REASONABLENESS OF “HOURLY” LEGAL FEES–A SUMMARY OF SOME CONSIDERATIONS, THOUGH NOT THE SUM, OF THEM ALL

Michael
Sean Quinn, Ph.D., J.D., Etc.*

See
the end

Lawyers
are fiduciaries of their clients. Lawyers have duties to their clients at the
“fiduciary level.” This entails that the lawyer must place the interests ahead
of his own, and a lawyer owes his/her client absolute, or undivided, loyalty.  Sometimes this is called “abundant good faith.” This sets the lawyer’s duties regarding the
charging of fees at a very, very high level. 
Ordinary, routine accuracy, for example, is not enough. (Loyalty and good faith are both implied terms in the attorney-client, and they apply to all sorts of features of the relationship, one of which is fees. The good faith lawyers owe their clients applies to fees in several ways important ways: 
  • incursion,
  • presentation, and 
  • collection

are three important ways contractual and fiduciary duty good faith apply to fees. This applies to all sorts of different kinds of fees, but it applies most obviously, perhaps, to hourly fees. 

All
fees of all lawyers to all clients must be just, and what follows is a spelling
out of at least some of the principles applicable. Justice almost always
requires compliance with the client-lawyer, lawyer-client contract. It also
requires keeping clients informed, and quite often seeking their consent,
before taking significant actions. 
Justice involves fairness and objectivity.

A
lawyer may not charge a client fees for work that falls outside the scope of
work
specified explicitly or by implication in the attorney client
agreement or that has been agreed to by other means. Lawyers may not charge
reasonable legal fees for work that is outside the agreed scope of the
representation
. No such fees could be counted as reasonable.  If a “sought” or “alleged” fee is not
legitimate, it cannot be reasonable.  There must be agreement as to what constitutes
the scope of the lawyer’s representation of the client. Often it should be
spelled out in writing. Subsequent actual oral agreements made as a case
evolves are permitted.

Reasonable
fees must be fees for legal
service
s, services of lawyers qua lawyers, that are reasonable and
necessary for required actions and activities given the attorney-client
contract; the activities of a lawyer, whether work or not, cannot be charged to
a client as legal fees.  



Some “legal
services” are implicit in explicit agreements; for example, in an international
case, or a national case, or even cases involving considerable distances, a  lawyers must be able, when the fee arrangement involves time billing, to
charge for travel. Ideally, of course, lawyers should regard themselves as
having a duty to work for the client while traveling. Some client-attorney
agreements virtually require this.  The
number of implicit agreements should be regarded as few and far between.




On the other hand, some services sort of close to what it is that lawyers do are not to be billed. Lawyers are not permitted to obtain fees based upon the time they devote to preparing invoices and seeking fees. Consequently, it is difficult to see why lawyers should be able to charge clients fees for fact to face, more or less, fee disputes. (Of course, litigated fee disputes are a different kettle of fish. Lawyers can surely hire lawyers to pursue collections of fees. They may not, however charge legal fees for the usual activities any creditor would have to undertake. Those are not legal services.  The matter is similar when the lawyer-creditor performs legal duties for himself. Then part of what she is doing might be rendering legal fees and part of it not.)
Reasonable
fees must be time-charged for lawyer activity and some paralegal activity, and
not at all for salaries of other staff members, e.g., by performing what has
been traditionally called secretarial work. Mailing a letter, and its ilk,  is almost never a billable activity.

Reasonable
fees may not be inconsistent with or violative of the terms of the
lawyer-client agreement (i.e., contract), whether those terms are explicit or
implies. In no human activity is absolute perfection likely or even always
possible. That should be the aim however.


·       Descriptions of work could always be more detailed
that they need be, but serious details as to descriptions are necessary for a
report in a bill to be reasonable.


·       Measurements of time cannot be completely accurate, or very, very nearly so. Lawyers who bill on an hourly basis must be obsessed—or close to it–with
measuring and keeping time.  The duties
lawyers owe their clients require it. Moreover, if a lawyer does not use time intervals to measure time that are set forth in the retention contract that can lead to  substantial over billing in large cases.  Even in smaller cases where the amounts of over billing may not amount to much money it still renders the word of the lawyer unreliable. He is not doing what he has promised to do. . . what he has represente
d that he would. 

    Consider the following example. 

The client-lawyer contract states that time is done in 10th
of hour episodes, i.e., 6″ intervals. 
  This means that, with one exception, any
fee the third digit of which is anything but zero does not accord with the
promise in the contract. Thus, 2.50 (2′ + 30″) is OK, while 2.55 is not, nor it 0.25.
neither of the examples amount to 1/10s of hours. The first one of the two is
15” not 12” or 18” and the latter is also a minute off.
  That may not involve a lot 
of money, but it still makes the lawyer
irresponsible as a teller of the truths, of keeping promises, of being attentive to the policies of his firm, and in attentive to the interests of his client. 

 

     


·    Time sheet problems have a long history: lawyers on hourly fees have commonly bill in fixed internals. By the quarter-hour was once a wide spread pattern but that has been rejected. Many lawyers
now announce in fee agreements that they measure time by tenths of hours; that
amount of time if six minutes. Keeping this time requires intense attention;
guess work is not good enough. (The illustration I gave of 0.25 hours being recorded when an attorney client contract calls for tenth of hour intervals is still found among older lawyers who have trouble with change.)


·       For a lawyer to bill in fixed internals, say, a tenth
of an hour, does not mean that each separate activity, no matter how little it
actually took, can be billed at one tenth of an hour. If an activity took 2”,
it did not take 6” and cannot be billed as 1/10th of an hour.  Generally speaking, block-billing cannot be a
report foundation for a reasonable fee. 
An exception to this is time a piece of work takes which is less than
1/10th of an hour. There grouping is permissible. Alas, it has to be OK for two short episodes of work to be blocked together under these circumstances.


·       The fiduciary level of solving temporal uncertainties
is this: All uncertainties are to be resolved in favor of the insured. If a
lawyer cannot remember whether it took 8” or 6” to perform a task, the task is
to be billed at 1/10th of an hour, and so on. This is a consequence of the fiduciary duties and the extent of good faith lawyers owe their clients. 


·       Lawyers should always be skeptical of their own
memories when it comes to temporality. There is an inherent conflict between
fiduciary duties and self-interest, as well as simple cognitive difficulties
and limitations.


·       Obviously, lawyers are not permitted tack on fractions
of hours just to make the bill as a whole look more plausible and/or
professional.


·       L1 billing for a task twice is forbidden, e.g.,
if he has simply forgotten what he has already done. An exception might occur
if he loses confidence in his initial conclusions.


·     L1 and
L2 up to Lx doing the same task is not permitted, except
when legitimate meetings are involved, e.g., debates, “moot courts,” and
cooperative discussions aimed at achievement are permitted, as are certain
types of “checkings” (facts and law).

In
part summary, hourly billed legal fees are reasonable only if the client is (or
the clients are) informed of them accurately, in appropriate detail, and in
ways that are informative and understandable, as well as timely.  Accuracy includes both activities and time.
Granted: Absolute rigor is usually not available even in the “hard” sciences.

Of
course, padded billing is forbidden, as is overbilling generated by other
problems.  Work should not be overdone.
In a relatively simple and relatively small case, for example, the amount of
legal research in support of a summary judgment is quite limited.


·       There is a relevant supreme court decision on a
quite similar topic that is not a closely split decision and that formulates a
justification of my view as a general rule, it is unlikely that considerable—or often
any–additional research is needed after fundamentals have been established. 


·      Research can easily be overdone by junior lawyers who
love the law and feel insecure. More senior lawyers need to supervise this
carefully. Lawyers should often not bill for supervision, although this is an
area where discretion is necessary; lawyers should never bill for over
supervising, and lawyers must be to some degree skeptical of their own impulse
to supervise.   

Understandable
and accurate descriptions are required for each separable or distinguishable
chargeable activity.  Legal bills are not
like those of handy-persons, plumbers, car mechanics, roofers, and others who
provide services based in part (at least) on time. They are not just amounts-owed
invoices with notes on them, like the check in a restaurant; they are detailed and accurate reports
as to both substance (what was done) and amounts of time.

Sufficiently
detailed billing probably must conform to what might be called the “Rudyard
Kipling Principle.” He called these the “six honest serving-[persons]”:

·       When

·       What,

·       Who,

·       Why,

·       Where, [and]

·       How.

An “alleged” or
“sought” fee—an amount that is demanded as a fee–which is billed

o  
obscurely,

o  
inadequately,

o  
confusingly,

o  
vaguely, or

o  
in ways that do
not distinguish amongst distinct activities, i.e., that are “billed in
blocks,”**

cannot be a
reasonable fee.

(**The
phrases “block billing” or “billing in blocks” are ambiguous. One meaning
pertains for format. Thus bills can be presented as lists, sort of like
a check in a restaurant or a receipt as a grocery store, only with individual
descriptions, or they can be set forth in paragraphs, as in essays.  In contrast, bills can be presented like
receipts in the sense of content and description–brevity versus details as to
information.**(See below.) See J. Harris Morgan and Jay G[]
Foonberg, HOW TO DRAFT BILLS CLIENTS RUSH
TO PAY,
(ABA LawPracticeManagementSection 2003). See also Quinn’s Blogs (1) Block Billing of Legal Fees Forbidden  and (2) Lawyer Temptations and Hourly billing (September 24, 2015)***). For some off reason both of them have the same subtitle.

Significantly
individual parts of a legal bill may fail to meet several requirements of
reasonableness at once. Thus, a defective bill may involve both block-billing
and vagueness at the same time.

Fees
are reasonable only if the client can understand virtually all of the various
activities and what was involved in each of them. An entry such as “Call to Charles re case” is not OK, nor is “email to Charles.”

Transparency
and thoroughness in billing are necessary conditions of an alleged fee’s being
reasonable. 

Unreasonable
or unacceptable billing practices defeat and undermine the idea that the sought
fee is reasonable.  There is no such
thing as a reasonable fee that is not reasonably reported.

It
is an accepted standard of lawyer conduct, obligations, and rights that if
billed fees do not conform to these principles, the lawyer has no moral,
customary, traditional, truly professional (as traditionally understood), or
contractual right to be paid them, since they are in breach of the fiduciary
client-attorney relationship, as well as contract.

Lawyers
are fiduciaries of their clients, and the invoices of lawyers must reflect this
distribution of duties and rights. This point is not simply a legal matter,
although it is that.  It is also an
implication of lawyering being a noble and learned profession, where clients
are depending on lawyers for not just performance, but also counsel and advice.
The fiduciary responsibilities lawyers have toward their clients include the
billing process from beginning to end.

Moreover,
it is also accepted in the legal profession that if the billing 
of
an “alleged” or “sought” fee is unreasonable, then the fee itself cannot be
determined to be reasonable. If a billing is not reasonable in presentation,
the lawyer has no right to be paid that amount. It is universally agreed that
it is the lawyer’s job to make sure that the fee claimed is set forth in a
reasonable way. 
(There
can, of course, be negotiation as to some of these requirements, but only if it
is conducted in the spirit of the fiduciary relationship. A reasonable fee
cannot be established through “negotiation by ‘bludgeoning.’”)

There
is a puzzle I have never really figured out. Some novel and/or complex cases
require a good deal of thought and reflection. The activities may involve
contemplation, scribbling, drawings and graphics.  How does one bill of these types of
“activities”?  How does one really keep
track of time? What if the periods of reflection do not lead to any desirable
conclusions or arguments. Reflections and ponderings can occur in all sorts of
different contexts.  If a lawyer is going
to seek fees for “doing” this sort of thing, it must be disclosed to the client
and not inserted or blended into something else. That seems like deliberately
saying something false.  Here’s the only
solution I have devised. Tell the client what one has been doing, outline the
details, and ask the client how it feels about my billing for it. Virtually
always if I have come up with a good deal the client has no objection to my
billing for it.  

***************************

Another—and
in the end—equivalent way to put some of these matters is that in order to be
entitled to a fee a lawyer’s hourly charges must be reasonable in at least
three senses.

First,
the acts and activities must be reasonable, e.g., in terms of time needed and
time spent.

Second,
the goals must be reasonable, e.g., reasonably related to the scope of the
project, what’s involved in the attorney-client agreement, the client’s needs,
and the client’s directions and/or consent. 

Third,
the reports, i.e., the invoices, regarding the fees sought must be reasonable.
They must be (a) truthful and plausible, or very close to it; (b) they must be
clear and informative; (c) they must be in accordance with the contract; and
(d) a client of the client’s representative must be able to correlate
concretely described activities with times actually spent.

The
self-interest of the lawyer is absolutely irrelevant to what counts as a
reasonable legal fee.

*Michael Sean Quinn, Ph.D.,
J.D. Etc.

The Law Firm of Michael Sean Quinn and

Quinn and Quinn

                                 1300 West Lynn Street, Suite 208

                                             Austin,
Texas 78703

                                                 (512)
296-2594

                                            (512)
344-9466 – Fax

                                E-mail:  mquinn@msquinnlaw.com
***Historically, the
aversion to and prohibition of block-billing is a relatively recent phenomenon
which apparently originated as an official kind of legal doctrine when courts
have to decide what fees to award, e.g., when a plaintiff has to pay the legal
fees of a defendant, or vice versa. Many in the legal profession resent even
prima facie prohibitions on block-billing. Of course, many professions and
business resent legal rules regulating their activities. It should additionally be kept in mind that prohibitions on block billing originated with fee shifting. It is not restricted to it, however.

If this topic interested you see my blawg/blog Legal Fees — Measuring Reasonableness, November 16, 2015. 

Originally posted on 10/31/2015 @ 9:02 pm

Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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