By Thomas D. DeMatteo
Is the death of the billable hour imminent?
While many of us in the legal community thought this was going to be the case due to alternative fee arrangements, it is still the predominate way law firms charge for their services.
However, you should not be afraid to discuss alternative fee arrangements with your lawyer.
But let’s first discuss what you should expect from your lawyer. A review of articles in Practical Law revealed the following question to a high-profile chief legal officer: “What does a law firm need to do to impress you?”
Here are some of the key considerations:
- Invest time to understand our company’s business, its objectives and core values.
- Be hands on, efficient and responsive to our needs and timelines.
- Have extensive experience in the applicable subject matter.
- In litigation, envision the end game early on and develop and execute a clear plan to resolve the case in a cost-effective way.
- Offer an opinion on how to solve a problem, not just options.
- Understand the difference between commoditized work and customized work and charge accordingly.
Determining whether your legal work is commoditized or customized is the key to whether alternative fee arrangements can work for your company.
We have all heard about contingency fees used by plaintiffs in personal-injury matters, but businesses can negotiate different types of billing structures such as project-based fees, success fees, a fee per transaction if the work is commoditized, and, of course, a retainer or some hybrid thereof.
You can also use a short form for an RFP and to obtain your best fee structure.
Once engaged, you then want to be able to analyze your legal bills. Your legal bills should contain the following line-item information: date, name of attorney, description of work, amount of time, and a dollar value associated with each line-item entry.
You should also have your lawyer set up a separate invoice for each matter. Here are some red flags to look for that may indicate potential problems with fees. Question your lawyer if you see any of these red flags.
File review — If the entry says, “review file,” particularly if not contemporaneous with any activity that you are aware of, there may be an issue. You want good descriptions of the activity, i.e. “Telephone conference with person A and B concerning new driver hours of service.”
Minimum time entries — Two issues arise in this area. The lack of minimum time entries – such as a 10th of an hour or 6 minutes — probably indicates that you are being overcharged for telephone calls or minor direction on your matters. Many telephone calls are less than six minutes and most are less than 15 minutes.
A large amount of minimum entries also may inflate fees, such as a mass mailing of a letter with a minimum charge for each letter.
Clerical tasks — There seems to be a trend toward charging for secretarial, paralegal and other clerical tasks. You should challenge this because administrative overhead should be included in the lawyer’s hourly rate.
Legal research — This can be very costly and should be done only with your approval after a thorough explanation of why the research is needed. You don’t want to pay for theoretical issues unless they are directly applicable and important to your matter.
Multiple timekeepers — This is my personal pet peeve, lawyers sitting around the law firm conference table talking about your matter and each billing the file.
The aforementioned example is a stretch but many times you have a junior and senior lawyer in the same meeting or on the same call, or lawyers talking about your matter in the hallway.
You should feel free to let your lawyers know that two lawyers are not required at the same meeting, unless each is bringing different areas of expertise or responsibilities.
Bottom line: Always feel free to discuss fees and invoices with your lawyer.
Thomas D. DeMatteo is chief legal officer, general counsel and secretary at ABC Companies. He can be reached at TDeMatteo@abc-companies.com.