This newsletter installment is a follow-up to my previous article on how to manage your legal counsel - How to Monitor Your Legal Bills. Most legal bills are shocking. You have heard the expression, "We have created a monster." The legal system and the practice of law is extremely complex. Sometimes invoice surprises are justified, other times they are not. What follows here, are some simple steps to make sure you are getting your money's worth.
You can review past issues of the newsletter at these links:
How to Choose a Law Firm Part I, Part II, Part III
, and Part IV.
HOW TO MONITOR YOUR
The Importance of Monitoring Legal Invoices
Developing efficiency and cost effectiveness is a key goal in the management of your attorney and your law firm. Close monitoring of legal bills accomplishes many things. First, it attunes your counsel to the fact that you are watching the clock and the firm's burn rate. Second, it gives you the ability to change questionable billing practices. Third, it helps you catch mistakes and unethical practices. Fourth, it helps you budget your legal costs, and, finally, it is the only way to monitor the estimates you receive.
As a business man it is incumbent on you to keep your expenses as low as possible. Legal fees are inevitable and smart companies use counsel proactively. Not monitoring legal invoices, however, is foolish and akin to not reviewing your bank statement. Even if you find an invoice in order, find something on the invoice to discuss with your attorney on the next call. Make sure the firm knows its invoices are being carefully reviewed.
Many companies that have in-house counsel or use outside counsel frequently, will rely on an attorney to monitor their legal invoices. I am not suggesting that you change this practice, but someone from the business side of the company that has good reason to watch expenses, should also be closely reviewing every invoice. Attorneys generally find it quite uncomfortable to challenge the billing practices of another attorney, and those that monitor invoices are much more likely to accept explanations of billing practices and time spent on specific matters than businessmen whose livelihood depends on negotiation. It is a natural bias, a professional deference, which even I have had to strive to overcome when managing counsel for a client.
Reviewing the Invoice
The first step is to carefully review the invoice each month after you receive it. Dissect the invoice. Look at the specific tasks that you were charged for. Legal invoices are always in chronological order following the way the firm's software tracks billable hours. The first thing I do is scan the invoice to look for the more obvious mistakes such as double billing, or billings for services that were not authorized by your company. Note who has worked on what tasks and confirm that these individuals are all authorized by the retainer to work on the matter. If there are billings without an adequate explanation, make note of this.
I will then break the invoice up into discrete tasks and calculate the approximate total time and cost for work on each task in the billing period. So for example, in a matter being litigated, I would tabulate both the hours and charges logged by various attorneys and paralegals for work done on specific tasks such as research, drafting or responding to different motions, setting up a discovery log, and calls between the company and the firm. Look carefully at the results of this exercise. Does everything seem in line? Use the result to estimate future monthly burn rates and individual task costs. Have initial estimates been blasted through in the first or second invoice? If so, make a note to discuss this with the lead partner.
Things to Watch Out For
Every invoice tells its own story. Estimates are usually exceeded when your counsel is forced to respond to unexpected motions or challenging correspondence. Your attorney cannot control your opponent or your opponent's attorney. Nonetheless, responding tit for tat is not always necessary. Keep in mind that if you stay involved, you may be able to control some of the hand to hand combat.
There are many things to watch for. Does it seem that junior associates spent an inordinate amount of time researching an issue or drafting a document? How many hours did the lead partner log in the past month and what was accomplished? Are the total charges for each task in line with what you expected? Are there any billings for tasks you did not expect? Consider that the following month's invoice may also contain additional charges incurred for some of the tasks shown on the current month's invoices.
Other things to watch out for include billings for multiple attorneys on the same conference call, and my pet peeve, excessive billing for "strategic conferences" between attorneys working together on your case. Finally, make sure your legal matter is not being used as a training ground for new associates, or a means that slow firm partners can get in some billable hours.
If you have questions or find objectionable practices, pick up the phone, or send an email to your attorney and ask that a call be set up to discuss some issues in the last invoice. Attorneys are used to cost conscious clients in this economy.
Now for the key question, do law firms negotiate invoices? Yes, they do, but only when pressed to do so by those clients that actually review their invoices carefully. According to an article written by a law firm management consultant, law firms of all sizes write down an "incredible amount of time." Here are the main reasons she found for the write offs:
- Over optimistic time and budget estimates
- Poor communication on budget, and the law firm just billed as usual.
- Changes to the agreed upon scope of work were not discussed
- Associates spent too much time performing legal work
- Partners in other practices who are called in broke the budget
- When original lawyers get busy there was additional getting up to speed time spent by the replacement attorneys
- The client declines to pay a timekeeper's billings because they are not on the "team" list given to the client.
Welcome to the Law Firm of Mark Garfinkel, Esq.
We are a boutique business law firm that proudly serves both international and domestic clients. Our office is located in an old Victorian in downtown Berkeley Springs, W.V., which is about an hour outside of the WDC metro area.
The founding partner, Mark Garfinkel is admitted to practice in the District of Colombia, Maryland, Pennsylvania and West Virgina. Prior to founding the firm, Mark was the General Counsel of OPIC in WDC (www.OPIC.gov
Prior to founding his law firm, Mark was the VP and General Counsel of OPIC in WDC where he was responsible for closing hundreds of overseas projects.
Mark is an experienced business and corporate attorney with both domestic and international clients.
He is also a commercial mediator who relishes solving business disputes without legal fighting.
See his website at www.garfinkellaw.com
to find out more about his practice areas.