Guilty as Charged: Confessions of a Former “Over-Biller”

 

 

Guilty as Charged: Confessions of a Former “Over Biller”

or

How to Stop Getting Ripped Off by Lazy Lawyers

Yeah, I said it. Guilty as charged.  When I began practicing law 32 years ago at the Los Angeles office of a tony, New York based law firm, the second thing I was taught by my mentors was how to bill clients.  The first was where the “Gent’s” was located.  Yup, billing is that important (to us), and “block billing” was what we were taught.  Calculated in quarter-hours.  And the client always lost.

So, before the days of the contingency fee (when the lawyer gets paid a percentage recovery only upon settlement or victory at trial), the exclusive means by which a lawyer billed a client was pursuant to an agreed-upon hourly rate.  “Agreed upon,” or imposed, depending on the sophistication of the client.

Straight-up hourly billing has not disappeared, but it is now reserved for charging mid-sized to big businesses, defense work, and cases not really amenable to contingency arrangements.  Family law, for example, or estate litigation.  And, as the economy for legal services has been degraded, and consumers become more aware and cost-adverse, all sorts of hybrid billing arrangements are being used.  The simplest example is where a lawyer is compensated on mixed contingency/hourly fee basis, but there are any number of permutations, like flat fees.  A good lawyer’s imagination knows no bounds when it comes to billing clients.

But the true evil of consumer abuse still lies in hourly fee billing.  What is “billing?”  It is the means by which a lawyer records his/her time spent working on a client’s case, in order to tabulate what will (usually) become a monthly bill, delivered to the client for payment.  The lawyer’s bill will normally also include line items for costs and fees, but let’s leave discussion of those headaches for another day.

There are two basic components of hourly billing; the arithmetic division of 60 minutes (one hour) of time, and the method by which that time is physically recorded.  In English, the lawyer will generally divide his/her time into quarter hours, or tenths of hours.  And will s/her parse out the amount of time spent on a per task basis, or in one contiguous “block,” a method called “block billing,” the practice of assigning a one-time charge to multiple tasks.  If you are getting the sense that legal billing is somewhat arbitrary and capricious, then you are following along pretty carefully.

Block Billing

So, what now of “block billing?”  You’ve been sued by your business partner, and you hire an attorney at the rate of $400 per hour.  As an aside, some people might think that $400 is an astronomical sum to pay for legal representation in a simple business dispute.  Really?  Top-shelf, big city lawyers (New York, Los Angeles, Chicago) bill out at as much as $850 an hour, and higher.  And no, I’m not kidding.  Indeed, depending on where you live and the complexity of your case, unless you are a plaintiff operating on a contingency arrangement, good legal counsel may literally be beyond your means.  Since the crash of 2008, people have understandably become much more risk adverse,  leaving them to settle claims on pennies to the dollar rather than face the prospect of titanic legal fees.

In any event, you find counsel, your first invoice arrives, and you notice that s/he has broken down the time billed into quarter hours.  Not a good start.  The next place to look, then, is how the lawyer’s time is actually recorded.  The prototypical attorney’s invoice will contain line items describing his/her activities dedicated to your case, performed during the preceding month.  The day will be listed, followed by the name (or initials) of the attorney who worked on whatever tasks are recorded, a description of the actual work, the amount of time spent, and the corresponding fee.  Here’s a simplistic example, again, calculated at an hourly rate of $400.00:

                 Description                               Time                 Amount        Attorney            Date

draft notes re how to annoy the ex,               2.25                   $900.00             ATM                8/20/17
emails from client, calls with associate

For the work listed above, counsel reports spending 2.25 hours of billable attorney time, for a total charge of $900.00.  Really?  The first entry is fine.  But “calls with associate?” How many “calls?”  Which “associate?”  Were they calls like, “where should we go for lunch,” or strategy discussions?  “Review emails from client.”  Okay, again, how many emails?  What were the subjects?  Did the client ask “can I come to the office at 4:00,” or was a substantive legal question posed?  According to your attorney, all of the work performed on 8/20 added up to 2.25 hours, but there is simply no way to determine the accuracy of this assessment.  As a result, you, the client, cannot determine whether you are being over or improperly charged: The evils of “block billing” are well demonstrated by this single $900.00 line item.

The good news is that the practice of “block billing,” albeit still common, is now highly disfavored by California courts, experts, arbitrators and legal commentators alike.  Clients too, are starting to “wise up” to this common, yet finally controversial, method of billing and overbilling the people who pay a premium for legal services rendered in Southern California.

In this regard, therefore, in an article written by M. Leigh, and D. Wolf in the November 1997 issue of U.S. Business Litigation, the authors opined that block billing is “almost universally disapproved.” At the very least, the practice of “block billing” indicates a certain degree of professional laziness; at worst, it is a time-honored practice which allows attorneys to conceal and/or exaggerate time spent working on a client’s matter.  For lawyers, “time” does literally “mean money.”  But especially in today’s constricting business and legal environment, more is required of senior attorneys in sophisticated practice.

California courts agree. Thus, in Bell v. Vista Unified School District (2001), 82 Cal. App. 4th 672, 689, the court ruled that when evaluating “block billing” invoices, the “trial court should exercise its discretion in assigning a reasonable percentage to its entries, or simply cast them aside” if the attorney “cannot further define his billing entries . . ..”  In other words, in cases of attorney v. client litigation (or fee arbitration), the Judge or Arbitrator now has the authority to reduce a lawyer’s bill by “a reasonable percentage,” or in toto.  The playing field is being leveled.

Federal Courts are also falling in line.  The Ninth Circuit (which includes California) permits reduction of fees due to “block billing,” suggesting that the calculation be based in part on the percentage of the billing that was presented in block form.  See Welch v. Metropolitan Life Ins. Co. 480 F. 3d 942 (9th Cir. 2007).  Another Federal Court opined that the use of block billing “quite correctly raise[s] suspicions about whether all of the work claimed was actually accomplished or whether it was necessary.” See Robinson v. City of Edmund, 160 F.3d 1275 (10th Cir. 1998).

Accordingly, as the consumer of sophisticated legal services, you have every right to demand that your attorney give you the opportunity to analyze your invoices forensically.  Lawyers are not expected to use Shakespearean prose when describing their services, but some indication as to how these large fees were accumulated is now an elementary requirement for lawyers, according to the Court in Bell. Before signing a retainer agreement (which you should do for any case where it is anticipated that more that $1,000 will be spent), you must make certain that it spells out precisely how your attorney will account for his/her time.  The retainer agreement is your contract with your lawyer, and s/he will be loathe to violate it by resorting to sloppy billing practices, knowing that clients can always challenge improperly prepared invoices in a fee arbitration.

Billing by Quarters

Another billing evil, necessarily associated with the practice of “block billing,” is the question of the increments of time your lawyer will use to bill the tasks s/he performs on your behalf.  When I began practicing law at big firms, I was initially taught to bill in quarter-hours, starting at 15 minutes, then 30, 45 or one hour (and then multiples of each).  But, not every task a lawyer undertakes consumes 15 minutes of time or, when bunched with numerous tasks, is neatly reducible to precise calculations in quarter-hour increments.  Imagine the abuses!

For example, let’s say I did a wee bit of research, looking to determine the statute of limitations for fraud claims in Maine.  I got lucky, and literally located my quarry in 5 minutes.  What to do?  I was moving on to a totally different matter for a different client once I found that answer, and yet I still had these 5 minutes to log onto a time sheet, and 15 minutes was the lowest denominator available.  Do I just forget the 5, or pad it to include, let’s say, a phone call and another small research project, to push my total up to equal at least a quarter-hour?  You already know the firm’s (at least) implicit answer: Pad it laddie, that’s how we pay your salary.

Indeed, at one firm I worked at, we were taught (and not just “encouraged”) to keep a very heavy foot on the billing pedal.  We associates used to joke that the basic billing menu we were expected to employ went as follows: Record a quarter hour if you made a telephone call, a half-hour if someone answered, three-quarters of an hour if you talked about anything at all (be it with client or opposing counsel), and a full hour if something truly significant was discussed.  Do you think I am joking?  Looking back, I wish I was, and it wasn’t the least bit humorous.

And so what would these quarter-hour billing practices mean for the client of our $400 an hour lawyer?  Their bill that would reflect charges of $100, $200, $300 or $400 per hour, and sometimes many multiples of those figures.  Yet, more to the point, even if the attorney was doing excellent legal work, and accurately recording the billable time being spent, invoice inflation was still almost invariably the result.

Thus, imagine a  long day of trial prep, 10 hours of near non-stop drudgery.  It’s a big case, staffed with 3 lawyers, including a senior partner.  Given the crush of work, billing is almost always left for last.  Considering the pressure of billing quotas, are those numbers going to be rounded up, or down?  Is that 45 minute lunch going to be deducted, or thrown into the mix?  So, at ten hours, the totals are $4,000 for the junior, another $5,000 for his more senior colleague, and a full $7,500 for the partner.  Just one day of many in advance of a big trial, and the client is down $16,500 for the day. And, of course, that’s before calculating paralegal costs, and all other manner of overhead.  Hell, on nights we stayed late, we even billed the cost of dinner.  Utterly without shame.

That’s why hourly civil litigation lawyers love defense work.  As we like to say, “there is no contingency in defense.”  When a person, rich or poor, or a company, big or small, gets named as a defendant in a lawsuit, they have 2 choices; pay hourly, or face a default judgment.  And you don’t want to default.  But there is still a remedy for over-billing due to quarter-hour recordation; insist on having your bills calculated in tenths of hours.

Thus, one immediate problem with quarter-hour billing is that there are many tasks performed by a lawyer that do not require the minimum 15 minutes to complete.  The motivation to “pad” time is thus immediately apparent. Using tenths, however, allows the client to see just how their lawyer’s time is being spent, and whether it is a fair report of the work being done.  Assuming that same $400 per hour rate, here is a sample day’s entry on a lawyer’s invoice, calculated in quarter-hours:

          Description                                  Time                Amount            Attorney              Date                              

draft notes, telephone call to client,         1.25                    $500.00                 ATM                  8/20/17
research venue issues

Okay, so assume it took one and one-quarter hour to complete these 3 tasks.  But when reviewing the bill, how does the client know how much time the attorney spent on each individual task?  And, whether it’s quarters or tenths, the above-cited example is nonetheless also an example “block-billing.”  Thus, it is both the ability to see the relative time expended on various tasks, and the equitable incrementalization of time recordation, which permit the client to evaluate the legitimacy of their invoice.  If money is being misspent, it is easier to spot.  Better billing practices allows clients (not to mention their law firm) to determine whether a particular lawyer is billing inefficiently.  Or working inefficiently.  Otherwise it’s all guesswork.

So, was the telephone call in our example above 50 minutes long, with 10 minutes of drafting and 15 minutes of research thrown in?  No one can tell.  Therefore, by dividing the time recorded into tenth’s on an hour, you may not get a “perfect” account, but it is still going to be a damn sight more accurate than when using quarters.  Here is that same day’s work, divided now, however, into tenths of hours:

 

Description                                           Time                Amount            Attorney              Date                              

draft notes (.2), telephone call to            1.20                   $480.00               ATM                     8/20/17
client (.2), research venue issues (.8)

One-tenth of one hour, billed at $400/hour, is a $40.00 charge.  On the other hand, one-quarter hour, billed at $400/hour, equals a $100.00 charge.  The lawyer billing in tenths, conscientiously rounding one entry down, increases the accuracy and lowers the same invoice by $20.00. The benefits — to the client — of using smaller billing increments is obvious.

The Future of Attorney Billing

As a now-sophisticated consumer of legal services, you have the tools to combat sloppy hourly billing practices.  The first step is learning these simple rules of billing, and then insisting that your retainer agreement reflects the proper means by which your attorney’s services are going to be billed and recorded.  One final word to the wise?  At the risk of being accused of “ageism” (I’m no spring chicken, by the way), any unethical lawyer can “pad” a bill, but it is usually the more senior ones who quite innocently have never evolved with modern practice trends.  I know attorneys of my generation who still dictate their written work and hand tapes to their assistants for transcribing. I know attorneys who “don’t use email.” Wait, what?  No, really.  So, the skills of an experienced lawyer can be invaluable, but their administrative practices maybe prehistoric.  Get it in writing.  A good lawyer protects you.  A good client protects themselves.

There’s no charge for any of this, by the way.

– DB –

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