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 services, 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 represented 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.  

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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.