On March 25, 2013, The New York Times reported that the "world’s largest law firm," DLA Piper, had been accused by a former client of a "sweeping practice of overbilling." Internal correspondence from attorneys within—the former client alleged—evidenced the firm’s overbilling practices. Attorneys at the firm gloated in the emails that: "I hear we are already 200k over our estimate" and that the firm had "random people working full time on random research projects in standard ‘churn that bill, baby!’ mode."
The firm denied any wrongdoing, explaining that the emails were nothing more than an offensive and inexcusable effort at humor, but did not reflect any actual excessive billing practices at the firm.
This alleged instance of attorney overbilling captured the media’s and the public’s attention because, as described in a statement from Lisa Lerman, a law professor at Catholic University and an expert on the issue, this is not an isolated event at one firm. Rather, attorney overbilling is a "pervasive problem" in the American legal profession.
It was reported in the Times on April 17 that the parties resolved the dispute and that the terms of the settlement were confidential. Thus, there is no way for us to know at present whether any actual overbilling occurred in this case.
However, overbilling in general is something that all consumers of legal services should know about and protect themselves from. Based on my experience representing plaintiffs in overbilling matters, there are several actions that a client can and should take to protect itself from possible overbilling abuses such as those alleged in the DLA Piper matter.
1. Choose the correct lawyer or law firm
Overbilling is not limited to large firms. However, there is little question that the realities of the economics of a large firm create added incentives for attorneys at these firms to pad their bills, pressures that do not exist at smaller firms. These include incentives for partners to maximize profits that now average over $1.4 million per partner at the largest firms; and on associates to meet minimum billing requirements, which can be as high as 2,400 hours per year.
Some large and complex matters require the capacity and infrastructure that can only be provided by a large firm. However, these matters are rare. Experienced and skilled attorneys practicing at medium-sized and small firms can handle the great majority of legal matters—including large and complex ones. In my experience, attorneys at smaller firms often provide superior and more attentive service, obtain better results, and do so more efficiently and at a fraction of the cost of a larger firm. This is especially true for individual clients, or small or medium-sized businesses, who are unlikely to be a priority for larger firms.
2. Ensure the matter is not overstaffed
The surest way to run up excessive fees is by overstaffing a matter with too many attorneys. Logic dictates that the more attorneys on a matter, the higher the bill. Staffing too many attorneys on a matter creates inefficiencies, results in a duplication of effort, and inevitably leads to numerous unnecessary and expensive internal meetings and communications.
While there may be some matters that are so large that they require numerous attorneys to properly handle, the overwhelming majority of matters can be handled by two or three attorneys with the assistance of a paralegal or secretary. Clients should demand to know exactly who is working on their matter, what it is those attorneys are doing, and why those attorneys are necessary to the representation.
3. Limit the use of inexperienced attorneys
Young and inexperienced attorneys at large firms are often given little training and are expected to learn on the job. Even though summer associates and first- and second-year associates at the largest firms can bill upward of $400 to $500 per hour, these attorneys are the ones most likely to work inefficiently, make the most mistakes, and provide the least value to the client.
These attorneys are also likely to be performing administrative tasks that are more properly performed by a secretary or paralegal, or performing tasks that are completely unnecessary, such as carrying the bags of a more senior attorney.
While there are some basic tasks that inexperienced attorneys can be reasonably expected to competently perform, such as research, clients should greatly limit the amount of time billed by these associates and should be leery of paying firms high hourly rates to essentially train their least experienced associates.
4. Limit the number of open matters
This is a corollary to the rule in paragraph 2 above—the more open matters, the higher the bill. For bookkeeping purposes, clients will often have a firm bill to numerous different matters. However, having too many open matters can result in excessive bills.
For example, in one case I represented a former client of a top-20 global law firm that had over 10 matters open at one point. By analyzing the time entries, we uncovered the fact that a senior partner at the firm was routinely billing the minimal billing increment of 0.25 hours—or 15 minutes—to each of those matters per day. This resulted in roughly 2.5 hours of daily billable time to the client even though we estimated that the actual amount of work that partner had performed was 30 minutes or less per day.
When a client is being billed for numerous different matters, it should be sure to look at the cumulative totals being billed to it by each attorney.
5. Scrutinize the bill
Reviewing and scrutinizing the firm’s invoice is the most important way that a client can protect itself. Law firms should invoice clients promptly at the end of each month. Bills should detail all of the work performed by any attorney working on that matter that particular month.
In scrutinizing the bills, clients should be sure to evaluate the work performed against the time billed for reasonableness.
For example, if a client is billed for an internal legal memo prepared by the firm, the client should total up the amount of time spent preparing that memo. If the memo has not already been provided by the firm, the client should demand a copy of the memo or other work product for which it has been billed.
The client should then determine whether the amount of time billed was warranted by the end result. This is true for all major tasks, such as preparing pleadings, internal or external correspondence, or document review.
There are other indicia of overbilling that clients should be aware of. (These patterns were reported by the California Bar’s Committee on Mandatory Fee Arbitration, Arbitration Advisory 03-01, "Detecting Attorney Bill Padding" [PDF], dated January 29, 2003.) Patterns in invoices that suggest padding include:
Formula billing: Billing separately for each task even if that takes a short time, i.e. billing 0.1 each for the review of 10 emails, for a total of one hour, even though less than one minute was spent on each email.
High minimum increments: The standard billing increment is 0.1, or six minutes. Higher minimum billing increments should not be accepted.
Time estimates: Numerous entries such as 8.0 or 10.0 hours are likely estimates rather than actual time billed and should be investigated.
Block billing: If one amount of time is shown for working on more than one discrete matter, this is known as "block billing" or "lumping." This practice is generally not accepted by federal courts and warrants closer scrutiny, especially for larger blocks.
Standardized work descriptions: Repeated use of the exact same phrases in bills, i.e. "document review" or "prepare for deposition," suggests padding.
Lack of detail: Lack of specificity in work descriptions, i.e., "Attention to file" or "Discovery," suggests padding.
Mistakes: Bills often contain mistakes. For example, if a client is billed two hours for a hearing that only lasted one hour. Clients should carefully review bills for errors.
6. Challenge the bill
If any evidence of overbilling is found, clients should discuss the matter with the law firm. There are many reasons why a client may be reluctant to do so. However, any law firm should be receptive to complaints from its clients about billing, provide answers to clients’ questions, and adjust their bills accordingly when confronted with evidence of overbilling. If not, the client should look to take their business elsewhere.
Steven Barentzen is the principal of the Law Office of Steven Barentzen in Washington. The firm focuses on complex and sophisticated commercial civil litigation including professional malpractice and overbilling matters. This article first appeared in Corporate Counsel, a Daily Report affiliate.