The Art Of Hiring The Right Lawyer & Negotiating A Fee Agreement That Will Save On Legal Costs

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In the introduction to The Art Of Hiring The Right Lawyer & Negotiating A Fee Agreement That Will Save On Legal Costs, I note that the book was written especially for small business or individual clients of lawyers. As I point out, these types of clients typically do not have the leverage that large corporations have with lawyers to alter a fee agreement to their advantage. But, that does not mean that these smaller clients of lawyers do not have some rights including insisting that certain language be included (or excluded) in any fee agreement. And if the language is not included (or excluded), they most definitely should look for another lawyer.

The following is an excerpt from Chapter 2, Agreeing On The Objective, A Course of Action, Staffing, and Costs.

Agreement on Staff to Be Used

One final thing from a legal cost-saving standpoint to discuss with the attorney before actually hiring the attorney and entering into a fee agreement is how the matter will be staffed. With regard to staffing, depending upon the size of the law firm, a law firm’s staff can consist of billing staff such as partners, associates, and paralegals, and non-billing staff such as legal assistants, clerks, and secretaries.

If it is a simple, non-complex matter, it may only require the services of one attorney. But, often at the outset of a representation, it may not be possible for the lawyer in charge to know if other law firm staff members will work on the matter or be able to identify specific law firm staff members who will work on the matter. And that is okay so long as the lawyer at least identifies the level of law firm staff that may be needed to work on the matter.

For example, if the lawyer is a partner and needs assistance from another firm attorney to handle the client’s matter, that assistance usually should come from a lower billing associate and not from another partner. But if the partner insists that she needs to be assisted by another partner, a question then arises as to whether she really has the expertise needed to sufficiently handle the matter—especially if it is not that complicated or complex of a matter. In any event, the attorney needs to explain why she needs assistance from another partner as opposed to a lower-billing associate attorney.

If the partner is to be assisted by an associate and the law firm is large and has multiple levels of associates, the question then becomes whether a very experienced (and higher-billing) associate or a less experienced (and lower-billing) associate is needed to adequately handle the necessary associate-level work.

If the partner states that he needs to be assisted by a more experienced (and higher-billing) associate, the partner should be asked to set out the reasons why this is necessary. Remember, if the main attorney is the subject matter expert he claims to be, does he really need to be assisted by someone who may be another subject matter expert?

But even if the partner can demonstrate the need to utilize a more experienced associate, it is important to note that the partner still would have a duty to drive work down to lower billing or non-billing staff wherever possible. For example, there are things that lower-level associates can do that do not require a higher-level associate (for example, basic research). In Chapter 6, I recommend some language to be included in the attorney fee agreement on this point when I discuss hourly billing rates for staff.

Two other important things to consider about law firm staffing. One is to be wary of the proposed use of any lawyer who has the “of counsel” designation. This is because of counsels are not associates. They may, in fact, be semi-retired partners who still bill at the partner rate. This is okay if what is needed is a senior-level attorney. At the other end of the spectrum are those of counsels who are just starting out or are trying to work their way into the firm. They are usually billed at an associate-level hourly billing rate.

The other important thing to consider about law firm staffing is that if the attorney hired is in a small firm that does not employ paralegals or non-billing legal assistants, chances are that the law firm cannot cost-effectively handle the matter.

If a law firm does not employ paralegals, for example, this usually means that the attorneys will be handling tasks that could otherwise be handled by lower-billing paralegals. And if the firm does employ paralegals, but no non-billing legal assistants or secretaries, chances are that the paralegals will be billing for tasks that could otherwise have been done by non-billing legal assistants or legal secretaries. So, as a general rule, it is almost always going to be more cost-effective to hire a lawyer in a law firm (whether large or small) that employs both paralegals and non-billing legal assistants or legal secretaries.

For information on how to obtain a copy of The Art Of Hiring The Right Lawyer And Negotiating A Fee Agreement That Will Save On Legal Costs, go to https://legalbillaudit.com/available-books/

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.

“Reconstructed” Time Sheets: Making Up For Lost Time and Then Some

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Earlier this month, I reviewed a legal bill that included time entries for work done in February. This reminded me that at this time of the year, attorneys (and paralegals) are likely going back through their files and reviewing previously sent legal bills to see if those legal bills reflected all work undertaken in their files. This likely is being done as attorneys and paralegals scramble to get all their time billed out to clients in order to meet firm billing minimums or be eligible for firm bonuses – or even to retain their jobs.

When an attorney finds that work that has not been previously billed for, it is often due to the fact that the time for the work was not recorded on the attorney’s daily timesheet that is used to generate the attorney’s legal bills.  And when time is not recorded contemporaneously when the work was done, the attorney will attempt to try to “reconstruct” that time by relying upon memory.

When attorneys attempt to reconstruct their time for work done by relying upon their memories rather than upon contemporaneously kept timesheets, courts and legal commentators alike agree that attorneys tend to misstate their time.  As one court put it, “reconstructed records generally represent an overstatement or understatement of time actually expended . . . lawyers who remember spending the entire day working on a case are likely to overstate the hours worked by forgetting interruptions and intrusions unrelated to the case.” Ramos v. Lamm, 713 F.2d 546, 553 n.2 (10th Cir. 1983). Because of a tendency for attorneys to overstate time rather than understate it, courts often do not allow attorneys to collect on legal bills with reconstructed time based upon their memories or make across-the-board cuts in the legal bills. See, e.g., Johnson v. Univ. Col. of Univ. of Ala. in Birmingham, 706 F. 2d 1205 (1983)(11th Cir.).

To address this issue, a company’s billing guidelines should require firms to bill their time on either a monthly or quarterly basis and require that the time billed be based upon time records filled out at the time the work was performed.  Going a step further, billing guidelines could even prohibit billing for work more than a certain number of months (e.g., 3 months) after it was undertaken.

As an alternative, billing guidelines could require that legal bills with time billed for work that was more than a certain number of months in the past (e.g., 3 months) be accompanied by copies of the actual timesheets for those days the work was performed. (No contemporaneously made out timesheet, no pay or reduced pay by a certain percentage.) This would help ensure that the time billed for work on those days was contemporaneously recorded and not the product of an attorney’s overactive imagination.

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Why Excessive Reviews and Revisions of Work Can Raise Both Billing and Competency Issues

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Recently I saw something unusual in a legal bill.  A senior partner actually billed “N/C” (or no charge) for the time spent on reviewing and revising the work of a subordinate attorney.

Before going further, let me state that in my CLE seminars for attorneys on the ethics of legal billing, I always suggest that in their fee bills they include work they may have done but did not charge for.  This is good P.R. as it allows clients to see all the hard work that the attorneys are actually putting in.  (I also suggest that they actually look over their bills before they go out to clients as I often see grammatical and other glaring mistakes in bills.)

But I do find that writing off time to review a subordinate’s work to be unusual. This is because I mostly see attorneys billing their full time spent on reviewing the work of subordinate staff. However, reviewing subordinates’ work to see if it has been correctly done is considered to be non-billable attorney administrative “overhead.” See In re Big Rivers Elec. Corp., 233 B.R. 768, 780 (Bankr.W.D.Ky.1999), rev’d on other grounds, 252 B.R. 393 (W.D.Ky.2000) (regarding “reviewing the work of associates . . . the costs associated therewith are [overhead] expenses to the firm.”). Also see Toothman & Ross, Legal Fees, (Carolina Academic Press 2003) at p. 44 (“Time expended by the lawyer on law firm administration or management is not normally billable (including) time spent . . . reviewing work of staff” citing Restatement (Third) The Law Governing Lawyers, Sec. 38(3)(a).).

By the same token, any time spent by a supervising attorney to “revise” a document prepared by a subordinate also should be considered as non-billable supervisory time. In this regard, I recently reviewed a bill in which an associate billed 1.1 hour to prepare a motion and the senior partner billed .8 hour to review and revise the motion.  For a senior partner to take almost as much time to revise a document as the associate did to draft the document generally means just one thing: the original draft was a sub-standard work product. And if so, it should go without saying that the client should not be billed for the time it takes to revise the work product to make it a competent work product. See Comments to ABA Model Rule 1.5 (“Lawyers are expected to provide competent representation (see Model Rule 1.1) and therefore may not charge clients for time necessitated by their own incompetence.”).

But what if a supervising attorney is repeatedly billing N/C for repeated reviews and revisions of a subordinate’s work product? What’s wrong with that? What is wrong with that is if there are repeated reviews and revisions by a supervisor, a question is raised as to whether the subordinate really is competent enough (or just too inexperienced) to be working on the matter,

A variant of the review done by supervisors is the review done by peer attorneys. And to be sure, there are times when review and revision by another attorney may be warranted. An example might be where a tax attorney reviews a brief prepared by an IP attorney because the brief has a section on a possible tax issue. But generally, reviews and revisions of documents by other attorneys are not favored by courts particularly where attorneys are all billing to review and revise each other’s work or are jointly participating in drafting the same documents. See Ash Grove Cement Co. v Liberty Mut. Ins. Co., 3:09-CV-00239-HZ, 2014 WL 837389 [D Or Mar. 3, 2014)(reduction of fees warranted for attorneys spending time reviewing and revising each other’s work ); Miller v. Holzmann, 575 F.Supp.2d 2 (DDC 2008)(where 7 lawyers participated in drafting/revising a complaint, “drafting by committee is a recipe for inefficiency”).

And reviews by other attorneys are especially seen as not necessary or reasonable if the attorney who drafted the original document is an experienced attorney. See Cox v. Council for Developmental Disabilities, Inc. No. CIV-12-0183-HE, United States District Court, W.D. Oklahoma, May 8, 2013. (“counsel  . . . should be experienced enough that substantial review and revision by other attorneys is unnecessary.”). But if the attorney doing the drafting is not experienced enough that reviews and revisions are seen as necessary, then those reviews and revisions – whether by a supervising attorney or by peer attorneys – should be viewed as non-billable as law firm supervisory “overhead.”

But even if there are no reviews and revisions being made by a supervising attorney or other attorneys, there still is an issue with multiple revisions being done by the drafting attorney. And unless there is a reasonable excuse for the revisions (such as receipt of new information), multiple revisions are more likely to be considered as “remedial work.” And depending upon the extent of the remedial work, issues relating to inexperience and incompetency may be raised. See Annotated Model RPC (8th ed. 2015) Comment to RPC 1.5 at p. 81, “Doing Remedial Work.”(“Lawyers are expected to provide competent representation (see Rule1.1); they may not charge clients for time necessitated by their own inexperience.” citing In re Poseidon Pools of Am. Inc., 180 B.R. 718 (Bankr. E.D.N.Y. 1995)(in denying compensation for various document revisions, “we note that given the numerous times throughout the Final Application that Applicant requests fees for revising various documents, Applicant fails to negate the obvious possibility that such a plethora of revisions was necessitated by a level of competency less than that reflected by Applicant’s billing rates.”).

Finally, to determine if any revision (or a plethora of revisions) to a document is acceptable or reasonable, it is important that the biller (whether it be the drafter of the document, a supervising attorney, or peer attorneys) clearly state what the purpose and substance of the revision. Thus, entries such as “revise answering brief” should never be accepted as a sufficient explanation of the task. See Hawaii Ventures, LLC v. Otaka, Inc., 173 P.3d 1122 (Hawai’i 2007)(court finding “vague” and non-compensable entries such as “Research and revise answering brief”).