Ethical Billing Tips To Get Paid
The following are general suggestions for all practices and practice areas. Note that billing procedures may deviate from these suggestions when agreed to with a client and with firm management. For instance, in many insurance defense representations or retainer situations, clients do not want detailed statements with each activity broken out by time. Discuss billing procedures with clients at the beginning of a representation to assure compliance with the client’s needs.
Arizona Rule of Professional Conduct 1.5 governs fees. Read the Rule confirm specific billing procedures for “earned upon receipt fees,” and sharing of fees between law firms.
Bill regularly – even when there’s nothing to bill
Most of what lawyers do clients never see or hear. They don’t see research, they don’t see drafting, and frequently clients do not even see negotiations with other parties. One way to keep clients informed about what is going on in their legal matter is to tell them in invoices – regularly.
View the invoice as a running chronology that should list for the client everything done on their behalf, with complete descriptions and entries for all communications (including emails), document review and preparation, research, and meetings/negotiations/hearings.
In addition to keeping clients informed, regular (i.e., MONTHLY) billing assures regular cash flow and managing clients who begin to have payment “problems.” Clients are far more likely to pay monthly bills that are moderate than one huge bill every six months. Failing to keep clients informed about their mounting fees also could be construed as failing to communicate in violation of the lawyer’s ethical obligations. Moreover, if the firm fee agreement provides for monthly invoices and complete bills (do not delay billing time from a prior month) are not sent consistent with the fee agreement terms, clients may have a basis for challenging a bill.
Include “no charge” entries – clients love to see that they are getting something for “free” and including the “no charges”
Send a monthly bill even if there was no new activity this month, especially if a client owes an outstanding balance. It serves as a reminder of overdue fees but also tracks for you that you have communicated with the client that nothing went on this month.
Use complete sentences
Acronyms and cryptic time entries only cause confusion, not payment. For example, “Draft document,” “telephone call with RSS,” and “Research” are insufficient billing entries. What document and for what purpose? What did you discuss with “RSS” and are we sure that there is only one person with the initials “RSS”? And a time entry that just says “research” without explaining what issue, for what purpose is pointless. The more explanation to add to a bill, the more likely the client will understand what you did and be willing to pay. Detailed sentences also help in the event that the client does not pay and the firm must ask a court or arbitrator to decide if the fee was reasonable for the services performed.
Never assume that your understanding of an acronym will be the same as a client. Remember, for example, that “SOL” has one connotation to lawyers and possibly another for clients….
If acronyms must appear, try using an index that is attached to the invoice or provided in the engagement letter to give clients a quick reference to exactly what you mean by PTO, TTAB, AUSA, UFO, etc…
Clients hate to have their names misspelled. They frequently will raise this as an objection to fees in fee arbitration hearings – both in the billing and if you misspell their names in pleadings. Do not be sloppy – proofread.
Clients also do not like to be referred to in billing statements or in letters as “client” – use their names.
Never block bill or Use Excessive Minimum Units
The Ninth Circuit has held that block billing may inflate a bill and makes it difficult to ascertain the reasonableness of the charges for a particular activity. Welch v. Metropolitan Life, 480 F.3d 942 (9th Cir. 2007). In a recent Arizona Court of Appeals, Division One, decision, the Court cited to Welch and discouraged the use of block billing. Sleeth v. Sleeth, 226 Ariz. 171, 244 P.3d 1169 (Div. One. December 09, 2010). The Court also frowned upon using minimum billing increments of .5 as an excessive minimum billing unit. For instance:
8/23/07 TC w/ client; Conf. w/ opp. Counsel;
R choice of law; office conf. w/ co-counsel = 15.4 hours
That billing entry is an improper block bill. To correctly bill this time, try:
8/23/07 Telephone call with client Jane regarding hearing (.4); Conference with opposing counsel John Smith to discuss discovery deadlines (1.0); Research choice of law requirements in California (11.0); office conference with co- counsel Larry Lawyer to review deposition schedule and expert witness testimony for motion for summary judgment(3.0) = 15.4 hours
CAUTION: The Welch decision also upheld the district court’s 20% reduction in the fee request because it found that a minimum billing unit of .25 hour for everything was excessive. Lawyers are warned – do not use .25 as a minimum unit for everything.
If you want to use block billing, you should discuss it with the client. Explain the use of block billing in the fee agreement.
Keep track of time – even for contingent and flat fee matters
Law firms are businesses. A firm cannot quantify whether the lawyers are handling matters efficiently, whether a flat fee or contingent fee accurately reflects the actual costs of performing the services, and whether the firm should consider alternate billing arrangements unless the lawyers and paralegals keep track of their time.
Even if the firm charges a flat fee for a service or a contingent fee, all professionals should record their time. In contingent fee cases it is crucial to keep time records because the firm will not be able to make a quantum meruit claim if it is terminated prior to settlement.
And for all matters, make sure that lawyers are required to enter their time every day. Some writers estimate that law firms lose as much as FIFTHY PERCENT of their billable time by lawyers failing to make daily entries. That’s a lot of money.
Notify clients in writing BEFORE charging a different fee.
And yes, this includes annual rate changes and movement from associate to senior associate billing categories. In many states ER 1.5 requires that clients be notified, in writing, in advance of a fee change – that means in the December invoices or holiday cards or by letter or email – before the January 1 rate increases take effect.
You cannot be cloned, so you cannot “double bill” time.
Hypothetical: You are flying from one city to another for client X, which takes four hours. You spend the four hours working on a brief for client Y. You CANNOT bill 8 hours.
ABA Ethics Opinion 93-379 clearly explains:
In addressing the hypotheticals regarding (a) simultaneous appearance on behalf of three clients, (b) the airplane flight on behalf of one client while working on another client’s matters and (c) recycled work product, it is helpful to consider these questions, not from the perspective of what a client could be forced to pay, but rather from the perspective of what the lawyer actually earned. A lawyer who spends four hours of time on behalf of three clients has not earned twelve billable hours. A lawyer who flies for six hours for one client, while working for five hours on behalf of another, has not earned eleven billable hours. A lawyer who is able to reuse old work product has not re-earned the hours previously billed and compensated when the work product was first generated. Rather than looking to profit from the fortuity of coincidental scheduling, the desire to get work done rather than watch a movie, or the luck of being asked the identical question twice, the lawyer who has agreed to bill solely on the basis of time spent is obliged to pass the benefits of these economies on to the client. The practice of billing several clients for the same time or work product, since it results in the earning of an unreasonable fee, therefore is contrary to the mandate of the Model Rules.
Do not bill for administrative services
A law firms’ hourly rates already include overhead. But what about if a lawyer or paralegal is standing at a photocopier, simply copying documents – can you bill for that time? Usually – no. See ABA Op. 93-379.
Many corporations, including insurance companies, specify what constitutes “clerical” activities that lawyers cannot bill. These include, for instance: Opening and processing mail; creating new client files, filing papers for client matters, maintaining attorney and office calendars, stamping documents and typing envelopes, photocopying, transcribing, faxing and emailing on behalf of attorneys, and assembling documents to file with courts and/or mail to clients.
Know the clients’ billing policies and your audience
Most large corporations and insurance companies do not permit billing for in-office meetings among lawyers, even though that may be some of the most productive time spent on a case. Know what policies each client has before billing time that will not be paid.
Many large companies also use “UTBMS” billing codes. Know which clients require such coding or your time not only will not be paid, the client may reject the entire invoice!
The ABA, in conjunction with the Association of Corporate Counsel and Price Waterhouse in the 1990’s developed “Uniform Task-Based Management System,” which is a system of uniform task and activity codes explained on the ABA Litigation Section’s website, in part, as follows:
Aside from “need” narrowly defined, there are significant benefits to both law firms and law departments in terms of administrative simplicity and cost reduction to be gained from standardization. In addition, the development of standard billing categories will permit introduction of billing based on Electronic Data Interchange (EDI). This technology is already widely employed in other areas of commercial activity. By linking the suppliers and consumers of legal services, EDI offers the prospect of “paperless billing” and a new level of administrative and cost efficiency.
The need, therefore, is for a uniform set of billing and task categories – detailed describers of legal work that would be acceptable to both law departments and firms, and that could prevail across American industry, financial services, and commerce. Analogous to the role of standards in other industries and functions, standard billing categories would make it possible for law firms to standardize their billing systems and for corporate law departments to work with their law firms in a far more efficient manner than prevails today.
Many companies are requiring law firms to use such uniform “coding” in their billing statements. Know whether a client requires such coding and assure that all time keepers at your firm receive training on the use of proper codes – or the clients’ automated invoice review software may simply reject the entire bill!
Associates – Three Things to Ask Before Leaving the Partner’s Office
Frequently new lawyers will receive an assignment from a senior partner and forget to ask several crucial questions before going off to bill time. Remember to ask:
- Does this client have any special billing requirements? Such as, not using the terms “review and revise,” or billing in .1 increments instead of .2 or task coding.
- How much time should be spent on this assignment before coming back to the partner? Many many new attorneys learn the hard way that going off to bill a partner’s biggest client 80 hours to research the statute of limitations on a contract claim – hypothetically – will result in the partner never using the associate again – ask before spending lots of hours researching something with no answer.
- When is the assignment really due? AND STICK TO THAT DUE DATE – do not come to the partner on the day the assignment is due to tell them you did not have time to get to his/her project.