The utilization of legal billing guidelines has become the norm in the day-to-day invoicing processes of law firms. General Counsel willing to enforce billing guidelines can increase savings and promote accountability of tasks billed. They want to be assured they are receiving the best and most cost-effective representation while effectively managing their company’s legal spend across all matters.
In drafting or updating billing guidelines, General Counsel and risk managers alike should consider specific guidelines for practice and communication standards, billing format, administrative tasks, time/task appropriateness, and authorization-required tasks.
Litigation Practice and Communication Standards
Litigation practice standards will provide outside counsel expectations for how your company’s matters are to be handled and how much feedback and communication your company expects. A few matter management issues to think about are:
- Budget requirements
- Litigation summaries at the outset of accepting representation of a matter
- Timeframes or milestones for regular client updates
- Other requirements specific to outside counsel’s representing the best interests of your organization
Billing format standards should instruct outside counsel on the logistical considerations of their invoices as well as the basic level of detail that you expect those invoices to contain. Things to consider include:
- Expectations for billing frequency
- The invoice format preferable to your organization
- Where to submit the invoices
- Any other specific information that your company may need the firm to include
Receiving invoices on a regular schedule and in a format that your company can review goes a long way in informing you of how much is being spent on what and helps to avoid the shock of unexpected litigation expenses.
Besides the overall bill format, the guidelines should also include details on how to describe the individual tasks and disbursements being billed. Requiring more detail than “Work on legal matter, 6 hours” will help you know what actual work is being done, as well as how much is being charged. One of the best ways to accomplish this is by requiring law firms to submit each task as a separate time entry. Additionally, every line item should have sufficient information to answer the “who, where and why” of the tasks a law firm is performing.
This section of the guidelines identifies tasks that, although not technically administrative, may be considered routine in the day-to-day business of a law firm. The following are administrative tasks which should be considered non-compensable:
- Processing of vendor invoices
- Organization of a file
- Contact with court reporting agencies
- Conflict checking
- Checking on court dockets
It should be noted that each of these tasks billed on invoices across the life of a case could easily add up to hundreds or thousands of dollars spent on what is essentially considered firm overhead if allowed as compensable.
General Counsel should expect to pay for tasks at the rate for which the task is comparable. For example, drafting of a notice of deposition or examination before trial may be performed by an attorney. However, this task is one that is performed routinely in the defense of a case and could essentially be performed by a paralegal. This task could be viewed as one compensable at the firm’s approved paralegal rate. To take it a step further, utilizing paralegals within a firm to perform certain identified tasks frees up the assigned attorney for more substantive work and is cost-effective to both the firm and General Counsel. Billing guidelines are a useful way of notifying law firms what level of work your company considers appropriate for paralegal and attorney time keepers.
Authorization-required tasks are those the client may not necessarily consider as non-compensable, but may want to monitor more closely and in that respect, require the firms to acquire their approval before invoicing. The billing guidelines should lay out both the type of task requiring approval and the process for gaining that approval. Tasks requiring prior authorization might include:
- Local travel
- Long distance travel
- Legal research (per case) over a certain time limit, i.e. 2 hours, 4 hours
- Multiple attorney attendance at depositions, hearings, conferences
- Multiple timekeeper attendance or travel
Guidelines should be drafted based on General Counsel’s specific needs, and should be built from the ground up. This allows for better tracking of work. The more specific the guidelines, the more specific the reporting.