. 2007), at p.57 “Duty to Inform Clients Promptly about Important Information.”

[5] See In the Matter of Daniel G. Areaux, 823 N.E.2d 1192, 1193 (Ind. 2005)(“The respondent violated Indiana Professional Conduct Rules 1.4(a) and 1.4(b) by failing to keep his client reasonably informed of her escalating attorney fees owed to respondent and Baker & Daniels.”). In the Matter of Patrick R. Taylor, 741 N.E.2d 1239 (Ind. 2001) (“Failure to keep a client apprised of escalating fees may constitute a violation of Prof.Cond.R. 1.4.”)

The “Does Anyone Have a Form I Could Use” Practice Section

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I used to belong to a particular practice section of my state bar association.  I won’t give the real name of this practice section. I will only say that many of its members are attorneys in smaller communities who basically take on anything that walks in the door.

This practice section has a very active listerv that was a real hoot to follow as lawyers sometimes send out desperate pleas for help with a matter they know virtually nothing about.   Those listserv postings invariably ended with the plea  “does someone have a form that I could use?”  Thus, my pet name for the practice section.

These listserv postings point out two facts of life in the legal profession.  One is that lawyers often take on matters they probably have no business trying to handle.  Two is that an awful lot of legal work is done using forms (or with recycled work product as I mentioned in my last post).

Forms are routinely used for appearances, initial and closing letters to clients, withdrawals, orders, etc.  Even more substantive documents such as discovery documents can also be form documents.

Several years ago, I was reviewing an elaborate set of discovery documents that the lawyer had billed several hours to prepare.  What made me suspect the documents were mostly recycled work product or form documents were the questions inquiring about the injured party’s occupation and military service.   You see the discovery was being directed to determine the injuries of a small child who obviously did not have an occupation or had served in the military.

As was explained in a previous post on recycled work product, lawyers may only ethically bill for that time needed to amend the work product to make it suitable to use in another matter. Similarly, when filling out a form document, a lawyer can only ethically bill for the time it takes to fill out the blanks in the form document.

In a perfect world, if all attorneys would simply honor the ethics of their profession when it comes to billing a client for services, there would be no need for folks like me.  But fortunately for folks like me, we do not live in a perfect world.

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On Using and Billing for “Re-cycled Work Product”

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“A lawyer who is able to reuse old work product has not re-earned the hours previously billed.”  ABA Standing Comm. on Ethics & Professional Responsibility Formal Op. 93-379 (1993)

In reviewing legal bills and speaking at CLE seminars to attorneys, I have found that too many attorneys lack a sufficient understanding of what is ethically permitted when it comes to billing for services.  And one of the things most commonly misunderstood is how to ethically bill for “re-cycled work product.”

Whether attorneys want to admit it or not, an awful lot of what any attorney does in any type of practice situation is especially suited to using forms or recycled work product.  Attorneys routinely use forms for appearances, initial and closing letters to clients, medical records requests, withdrawals, motions, orders, and even settlement documents.  Even more substantive documents such as briefs and appeals are often drafted in large part using recycled work product.

When it comes to billing for re-cycled work product, though, I often find attorneys engaging in what is called “value billing.”  That is, rather than billing for the actual time it took to modify the re-cycled document, they bill for what they believe to be the “value” of the re-cycled document.  The value is often determined as that time they think it would have taken had the document been drafted from scratch.

However, attorneys are not permitted ethically to bill re-cycled work product as if it was an original.  Rather, attorneys may only ethically bill for that amount of time it takes them to make changes in the original work product to make it fit the new matter.  For example, if an attorney took 4.0 hours to draft a brief in one case and only 0.5 hour to revise it to use in a subsequent case, the attorney can only ethically charge 0.5 hour in the subsequent case.

A related billing issue is the issue of attorneys using original work product when re-cycled work product could have been used.  Billing guidelines that I prepare for corporate clients always include a provision that obligates the attorney to use previously prepared work product wherever possible. For if you stop to think about it, requiring an attorney to use previously prepared work product where possible ties in with one of the main reasons you hired a particular attorney.  You hired that attorney because the attorney is experienced in handling the type of case you want handled. So it is more than reasonable for you to expect (and require) that the attorney use previously prepared work product successfully used in similar cases.

A statement by an attorney that all the work product billed for was originally prepared is a strong indication that the attorney is not attempting to use any previously prepared work product.  Even more troubling, it may also be a strong indication that the attorney is not much interested in helping control case costs.