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BIRMINGHAM, Ala. — One of the most difficult attorney billing issues is how a lawyer may receive fair compensation for the “intellectual property” value of work products reused for a later client. An attorney who has spent substantial time developing interrogatories, jury charges, legal memoranda or other such documents for one client naturally will want to “recycle” the same materials when they are relevant to later clients. But on what, if any, basis can the lawyer legitimately bill for this recycled work? The answer depends on whether the attorney uses traditional hourly billing or some form of alternative billing. An attorney who engages in “value billing” must decide how to place a price tag on such work. Similarly, an attorney who charges a contingent fee may take the availability of this work product into account in allocating his share of the fee award. While the lawyer’s estimate can be debated, it’s clear at least that billing for the prior work is permissible. A lawyer who bills by the hour, however, faces a greater problem in recovering just compensation for such work: He is ethically barred from charging a client for time spent developing work product for an earlier client, unless the client gives informed consent to such charge. MISREPRESENTATION The ethical prohibition against charging a time-based fee for recycled or “canned” work is a sound rule supported by various judicial decisions, an ABA ethics opinion, several state ethics opinions and numerous scholars and other commentators. The reasoning behind this rule is simple: An attorney’s time sheet is a historical record; it represents that an attorney spent a particular amount of time performing particular work for a certain client at a specific time. Any inflation of recorded time to absorb work that was done at an earlier time for another client obviously constitutes a misrepresentation. “Fraud” is not too strong a word to describe it. In flatly condemning this practice, the ABA’s Formal Opinion 93-379 (1993) aptly declares that a “lawyer who is able to reuse old work product has not re-earned the hours previously billed and compensated when the work product was first generated.” The opinion suggests that the attorney is earning a windfall from “the luck of being asked the identical question twice” and contends that the issue should be considered “from the perspective [of] what the lawyer actually earned” rather than “from the perspective of what a client could be forced to pay.” Similarly, a North Carolina State Bar opinion has declared that “implicit in an agreement with a client to bill at an hourly rate for hours expended on the client’s behalf is the understanding that for each hour of work billed to the client, an hour’s worth of work was actually performed.” This opinion concluded that “if a lawyer who has agreed to accept hourly compensation for her work subsequently bills the client for reused work product, the lawyer would be engaging in dishonest conduct.�” FEES REDUCED BY COURTS These ethics opinions are consistent with various judicial decisions in which courts have reduced fees resulting from work that attorneys performed in previous cases. As the U.S. District Court for the Northern District of California explained, “Accumulated expertise may be a factor justifying a higher hourly rate, but it is clearly improper to make multiple charges for work that has only been done once.” Lockheed Minority Solidarity Coalition v. Lockheed Missiles & Space Co., Inc., 406 F.Supp. 828, 832 (1976). Accordingly, the court in that decision permitted recovery for only 10 hours of time instead of the 30 hours an attorney had billed for interrogatories he had used in three prior cases. In another case, a court held that it was “grossly excessive” for plaintiffs’ attorneys from 11 firms in a class action to expend more than 900 hours on a motion for a preliminary injunction, since they had filed many similar briefs in similar cases. Weinberger v. Great Northern Nekoosa Corp., 801 F.Supp. 804, 817-18 (D.Me. 1992), aff’d on other grounds. The court therefore disallowed all but 10 percent percent of the billings for the preparation of the initial brief. Similarly, billing for recycled work was a ground on which a New York state court a year ago rejected an arbitration panel’s $1.3 billion award to counsel in California litigation against the tobacco industry. Williamson Tobacco Corp. v. Chesley, 749 N.Y.S.2d 842, 849. COMPLIANCE AND CIRCUMVENTION Fortunately, most attorneys seem to recognize that billing for recycled work is unethical. In a nationwide survey of partners and associates that I conducted during 1994-95, only 9.5 percent of outside counsel and 6.3 percent of in-house counsel stated that time-based billing for recycled work was ethical when the client was not informed of the practice. Two-thirds of the outside counsel stated that they never had engaged in such a practice, and less than 5 percent admitted that they often engaged in it. Responses by inside counsel, however, indicated that the practice may be more widespread than outside counsel admit. Four-fifths of inside counsel believed that outside counsel who worked for their companies sometimes billed for recycled work, although only 10 percent felt that this occurred frequently. These findings are consistent with Professor Susan Saab Fortney’s more recent 1999 survey of 1,000 Texas associates, 83 percent of whom said that they did not bill for recycled work. Fortney’s survey found that the incidence of admitted billing for recycled work decreased as the size of a firm increased: 30 percent in small firms, 19 percent in mid-sized firms, and 9 percent in large firms. (“Soul for Sale: An Empirical Study of Associate Satisfaction, Law Firm Culture, and the Effects of Billable Hour Requirements,” 69 University of Missouri-Kansas City Law Review 239 (2000).) Billing for recycled work may become more common as more law firms use computer technology to create, index and organize boilerplate forms and other fully or partially reusable work products, including research. On the other hand, the prevalence of technology and the growing specialization of legal practice may make clients more vigilant in questioning whether attorneys have created documents from scratch. Corporations can reinforce the widespread disapproval of billing for recycled work through their billing guidelines, which increasingly are being made part of contracts with outside counsel. Some attorneys may try to circumvent these prohibitions by spending time to re-create work already performed for another client — knowingly “reinventing the wheel.” But failure to pass along to the client the economy of work already performed is tantamount to “churning,” which is scarcely less unethical than misrepresenting the number of hours worked for the client. GETTING FAIR COMPENSATION If, however, an attorney refrains from billing a client for valuable intellectual property that she developed for another client, the lawyer may not be receiving compensation that reflects the just value of her services. Depriving the attorney of what the ABA opinion describes as a windfall may result in the client receiving a windfall. One obvious way to avoid such a windfall is for the attorney to ask the client for additional compensation to reflect the value of the intellectual property. The North Carolina ethics opinion explicitly proposes this as a means for providing full compensation. Recycled work may be difficult to value, however. Indeed, the difficulty of assigning a price tag to attorney work product is one of the reasons why value billing has not supplanted time-based billing. Moreover, a client might balk at paying extra to compensate an attorney for work that is part of the base of expertise for which the client hired the attorney. In condemning time-based billing for recycled work, an Alaska ethics opinion observed that “the client likely expects that the lawyer’s hourly rates will reflect the efficiencies which may be gained because the lawyer has significant experience in a particular area of the law.” An attorney wishing to receive added compensation for recycled work product should therefore consider detailing these expectations in his or her fee agreement; otherwise the client may later feel the attorney is trying to exact a higher fee after representation has commenced. To avoid the problem of negotiating the value of recycled work product, the attorney should also consider charging a higher hourly rate for time spent adapting recycled work. If the attorney’s work product is genuinely valuable, the lawyer ought to be able to command a high rate. Even if unable to negotiate additional compensation, or a higher hourly rate reflecting the work product, the attorney may still be rewarded for having such intellectual property. The attorney’s experience may help attract business, and time the attorney saves by recycling old work product may be profitably applied to other activities, including work for other clients or client development. William G. Ross is the co-author ofLegal Fees: Law and Management,” and author ofThe Honest Hour: The Ethics of Time-Based Billing By Attorneys.” Ross teaches professional responsibility, civil procedure and constitutional law and history at Cumberland School of Law of Samford University in Birmingham, Ala. This article originally appeared in a newsletter from American Lawyer Media, a Recorder affiliate.

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