The Catch-All Phrase that Could Protect You Against Dispute
We are continuing to talk about "tips" in the area of billing that deals with expenses.
As you know, billing is the fourth area of the five areas that make up every business in the world. The other four are as follows: Clients or customers; Administration; Getting the work done; and Collecting.
In the last several weeks, we have been talking about billing expenses to clients who actually incur the cost, as opposed to putting those expenses into your overhead and spreading them across all of your clients with your increased hourly rate. This week's "tip" is to set up a system in your office where all litigation and case expenses get billed to the clients who incur such expenses.
I know you have seen the paragraph we have in our engagement letter with all of our clients dealing with expenses before, but I think it bears repeating here to talk about the subject of litigation and case expenses being billed to individual clients. The paragraph on expenses is as follows:
Expenses
It is our policy to utilize the personnel who can most efficiently handle the task to be accomplished. In addition to our hourly rate charges, which are billed in quarter (1/4) hour task increments, we will bill for all out-of-pocket expenses incurred on your behalf, including all charges for photocopying, long distance telephone calls, postage, word processing, telecopier, court filing fees, court reporter fees, mileage and travel costs, parking charges, file storage fees, office supply fees, consultation fees for outside professionals, exhibit and witness fees, delivery fees, service of process fees, subpoena fees, and all other necessary and incidental expenses incurred on your behalf.
Let's make a list of all the things that show up in the above paragraph that have to do with litigation and case expenses being billed to the clients. That list is as follows:
1. All out of pocket expenses;
2. Court filing fees;
3. Court reporter fees;
4. Mileage and travel costs;
5. Parking charges;
6. Consultation fees for outside professionals (experts);
7. Exhibit and witness fees;
8. Delivery fees;
9. Service of process fees; and
10. Subpoena fees.
It is obviously important that the list start out with the all encompassing "all out of pocket expenses." You want to be sure that you have a catch-all in your engagement letter.
The reason we have all of the other typical expenses enumerated, is to be sure that we do not fail to set out anything that we would normally bill to a client for a particular matter. This way the client will not be able to complain that they did not realize a particular cost was a cost they would be billed for.
Having both a catch-all and specifics enumerated will often avoid any misunderstanding with your client. When in doubt, set it out!
Most of the litigation and case expenses that will be incurred in a law firm are easy to keep track of through your electronic billing system because you will often be writing computer generated checks. These checks can then be electronically transferred to your client's monthly bill so those matters can be included in the monthly bill along with the monthly fees. If you are handling contingent fee matters, it is also equally important that all of these expenses get allocated to your contingent fee electronic bill so when the case is resolved, you can be sure to reimburse yourself or your client for all of the advances that each of you have made on the expenses.
Of course, it should go without saying, as you incur these litigation and case expenses they actually need to be paid promptly so people will continue to work with you on not only the case where the expenses were incurred but on other cases where you are going to need their help as well.
Frankly, I cannot envision a single litigation or case expense that should not legitimately be billed to a file. Over the years I have billed travel time, hotels, meals, and tips as case expense on pieces of litigation that have taken me out of town. I remember one time when myself and two other people from my office lived in a hotel in Macon, Georgia, for six weeks getting ready for and trying a major products liability case. Every dime of expense was billed to the case as a case expense. That case was one in which a theory of liability with regard to a particular product was tried to a jury for the first time in the United States. At the time, there were no other lawyers in the United States pursuing that theory of liability on that particular product, and so we were "the only game in town." I recommend that you not be shy about billing expenses to your litigation and cases, but obviously you need to be scrupulously honest and only bill legitimate expenses that should be reimbursed out of any recovery or that the client legitimately should be billed for.
At the end of our paragraph involving the billing of expenses, we put the following phrase: "in all other necessary and incidental expenses incurred on your behalf." Again, having these general comments included with the specific expenses is very helpful with regard to being able to recover all of the expenses connected to a particular piece of litigation or case. Please note that we did not put in the word "reasonable." The addition of the word "reasonable" would only create an argument over what was "reasonable" and what wasn't. If it is necessary and/or incidental to the litigation or the case, it is billable. In thirty-five years of practice, I have never had a client ever question any expense in the area of litigation and case expenses. I have had some clients quibble over postage or photocopying cost per copy, but never over litigation and case expenses.
When a client questions an expense, I usually will instantaneously defer to the client and no-charge the expense. I have found it very worthwhile over the years to always be differential to the clients when it comes to a dispute. I am much more interested in satisfied clients who will continue to refer legal business to our firm than I am in worrying about a few dollars. I used to have a partner whose philosophy of life was: "if you watch the pennies, the dollars take care of themselves." I guess you could have that philosophy if you had enough money from other sources. I have never had any money from any source other than myself, and my philosophy has always been: "the bulls make money, the bears make money, and the pigs get slaughtered." Every time I have given something away, I have gotten it back ten fold. Every time I have compromised with a client and deferred to them, I have always made a friend for life and a walking, talking advertisement for legal business for my firm. I have always tried to make the clients feel that I am their "advocate" even when I may be advocating for them against my own self interest.
Next week we are going to talk about the billing of outside or contract counsel as an expense. I think you will find some of the ideas I have about my virtual law firm that we have discussed before as well as utilizing law firm faculty as co-counsel in cases, will be very fascinating with regard to being able to handle cases when you might not otherwise believe that you have enough "horses" to be in the race.
Talk to you next week.
Jim Wirken is a civil trial attorney and the Chairman of the Board of The Wirken Law Group in Kansas City.