18 Sep Getting the Most Out of Your Lawyer’s Fee Agreement: The Big Four of Legal Billing
Probably the best person in the world of legal fee review, John Toothman, has this piece on legal fee review for the Detroit Municipal Bankruptcy and how the fee examiner in that case (another bankruptcy lawyer riding herd on bankruptcy lawyers) is not looking in the right place to keep the legal fees down. The legal fees in the Detroit Bankruptcy may exceed $250 million. Toothman has a number of theories on that matter, as do I, but that is not the focus of this post. Toward the end of the post, Toothman writes:
To do any sort of credible bill examination you need to take on the “big four”: Rates, staffing, hours, and tactics. Everything else is just peanuts, which is what’s really obscene here.
The “big four” is where the big squeeze comes in for billing. I have addressed some ways to dealing with spiraling legal fees, by making sure your fee agreement contains some provisions to help you control costs. Toothman, and his firm The Devil’s Advocate (not in any way realted to the rather uneven Keanue Reeves/Al Pacino movie of the same name) have reviewed major cases with millions of dollars of legal fees, as well as smaller cases. (Disclosure: I once worked with Toothman on a case where he served as an expert witness for our client on the matter of legal fees).
When we think of unreasonable fees, we might think of hundreds of thousands or millions of dollars. But the fees don’t have to be six figures to be unreasonable.
Today, I want to talk about staffing. One of the things that gets me exercised (and I suspect Toothman as well) is over-staffing a case. Over-staffing can take several forms:
- Having too many partners on the case (partners bill the most per hour)
- Having too many associates on the case. Associates generally bill less, but often what you are paying for is on-the-job training.
- Having a plethora of billable support personnel on the case, including paraglegals, computer/data technicians/or other in house, non-lawyer staff.
- Constantly changing associates so that they have to spend significant time (often with a partner or two) doing “file review’ to learn the case.
- Farming out discrete “projects” to other attorneys to do one-off or short term projects. (This is often done to keep associates busy and to help them achieve their billable hour
These staffing decisions by a firm almost always increase the size of your legal bill without actually increasing the quality of your representation. If anything, the constant changing of staff or a bloated staff leads to inefficiencies. Inefficiencies lead to bigger bills.
How to Address the Problem
Preventing staffing problems that increase your bill has to start with the Fee Agreement itself. If the Fee Agreement does not specify the staff that will be working your case, require it’s inclusion. Do not allow the law firm to have a carte blanche to staff the case anyway they want. If the firm wants to use non-lawyer technicians or staff, those people should either be identified at the start of the engagement or they should not be billing to your case. For each person identified in the Fee Agreement, demand a copy of their bio/resume and an explanation from the firm of why this person was being chosen if the reason is not apparent. By “apparent” I mean apparent to you as the client. Such a demand includes both lawyer and non-lawyer staff.
Next, as you start to receive bills from the law firm check to make sure each time keeper is identified by name. Usually on bills, the initials of the time keeper are noted in the detailed listing, but each bill should identify the time keeper by full name. If those names are not in your Fee Agreement, dispute the charge and refuse to pay the charge until a satisfactory response is given.
I am, of course, aware that things change, lawyers move firms as does staff. I am not suggesting that you don’t take such matters into account, but you should be skeptical of changes in staffing when a lawyer or staff member has not left the firm.