Close X

Blog

What Can a Law Firm’s Billing Methodology Reveal?

Posted by Judie Bronsther | May 19, 2014 | 0 Comments

Most lawyers are honest and their bills reflect what was actually done.  However, a law firm's billing methodology can artificially increase the legal bill (i.e. bill padding) even though the law firm's intent may not have been to overstate the amount of time required for the work performed.

California'sArbitration Advisory 03-01 “Detecting Attorney Bill Padding” (January 29, 2003) gives some guidance and advise on what patterns in the work descriptions indicate there may be bill padding.

Specifically, the Advisory states these patterns contribute to unreasonable legal fees:

1.Formula billing: Every single piece of paper gets a time entry as it wends its way past the timekeeper to its destination. It does not take more than a few seconds to read most routine correspondence. If the timekeeper reads a group of documents in a minute or two and then records a minimum time for each document, this may ultimately increase the time by several hours. Look for multiple timekeepers reading the same documents.

2.High minimum increments: The standard minimum is 1/10th of an hour or 6 minutes. If a higher minimum is used, such as .25 or .5, this probably increases the time by 15%to 25%. Some courts have criticized the use of a .25 or 1/4 hour minimum as being too high.

3.Time estimates: If the bills show hours in even numbers such as 8.0, 9.0, or 10.0, these are probably estimates rather than actual time spent and should be investigated.

4.Block billing: If one amount of time is shown for working on more than one discrete task, this is called “block billing” or “lumping” time. This is almost never allowed by federal courts. The practice hides accountability and may increase time by 10% to 30%. The larger the “block”, the more care should be exercised.

5.Standardized work descriptions: If one sees the exact same phrases used again and again in the bills, it is likely that some routine has set in and this allows some “down time” to findit way into the bills. An entry such as “review documents produced by opposition, 7.5 hours” is typical.

6. Lack of detail: “Research issues”, “attention to file”, “discovery”,“prepare for trial”, and similar statements are not specific enough to let the reader know what was done.

7. Wrong times:  Sometimes a client knows that certain things took less time than was billed such as the meeting in Example 1, above. Perhaps other meetings were for known times or can be checked. Deposition transcripts usually have start and end times and can be checked against billing invoices.

While these guidelines are merely advisory, it should be noted that many courts throughout the nation have cited it as justification for reducing legal fees.  For instance,APPLE, INC. v. Samsung Electronics Co., Dist. Court, ND California 2012, relying on the Advisory Opinion, the court ruled:

Because it cannot evaluate the reasonableness of the hours,and in light of the evidence that block-billing inflates hours by between 10%and 30%, the court trims 20% from the block-billed hours in Samsung's request.

InPayan v.NASH FINCH COMPANY, Colo: Court of Appeals, 7th Div. 2012, the court ruled:

Citing a California study that found block billing resulted in a 10% to 30% increase in time shown in billing statements, the trial court followed the Ninth Circuit's approach, and concluded that a 20% downward adjustment for block billing was acceptable. See Welch, 480 F.3d at 948 (discussing StateBar of California Committee on Mandatory Fee Arbitration, Arbitration Advisory03-01 (2003)). We see no reason to disagree with the trial court's conclusion in this regard.

And, in DEOCAMPO v. Potts,Dist. Court, ED California 2014, the court said:

Additionally, "block billing hides accountability and may increase time by 10% to 30% by lumping together tasks." Yeager v.Bowlin, Civ. No. 2:08-102 WBS JFM, 2010 WL 1689225, at *1 (E.D. Cal. Apr. 26,2010), aff'd, 495 Fed. App'x 780 (9th Cir. 2012) (citing The State Bar of California Committee on Mandatory Fee Arbitration, Arbitration Advisory 03-01 (2003))(internal quotation marks omitted). This court has therefore concluded that"the usage of block billing is fundamentally inconsistent with the lodestar method."

Should you find some or all of these billing patterns in your legal bills, you may want to consider bringing in an outside auditor to quantify the financial effect of these practices as well as other issues that may have been unreasonable such as overstaffing, inappropriate staffing, duplication in efforts, unnecessary or inappropriate work and unreasonable mark-up on disbursements.

About the Author

Judie Bronsther

Ms. Bronsther began her career in 1979 as an associate with Finley, Kumble, Wagner, Heine, Manley & Underberg specializing in corporate finance. In 1984, she joined forces with a client, Empire Securities, a brokerage house specializing in oil and gas transactions, and became Executive Vice President and General Counsel. In 1989, she joined Kaye, Scholer, Fierman, Hayes and Handler. Ms. Bronsther graduated from University of Rochester, magna cum laude, and New York University School of Law. Ms. Bronsther has written extensively on the subject of legal cost control and lectures frequently on this subject.

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Accountability Services, Inc

Logo2 03

Accountability Services, one of the pioneers of the legal cost control and auditing industry, has proven techniques that result in significant savings.

Accountability Services, Inc

Since 1991, our legal auditors have reviewed over a billion dollars in legal fees and have reduced legal bills as much as 46% with our legal cost control services and 67% with our expert witness testimony.