Avoid problems when billing your clients

By Diane Karpman

Karpman

The lawyer’s stock in trade is the sale of legal services, not photocopy paper, tuna fish sandwiches, computer time or messenger services.” (ABA Formal Opinion 93-379) Some billing fundamentals are: lawyers cannot bill for billing; lawyers cannot bill clients for a fee dispute (In re Conduct of Benett, 14 P. 3d 66 (Or. 2000)); and a lawyer, no matter what type of super hero, cannot bill 24 to 33 hours per day (In re Entin, 732 N.Y. S. 2d 648 (N.Y. App. Div. 2001)).

Billing practices have changed with the passage of time. Block billing was typical 25 years ago, but although not prohibited per se, it is now not favored and raises eyebrows. Block billing makes it difficult (if not impossible) for clients to know how much time was actually spent on a project.

Generally, lawyers may not charge clients for overhead or soft costs like heat, rent, lights, or secretaries. Those are encompassed in your fees and cannot be included as “costs,” because they can’t be attributed to specific client needs.

A workable definition of “costs” is the cost to the client of maintaining the litigation or case; i.e., court filing fees, investigation and process service, deposition expenses, experts and jury fees. The problem is that the term “costs” is constantly changing. Many lawyers attempt to recapture hard costs like telephone/fax, travel and parking, and computer research charges. Others consider that a nickel and dime approach.         

Fifteen years ago, it was typical to see additional charges for computer-assisted research. If you are already charging for your professional time, how can you tack on additional charges for the use of Lexis? Perhaps that’s a charge that ought to be reversed today, since computer research is far more reliable than the price or luxury of maintaining a hard copy library. Today, a court awarding fees and costs may treat computer research as overhead to be subsumed within the firm’s hourly rate.

A flat charge of a quarter hour for every phone call or e-mail may raise judicial eyebrows. Capturing these costs or sourcing out that phone call or fax could be an administrative headache. How can lawyers reduce the administrative difficulty of accounting for services provided to each individual client? There is out-of-state authority that with client consent, a lawyer can charge a flat fee, perhaps 2 percent across the board. This could be a substantial savings to clients. No more extra bookkeepers, secretaries, software, client-matter number — all of which consumes lawyer time.

But is that fair? A client who calls five times a day uses more receptionist time than one who doesn’t call. If the total amount of all costs collected by the firm exceeds the actual costs, the lawyer is making a profit for the sale of nonlegal services. Lawyers have enough ways to get in trouble, so let’s avoid billing irregularities, which can result in criminal, civil or State Bar problems.

• Diane Karpman, a legal ethics expert, can be reached at 310/887-3900 or at karpethics@aol.com.