Allocatur

Billing Ethics - Do you pass the Quiz?

The Wall Street Journal Law Blog recently ran a quiz on billing based on a hypothetical posed by the American Bar Association. The question posed by the ABA was:

You are taking a two hour plane trip from Chicago to New York to conduct a deposition in a matter involving client A. While on the plane, you review materials for a brief you will be filing for client B the following week. You normally bill clients for your time spent traveling on their behalf.
Can you bill clients A and B for two hours each for a total of 4 hours?

What would you do?
Many of the Wall Street Journal respondees got it wrong. The ABA ethical opinion (consistent with the Australian position) is that it is unethical to double bill. The travel time billed is to cover "loss of opportunity", and if the lawyer does other work in this time, there is no opportunity lost.

The dilemma posed demonstrates one of the difficulties of hourly billing. Both the travel (and associated inconvenience) and the work performed during the travel time, provide value to the respective clients. An alternative billing arrangment whereby a fixed fee or fee for value is agreed may help avoid this problem.

Paper, Scissors, Rock to resolve Discovery Brawl

Discovery fights take up huge amounts of court time, can be expensive and time consuming for the client. A US judge found a novel way of resolving a discovery fight in his court as Jim Calloway explains. Why leave it at discovery? Imagine resolving the building dispute with a game of Monopoly, a Family Law dispute with a round of Snap, or a commercial dispute with a game of Risk. Anyone for pistols at 20 paces?

KPIs as a Marketing Tool for Law Firms?

The Harris Cost Lawyers/Mahlab Recruitment survey of Corporate Counsel/Law Firm Relationships found that 51% of corporations use panel firms, but only 23% of Corporate lawyers had procedures in place to formally review the performance of their lawyers, even if a panel was used.

Formal KPIs provide a non-threatening environment in which a client can express their concerns and desires. It is an interesting marketing tool for a law firm to propose their own set of KPIs, if the client does not do so. This assists the client, but also sets the ground rules and parameters within which the parties are operating. Identifying appropriate KPIs will require identifying the client's expectations - which is the base starting point for delivering value to the client.

We all should know that we are fortunate if a client expresses dissatisfaction, because at least we then have the opportunity to remedy the situation. 95% of clients keep quite if they are unhappy and simply never come back, or worse still, we both lose the business and end up in a dispute over costs.

Formal KPIs help avoid this.

Will Your Law Firm Service Company have to Repay Clients?

Thanks to Simon Lewis (http://www.sinch.com.au/seminfor) for referring me to the release from the Queensland Legal Services Commissioner regarding charges for outlays and disbursements. Any markup on these will now have to be disclosed to clients and the client's consent obtained. This ruling also applies to service companies. In that instance, the law firm will be required to disclose the interest in the service company or other entity which is charging marked up disbursements.

Not only that but firms will need to refund markups from 1 July 2004 to avoid prosecution. It will be interesting to see if the ruling is followed up in other states. Certainly, in Victoria, markups on disbursements will not be recoverable other than in accordance with specific provision in a Cost Agreement. Some years ago the Law Institute of Victoria alerted practitioners to the difficulties of charging file management and file opening charges. The full release is at http://www.lsc.qld.gov.au/policies/guidelines.pdf

Do In-House Counsel Charge Other Business Units?

78.4% of Australian in-house counsel do not track internal legal costs - therefore most costs are not passed back to other business units. Only 6% of Australian in-house counsel charge business units, and if they do, costs are generally based on an estimate rather than on time actually spent. Tracking internal legal costs is one way of demonstrating value of the legal department - if this work was not undertaken by the in-house department, significantly greater costs would have been incurred with external lawyers. Rees Morrison has an interesting post about the New York City in house law department sending hypothetical bills to all the City departments it represents. Both demonstrating value, but also a way of encouraging efficiency in the use of the law department. This could also be used to show how a lack of communication within a corporation about business activities can increase costs in the corporation. (see my previous post on pressing business issues).