When Is Your Lawyer Billing You Too Much?
The "Necessary Evil"
Even among legal professionals, "billable hours" get dubbed as a "necessary evil." It seems no one enjoys this aspect of the lawyer-client relationship. Yet overhead and salaries must be met; fixtures and equipment must be paid for; and benefit packages that are designed to attract the best and the brightest are expensive - all burdens that must be largely met by the employer.
Any number of formulas may be utilized by a legal practice to determine how to meet overhead and expenses while maintaining competitive billing rates for their clients. Whether your lawyer's practice has 1-2 lawyers or 50-100 lawyers, billing is unavoidable barring a contingency case. Variable expenses like travel and meals are almost always billed back to the client, but otherwise, what's truly behind the veil of legal billing is rarely seen. Your lawyer will set an hourly rate for non-contingency work designed to compensate him/her for their time, expertise, and cover some portion of or all of expenses, but how do you, they paying client, know when you are being charged too much?
First and foremost, ensure that you are not paying for services that should not be billed to you to begin with. Second, set boundaries or parameters at the outset of the billing relationship which includes knowing WHO will bill you and at what rate. And last, don't be bashful -- ask questions about your bill early to prevent major upsets later.
Who's On the Clock?
A legal professional bills you in increments of .10, .20, or .25 hours. Savvy clients learn quickly that requesting a .10 billing scheme saves them money but your lawyer isn't the only professional charging you. There is a cumulative effect to consider because the firm you've hired also has interns, associate lawyers, and paralegals who may bill you. It is wise to understand that there is a big difference between the work your lawyer performs personally, and the work he/she delegates to other staff support.
In most cases your lawyer's rates should be the highest rate you pay and while you should know their rate at the outset, you should also know the rates of other professionals that will be billing you (sometimes contracted employees or services). Understanding the difference between the various tasks your personal lawyer, paralegals, associates, interns, and secretaries can perform will help you understand your billing statement immensely.
Paralegal Tasks vs. Secretarial Tasks
Paralegal tasks should be clearly delineated from secretarial tasks for one reason - clients pay for paralegal services just like they pay for attorney services. A paralegal should NEVER bill for secretarial work such as cover letters to the clerk of court, setting up conference calls, settlement correspondence, non-discovery related copy jobs, or binder preparation but it happens more frequently than you might imagine. My advice is that you clarify at the outset what you're lawyer classifies as secretarial work. The list will vary based on the law practice. For instance, some law offices still have paralegals bill for preparation of notices of deposition which in most cases is a simple form generated with the date and time added. You would expect a paralegal to bill for developing a complex notice of corporate deposition with interrogatories and document requests, but a secretary can and should perfect a simple notice of deposition. If you think of your lawyer's paralegal as an extension of your lawyer, it is easier to distinguish what tasks the paralegal should perform and what tasks the secretary should perform.
Paralegal Work vs. Lawyer Work
Paralegal work should be delineated from attorney work and in larger firms, you may see more paralegal-billed time than lawyer-billed time. Most lawyers have preferences about what they assign to paralegals and when. Find out what those preferences are because this affects your bottom line. Each law office may have a different standard for what paralegals bill or what they are allowed to bill. Those standards should be set by you. A paralegal generally performs the same functions as an attorney or law clerk (intern) but at a lower rate. I've billed out my time for as little as $60 per hour and as much as $190 per hour. That's a huge variance but it depended on my expertise. When I was doing very specialized work such as immigration or affirmative action, the rate was justified. Clients were happy to pay $190 per hour versus the $300 per hour my supervising attorney could charge. However, when drafting simple motions, discovery responses, complaints or answers, it is far more difficult to justify a higher rate.
There is a very long list of things you should expect a paralegal to bill for and many of them resemble what your attorney would bill for. In large part; however, your attorney should be spending his time making court appearances, attending depositions, developing winning strategies, negotiating settlements -- things the American Bar Association or National Association of Legal Assistants says a paralegal cannot do.
The Role of Interns & Associates
You've heard the old adage "there are too many lawyers" -- it does seem true that the profession is more appealing than physician. Consequently, not only do you have paralegals performing legal work under the supervision of an attorney, you have interns or law clerks (law school students) gaining their experience on your dime. Whether or not interns should bill clients has been a subject of great debate and there are many legal opinions that suggest they can. It is wise to determine this at the outset because a lack of experience generally translates to a slower work product in terms of hours billed. If the lawyer you hired is willing to mark this time down, then no-harm, no-foul. But taking a day to do what could have been done in two hours is bone chilling to most clients. On the bright side, most law firm's hire interns seasonally (summer) while associates work year-round.
Associates are lower tenured or non-partner attorneys that work in collaboration with or at times under the supervision of a more tenured attorney or partner. The hierarchy should be irrelevant to you as a client, but it does becomes relevant when the billing statement comes out. Associate lawyers, like paralegals, usually have a strong association with the case from start to finish. This translates to lower rates since they don't have to "study" the file to get up-to-speed at every turn. The question to ask is whether an associate will be assigned to the case for the life of the case.
When reviewing bills, ponder the experience and attention required to perform the task. For example, it is justifiable for a lawyer to bill at a higher rate when developing and preparing a complex medical affidavit, but a simple witness affidavit is work more appropriately performed by the paralegal.
Annual Billing Requirements
Annual billing requirements for lawyers and paralegals are a byproduct of a capitalistic society. Some lawyers are required to bill as much as 2,300 - 3,000 hours per year and some paralegals required to bill 1,800 - 2,000. What does this have to do with you, the client? Everything! Think about it. There are only 2,080 hours of billable time available in a 52 week year. Throw in personal appointments, two-week's vacation, and administrative or other professional obligations, even 2,000 hours is virtually impossible without double-billing. And that's exactly what happens. An attorney or paralegal will attend a conference call or the like, while simultaneously working on your discovery. The question to ask is how often this occurs because it is clearly divided attention which in my view, should be a divided rate.
Retainer or Rention Agreements almost require a separate lawyer to review them. Simply stated, a retainer is a sum paid in advance for services expected to be performed. There are general agreements for corporate clients which may cover a specific period of time, though not relate to a specific project. And there are specific agreements which relate to a particular case or project for an indefinite period. Retainer fees are paid in advance and/or incrementally and then drawn down as the work is done with any residual funds being reimbursed to the client if not used (which is rare). Some states allow flat fees but these are generally regarded as dangerous because it limits your ability as a client to discharge the attorney.
Be sure you have a complete understanding of what you are signing before you sign any retainer because agreements vary enormously from one firm to another and even from one client to another. In short, retainer agreements should contain no more than the compensation agreed upon including hourly rates, how the retainer will be drawn from, how additional costs will be handled (such as court costs, travel and other expenses), and billing frequency and net payment terms. Most agreements have arbitration clauses as well.
No One-Size Fits All
There is no perfect method for billing attorney or paralegal time, but considering your needs against a firm's strengths and limitations is a good place to start. The billing system utilized by a firm depends on that firm's structure, personnel and administrative culture. It's best to understand it before your lawyer performs any task on your behalf.
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