Billing Guidelines
It is an essential practice to develop a written set of billing guidelines as part of the engagement agreement with a client. Apart from the obligations set out in the RPCs (see ABA Model Rules 1.4 & 1.5), attorneys have an interest in maintaining written billing standards agreed to by the client for transparency in collecting fees and for the defense of potential claims centered on the attorney’s bills. As a matter of practice, most institutional clients require acceptance of and adherence to their own set of established billing guidelines as part of the retention. These standards serve as the blueprint for billing throughout a given representation, and set out various requirements and prohibitions for getting paid. At the outset, be sure to develop a familiarity with the billing guidelines for a given matter, which typically includes such details as timing of the client’s invoice, payment schedules, personnel rates, and task-specific guidelines. Not being cued in on a client’s billing particulars can lead to swift phone calls from the client, rejected invoices, outright nonpayment, and client dissatisfaction.
A common pitfall is overstaffing on routine or ordinary tasks that can yield duplicative charges. See J.E.V. v. K.V., 426 N.J. Super. 475, 494 (App. Div. 2012)(“deduct[ing] $5625 from the counsel fees, stating that amount was unreasonable because the situation only warranted one attorney when two were present.”); Bell v. Prefix, Inc., 784 F. Supp. 2d 778, 787 (E.D. Mich. 2011) (finding it “not reasonable to consistently bill a party for two attorneys to do the same work/review each other’s work.”). Root this out early on by designating a legal team with members who have clearly defined roles and can allay fears of overstaffing. A cohesive legal team will also minimize inefficiencies that can strain the attorney-client relationship and be a detriment to billing success. See Universal Drilling Co. v. Newpark Drilling Fluids, LLC, 2011 U.S. Dist. LEXIS 17203, at *8 (D. Colo. Feb. 22, 2011) (“The Court lauds the economies that can be obtained by delegating the bulk of litigation responsibilities to associate attorneys, and recognizes that the limited oversight and guidance of more senior attorneys to provide supervision and review of such work may be appropriately billed as well.”).When client satisfaction is paramount, lawyers should always strive to leave the positive impression of efficiency with a results-oriented billing practice.
Risk Management in Attorney Billing
Clarity is key when it comes to billing formats. Regardless of the particular matter, the goal is to convey in a clear and articulable manner as much information as is reasonable, both for the client and the attorney’s benefit. See, e.g., Handschu v. Special Servs. Div., 727 F.Supp.2d 239, 242 (S.D.N.Y. 2010)(Attorneys seeking court-ordered compensation “must document the application with contemporaneous time records[…][that] should specific, for each attorney, the date, the hours expended, and the nature of the work done.”); Bell v. Prefix, Inc., 784 F. Supp. 2d 778, 787 (E.D. Mich. 2011)(“[B]oth attorneys frequently utilized non-descript ‘block-billing’ in their entries. In other words, for many entries it is not possible for the Court to ascertain what the attorney was doing.”). From a risk management standpoint, clarity in billing entries allows a client to better understand the what and why for each billed activity taken on the client’s behalf. As the adage goes, it is quality rather than quantity that matters. For attorney billing, this means being able to project the quality of representation in billing entries that are both clear and helpful to the client.
Another incentive for honing your billing practices is to reduce the likelihood of a potential fee dispute, or catalyst for a malpractice claim or disciplinary action. Excessive billing can lead to disciplinary action. See In re Coffey’s Case, 152 N.H. 503, 511-12 (2005)(finding violation of RPCs, including “charging his client a clearly excessive fee” where attorney “billed 225 hours to write [a] brief”). State disciplinary authorities routinely conduct audits of the books and records of attorneys and law firms that engage in the private practice of law within a given jurisdiction. A discussion on the topic of audit compliance programs may well be reserved for a future publication, but suffice it to say for present purposes that ethical billing is critical to the integrity of the legal profession, and falling short of ethical standards in this regard can jeopardize a practitioner’s law license. Apart from state disciplinary arms, law firms will conduct audits of legal fees and expenses for risk management purposes. The rise in unique and client-specific billing guidelines often requires law firms to employ personnel whose responsibilities include compliance with billing guidelines.
The Bottom Line
Throughout the attorney-client relationship, lawyers and law firms should keep an open dialogue with the client when it comes to billing expectations. Communication is key. Practitioners will also want to master the billing guidelines of clients early on and keep up-to-date with any changes. The scrutiny over bills by clients (and ethics authorities) has only increased with advancements in technology. The goal for practitioners should be to develop a system for billing that is both ethical and efficient.
Reprinted with permission from the July 6, 2023 edition of The Legal Intelligencer © 2023 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.