Using Iternet Explorer 11? Please click here if experiencing problems.
by John L. Trunko
Hourly billing (i.e., billing based on time expended times hourly rate) remains the most common method by which attorneys bill their clients. Billing by the hour requires detailed and accurate recording of the time spent and tasks performed on a client matter. Good timekeeping practices can lead to greater efficiency and productivity, and help to prevent later problems such as fee disputes. Moreover, good timekeeping practices are important not only for attorneys who actually bill their clients by the hour. Attorneys who take cases on a contingent fee basis are generally required to provide adequate documentation of their time expended on a matter in order to obtain court-awarded fees. Internal time records are also important for measuring productivity and for providing accurate estimates of the time required for particular types of matters and activities should the attorney be required to provide a budget or bill based on a flat fee.
Legal Billing Standards
Standards for billing and timekeeping practices can be found in a number of sources. These include: (1) ethical rules and opinions, such as the American Bar Association Model Rules of Professional Conduct, state rules governing professional conduct (often derived from the ABA Model Rules), ABA ethics opinions, and state bar ethics opinions and disciplinary cases; (2) statutory and case law concerning attorneys' fees and billing; and (3) custom and practice, including billing guidelines and standards typically adopted by sophisticated consumers of legal services.
Ethical requirements. Any discussion of billing and timekeeping practices must start with the recognition that the relationship of the attorney to client is of the highest fiduciary character. As such, attorney fee agreements must be fair, reasonable, and fully explained to the client. Attorneys have a professional responsibility to make sure clients understand their billing procedures and rate, and an attorney may not recover a fee in excess of that which was explained to the client, and to which the client has consented. (See State Bar of California Standing Committee on Professional Responsibility and Conduct, Formal Opinion No. 1996-147). Several of the ABA Model Rules are applicable to billing and timekeeping. Rule 1.5 provides that a lawyer's fee "shall be reasonable." One of the factors listed in Rule 1.5 for determining the reasonableness of a fee is "the time and labor required." Also relevant are Rule 7.1, which provides that a lawyer "shall not make a false or misleading communication about.the lawyer's services," and Rule 8.4(c), which provides that "it is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation." In 1993, the American Bar Association Standing Committee on Ethics and Professional Responsibility promulgated Formal Opinion 93-379 dealing with billing for professional fees, disbursements and other expenses. Formal Opinion 93-379 provides that "absent a contrary understanding, any invoice for professional services should fairly reflect the basis on which the client's charges have been determined."
Statutory and case law. There are numerous published cases in which courts throughout the country have addressed the reasonableness of attorneys' fees and billing practices. These include fee-shifting cases such as civil rights litigation, class actions in which attorneys' fees have been awarded, fee dispute cases, and bankruptcy cases in which attorneys have sought compensation from the debtor's estate. In some cases, there may also be applicable statutes that set forth standards and requirements concerning billing.
Custom and practice. The billing and timekeeping practices required by sophisticated consumers of legal services such as corporations and insurance companies also provide standards as to what clients will accept as reasonable. Such clients often have detailed billing guidelines which set forth the billing and timekeeping standards that they expect will be followed by their attorneys. The Chicago-based Defense Research Institute, with input from the insurance industry, recently published "recommended case handling guidelines for law firms" which include guidelines concerning billing and timekeeping.
Good Timekeeping Practices
Accurate and contemporaneous time records. Time should be recorded contemporaneously with the task performed. Task descriptions should identify (1) the date the work was performed, (2) the attorney or staff person performing the work, (3) the specific task performed, and (4) the time spent on the activity. The billing statement should also identify the hourly rate of the timekeeper and the amount billed for the activity.
Detailed task descriptions. Task descriptions should be sufficiently detailed to enable the reader to identify the specific activity performed, the time spent on the activity, and its purpose and relationship to the matter. Vague descriptions such as "review file", "research", "strategy", "conference", "trial prep.", etc. are non-descriptive and should be avoided.
Itemized time entries. "Block billing" (also sometimes called "lumped" billing) refers to the practice of grouping multiple task descriptions together under a single time charge, rather than describing each task and the actual time associated with it individually. For example, a timekeeper may list all of the tasks performed on a matter in a particular day in one time entry (e.g., "Draft summary judgment motion, conference with plaintiff's attorney re settlement, review supplemental interrogatory responses from plaintiff, draft letter to client re deposition of plaintiff: 6.7 hours"). The use of block billing obscures the actual time spent on each task contained within such an entry. Block billing is a practice that has frequently been criticized by the courts in fee cases, and is generally prohibited by sophisticated consumers of legal services. Each task performed on a case and the time associated with it should be described separately (e.g., "Draft summary judgment motion: 4.2 hours; Conference with plaintiff's attorney re settlement: .5 hour; Review supplemental interrogatory responses from plaintiff: 1.8 hours; Draft letter to client re plaintiff's deposition: .2 hour").
Minimum billing increments. Sophisticated consumers of legal services generally require that time be billed in increments of one-tenth (.10) hour. This means that time billed for a task should be rounded up to the nearest .10 hour, and that .10 hour will be billed for tasks that take less than six minutes. The use of minimum billing increments greater than .10 hour (e.g., .25 hour) has been criticized as a practice that can lead to inflated billable hours. For example, an attorney who actually spends 5 minutes on four different tasks and bills a minimum increment of .25 hour for each task has billed one hour of time for 20 minutes of work. In contrast, the attorney who bills in minimum increments of .10 hour will bill a total of .40 hour, or 24 minutes, for the same four tasks, an amount much closer to the actual time expended.
Time actually expended. "It goes without saying that a lawyer who has undertaken to bill on an hourly basis is never justified in charging a client for hours not actually expended." ABA Formal Opinion 93-379, at p. 7. "In matters where the client has agreed to have the fee determined with reference to the time expended by the lawyer, a lawyer may not bill more time than she actually spends on a matter, except to the extent that she rounds up to minimum time periods (such as one-quarter or one-tenth of an hour)." Id. at p. 1. Billing time in excess of that actually expended on a particular task, in the absence of full disclosure to and informed consent by the client, is unethical. In addition to the obvious examples of "padding" hours and billing for work not performed, other examples of billing time in excess of that actually expended include billing more than once for documents prepared once but sent to multiple persons or parties, billing the full time required to originally draft "recycled" work product or "form" pleadings rather than the actual time required to revise the document(s) for use in the client's case, and the "double billing" of time for activities that benefit multiple matters or clients (e.g., a court appearance with more than one case on the same calendar) rather than splitting the time between matters.
Duty to review. Partners in a law firm have a duty to supervise the associates and paralegals that work on their cases. (See ABA Model Rule 5.1). This includes reviewing the time billed by such individuals. Moreover, a lawyer is ethically obligated to exercise "billing judgment" and make a good-faith effort to exclude from his fee submission hours that are "excessive, redundant, or otherwise unnecessary." Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S. Ct. 1933 (1983).
Conclusion Many attorneys dislike timekeeping and view it as a necessary evil. As a result, they treat the recording of their time as an afterthought, put off recording their time until the last minute, and/or record their time in a cursory or non-descriptive manner. Sloppy and undisciplined timekeeping practices decrease productivity, result in lost fees, and can create serious client-relations and other problems down the road. Moreover, attorneys who bill by the hour are ethically required to provide accurate and detailed descriptions of the time that they have actually expended on behalf of their clients.
Billing statements provide the opportunity to communicate to the client in a detailed manner the time expended and the services performed on a matter. Make an effort to record time contemporaneously. Keep track of the tasks you perform as you go through the day, and don't leave the office without recording all of your time for that day. Provide detailed task descriptions that describe not only the specific activities performed but also how they relate to the case. Good timekeeping requires discipline, but with effort will eventually become second nature.
John L. Trunko is a Senior Legal Auditor with the firm of Stuart, Maue, Mitchell & James, Ltd., in St. Louis, Missouri. Stuart, Maue is one of the nation's oldest and best known legal fee auditing firms, and over the past 15 years has conducted fee audits in some of the largest attorneys' fee dispute cases in the country. Mr. Trunko is a licensed attorney in the states of Missouri and California, and practiced law as a litigator for 12 years in St. Louis, Missouri, and Orange County, California. He has also served as an expert and consultant on legal fee billing and has been designated and testified as an expert witness in a number of cases involving disputes over attorneys' fees. Mr. Trunko can be reached at email@example.com.
Comments? Suggestions? Click here to contact us
Paid for by The Missouri Bar Sebrina Barrett, Executive Director PO Box 119 Jefferson City, MO 65102