A large law firm is in the news recently. This firm advertises on the internet that it is "one of the largest business law firms in the world." The are "built to serve clients" and can do so "quickly, efficiently and with genuine knowledge of both local and international considerations." Their clients "range from multinational, Global 1000, and Fortune 500 enterprises to emerging companies developing industry-leading technologies."
According to the New York Times, this large firm sued a client over unpaid legal bills in the amount of about $675,000.00. These fees were associated with a 2010 bankruptcy filing. The Times reported that "a month after the filing, a lawyer at the firm warned colleagues that the businessman’s bill was mounting." there was allegedly an exchange of email in which some attorneys seem to relish the mounting bill. One email allegedly said that a firm attorney had "random people working full time on random research projects in standard ‘churn that bill, baby!’ mode.”
The law firm responded to the billing allegations by issuing a memo to its attorneys, clarifying that the emails about billing were unprofessional (were the billings unprofessional?). They deny that the firm did anything wrong, and claim that the email language was an “offensive and inexcusable effort at humor.” The firm's memo to its attorneys also assured them that "the actions described in this (the NY Times') story did not happen." They succinctly stated that their firm has always "adhered to the highest level of ethics and integrity in all of its work, including billing practices." The memo characterizes the emails as "foolish" and promises to "defend vigorously the firm’s track record of delivering high-quality legal services at a fair price, including the reasonable fees generated in the matter in question." (So, are the attorneys' email representations false?)
The comments to both articles seem not to be on the side of the law firm. However, both detractors and supporters commented. Some comments suggest that the emails are the result of overwork. Others accept the failure of email generally and suggest that the lawyers were naive about who would see them. One detractor even refers to the emailing attorneys as "idiots." Is this how attorneys want the public to perceive them? Is the issue the emails or the billing practices?
The point in this blog? Ethics matter.
Fresh out of law school, I interviewed with a firm in Orlando. It was Spring Break and I was very proud that this firm, with its prestigious name would interview me; I did not attend a top-tier law school. Having clerked in a smaller defense firm, with a similar defense-client base, the first question I asked, after the interviewer concluded and inquired, was about the "billable budget." I was given a number I do not recall, but it was north of 2,000 hours per year.
The look on my face must have told the tale because the firm partner quickly said, "that is not that hard to reach, I have already billed half that this year." More than 1,000 hours; did I mention it was Spring Break? (that is over 250 hours per month, at 20 billable days per month, that is an average of 12.5 billable hours per day). The partner then explained to me the ease with which hours could be "multiplied" by double or triple billing multiple file "trips" to Daytona and other nearby cities; billing each case separately for all the travel time. I left the interview disheartened. The message, in short, the secret to meeting the high budget is to lie.
In the course of my early practice, I was lectured many years ago for my failure to capitalize on similar billing "realities." I was questioned time entries regarding work I had done at the courthouse, examining the court file in four cases, to prepare status letters to clients. The firm's partner explained that I had made one trip to the courthouse, examined filings in four cases, and had not billed enough time for the tasks. I explained that I had billed the time I spent. The partner explained that I needed to bill each of the four files for the spent walking to/from the courthouse and that my walking time was not sufficient.
I explained that I had billed for the time walking, but had divided the walking time by four, and included the respective 25% (approximate, because it was not readily divided exactly that way) of that time on each file. The partner first explained that no one could walk to the courthouse in the amount of time I had recited (.6 hours, seventeen minutes each way). I had done so; despite the denial that it was not possible. This partner would need at least 30 minutes each way, according to this lecture.
The partner then explained that at some point I or another firm attorney might need to walk to the courthouse on a single case and be unable to therefore "share" or divide the walking time as I had in this instance. The partner then explained that our clients would then get a bill that showed the "actual" walking time (.6 hours round trip at my pace, or 1.0 hours at the partner's).
The partner explained that our clients were not smart enough to understand the distinction in these situations, a multiple file trip versus a one file trip, and the walking speed of one lawyer being quicker than another; then the partner instructed me to change the time sheet to reflect at least eight-tenths (.8) of an hour travel time for each of the four cases for that date. Having originally billed one-tenth to two-tenths (it is not easy to divide 34 minutes into equal 6-minute, one-tenth portions attributed to four cases) travel time to each case, a total of .6 hours. Having originally split up .6 hours among four cases, I was now instructed by my employer to increase that to at least 3.2 hours (.8 times 4) of travel time. Disheartened yet again. The partner's message? Stealing from your clients is really a benefit to them because they are not smart enough to understand the truth.
There was another recent case in the news in Wisconsin, regarding attorney billing. This attorney (a partner in the firm) billed time, and by doing so was entitled to a bonus from his firm. After receiving the bonus, the attorney would later write down the time. The law firm brought a complaint to the bar. The Wisconsin Supreme Court suspended the attorney for 12 months and ordered him to pay the bar's costs of prosecution, $18,916.68. The opinion is not clear on the repayment of the bonus money, $46,978.04, to the firm. Perhaps if the firm wants that money back, they will have to proceed in some form of civil action against their former partner?
The point is that ethics matter. I think clients are certainly smart enough to know the difference between attorney's travel time differing. The condescending belief that they are not is silly; this justification for multiple billing of various clients for the same work is illogical and wrong. Partners should not ask it of their associates and the associates should not be put in the position by their employers.
The NY Times article discussed above illustrates many excellent points raised by those who commented. First, avoid suing clients. Second be honest. Third, there is nothing humorous about stealing from someone (or even about implying or joking that you are). The Wisconsin case illustrates but another wrinkle in the analysis; billing issues also present implications within law firms, and among partners.
Gallup conducted a poll, asking "how you would rate the honesty and ethical standards of people in these different fields." Judges were rated 10% very high, 37% high, and 37% average; a total of 47% high or very high. Lawyers were rated 4% very high, 15% high, and 42% average; a total of 19% high or very high. Do lawyers want or actually deserve these perceptions?
Is there an appropriate justification for manipulating the billable hours?
