Ethical Billing of Attorneys Fees
By Carole J. Buckner
If a client complains about your bill, and the dispute makes its way into mandatory fee arbitration, how is the arbitrator likely to view your billings? According to a recent Advisory from the California State Bar’s Committee on Mandatory Fee Arbitration, the arbitrator will scrutinize any block billing, evaluate patterns and descriptions in time entries, analyze the staffing on the matter, examine the process of preparation of the bill, and compare the work performed to what was billed.1
Bills rendered by an attorney to a client must “clearly state the basis” for the billing, typically including the amount, rate, and basis for calculation.2 Otherwise, the fee agreement is voidable at the option of the client, and the attorney is entitled to collect only a reasonable fee.3 The billing should also reflect which attorney or paralegal performed the itemized services, by date, along with the hourly rates.4
Accuracy is an important issue in billing. An attorney may charge a client only for work actually done by the attorney.5 Value billing (adding a bonus or premium) and double billing (charging two clients for the same period of time) are improper unless a client agrees after full disclosure,6 and the fee is not unconscionable.7
In general, billing time as it is worked, rather than delaying billing to a later date, results in greater accuracy.8 This allows a greater degree of specificity, which also indicates a higher level of accuracy when bills are examined in retrospect.9 Inaccuracy and overcharging can arise where time is billed in high minimum increments such as a .25 minimum hour.10 For example, where several discrete short tasks such as phone calls and emails of a minute or two are billed at .25 hours each, overcharging may result. Even where clients have agreed in writing to the minimum, recording such entries with “no charge” may be appropriate on occasion in order to avoid overbilling. Round numbers on bills may also draw attention, especially where an attorney is not engaged in trial.11
Among other aspects of billing the arbitrator may examine are the pre-billing process, in which time entries are edited and billing is adjusted. Fee arbitrators may scrutinize any upward adjustments, as well as any failure to review pre-bills and have them reviewed for accuracy by the other attorneys billing time on the matter.12
Staffing is an important area in which the arbitrator’s 20/20 hindsight is applied to the billing in the context of the arbitration of a billing dispute. Staffing issues resulting in reduction of bills by an arbitrator can arise from billing time that is essentially training of less experienced attorneys, or billing time by a more senior attorney whose experience is not necessary to the task.13 Revolving billers, who join the case for a short time, then are replaced, may result in duplication of effort for which the client should not be billed. Overstaffing can also result in a significant reduction by an arbitrator. In Christian Research Institute v. Alnor, 165 Cal.App.4th 1315 (2008), the attorney sought recovery of 638.6 hours on a motion to strike and appeal with 228.7 hours allocated to the motion and 410 hours allocated to the appeal, which the court reduced to 71 hours. Among other problems with the fee request, the court mentioned overstaffing, indicating that, “the five Alnor deployed on the motion appear to have expended more time telephoning, conferencing, and e-mailing each other than on identifiable legal research for the motion.”14
Comparison of the substance and quality of the work created to the cost of each item is also an area to which an arbitrator may direct his or her attention.15 For example, a motion to dismiss may be drafted by a new attorney, revised by a senior associate and reviewed and signed by a partner. The arbitrator might ask whether part of the new attorney’s time involved training, and whether the senior associate should have prepared the motion. Whether the motion necessitated an interim review or partner-level review might also be questioned. Of course, everything depends on the complexity of the matter and such an approach might be perfectly appropriate. In Christian Research Institute, while counsel asserted that the motion was complex and novel, the court said several issues were “settled as hornbook law” and that “a close question based on the facts is not necessarily a complex or time consuming one.”16 The same court also noted that, despite 400 hours spent on the appeal, “counsel failed to uncover or cite the seminal cases applying the dispositive standard.”17 In addition, the court said that there was no evidence extensive time was devoted to investigation or discovery, nor did the legal research entries show that the pertinent issues were difficult.18
One area of some concern is so-called block billing.19 This is the failure to show the attorney, rate and time expended for each task performed. Where a lawyer handles several disparate tasks in the same day, and bills one block of time to all of them, some cases indicate that this disguises non-compensable tasks.20 Some case law indicates that a penalty is appropriate at the discretion of the trial court assigning a reasonable percentage to block-billed entries.21 This approach may be all right “when those services are rendered in one time frame without interruption, but it is preferable when counsel interrupts research to make or receive a phone call, that the time spent on that phone call should be separately stated for the reasons set forth above.”22 Different functions performed at different times of day should result in separate entries.23
A prior Advisory from the Committee on Mandatory Fee Arbitration had cautioned that the practice of block billing could increase time by 10-30%.24 Therefore, arbitrators can apply a reasonable percentage to block-billed entries or even disregard them entirely. In Christian Research Institute, the court found that block billing, “while not objectionable per se in our view, exacerbated the vagueness of counsel’s fee request….”25.
The author is the dean of St. Francis School of Law in Newport Beach, and a member and former chair of the Los Angeles County Bar Association’s Professional Responsibility and Ethics Committee, and current member of the California State Bar’s Committee on Mandatory Fee Arbitration.
1 Arbitration Advisory 2016-02, Analysis of Potential Bill Padding and Other Billing Issues (3/25/2016) (“Arbitration Advisory 2016-02”)
2 Cal. Bus. & Prof. Code § 6148(b).
3 Cal. Bus. & Prof. Code § 6148(c).
4 Arbitration Advisory 95-02, Standards for Attorney Fee Billing Statements (6/9/1995).
5 Cal. State Bar Formal Opn. 1996-147 (1996).
6 Cal. State Bar Formal Opn. 1996-147 (1996).
7 Cal. Rules of Prof’l Conduct, Rule 4-200.
8 Arbitration Advisory 2016-02, at p. 3.
9 Arbitration Advisory 2016-02, at p. 4.
10 Arbitration Advisory 2016-02, at p. 8.
11 Arbitration Advisory 2016-02, at p. 8-9.
12 Arbitration Advisory 2016-02, at p. 3-4.
13 Arbitration Advisory 2016-02, at p. 5-6.
14 Christian Research Institute v. Alnor, 165 Cal.App.4th 1315, 1326 (2008).
15 Arbitration Advisory 2016-02, at p. 6-7.
16 Christian Research Institute v. Alnor, supra, 165 Cal.App.4th at 1327-28.
17 Id. at 1329.
18 Id. at 1326.
19 Arbitration Advisory 2016-02, at 9-10; see, e.g., In re Tom Carter Enterprises, Inc,. 55 B.R. 548, 550 (C.D. Cal. 1985).
20 See, e.g., Bell v. Vista Unified School Dist., 82 Cal.App.4th 672, 687-689 (2000).
21 Heritage Park Financial v. Monroy, 215 Cal.App.4th 972 (2014).
22 In re Tom Carter Enterprises, Inc., 55 B.R. 548 (C.D. Cal. 1985).
24 Arbitration Advisory 95-02, Standards for Attorney Fee Billing Statements (6/9/1995).
25 Christian Research v. Alnor, supra, at 1325.