Turning a Billing Scandal Into a Learning Opportunity

The following post comes to us from Professor Benjamin Madison:

Many have read about the recent DLA Piper billing scandal; see http://storify.com/Edward_Stephen/dla-piper-billing-scandal-review (citing articles on the scandal, DLA Piper’s responses, and criticism of Piper’s responses). Unfortunately, the scandal will likely smear the legal profession more than it should. The results of the dispute between DL Piper and the client with whom it disputes the allegations it questions in this matter remains to be resolved. Assuming that DL Piper is exonerated completely, however, the damage to lawyers from the negative press has already occurred.

The practice of overbilling a client alleged in the Piper Scandal is most likely to occur in large firms with billable hour quotas. When lawyers face the demand to bill anywhere from 2,000 to 2,500 hours per year, they are certainly more vulnerable to the temptation to do unnecessary work, at the least, or to pad their bills with time not actually spent on the client, at worst. However, most lawyers do not work for large law firms. The ABA’s most recent study of lawyer demographics shows that a relatively small percentage of lawyers work in large law firms. See http://www.americanbar.org/content/dam/aba/migrated/marketresearch/PublicDocuments/lawyer_demographics_2011.authcheckdam.pdf. Lawyers in smaller firms, without the crushing hour quotas, are less likely to charge unfairly. Moreover, I know large firm lawyers who are scrupulous about the time that they bill. These lawyers resist the temptations resulting from billable hour quotas and manage to succeed anyway. How can we encourage law students to recognize the significance of careful time recording and ethical billing?

Legal education is moving toward educating lawyers to be “practice ready” and to have a sense of ethical responsibility. In this vein, we would do well to offer law students the opportunity to learn about billing. In my civil procedure and pretrial practice classes, I have students break into groups to work on projects—e.g., a plan for discovery in a simulated case, or jointly preparing a pleading, a motion, or some other document in the simulated case. When I have the groups do these projects, I now plan to assign them an hourly rate (say, $200 per hour) and tell the student “lawyers” that they must—independent of one another—keep track of the time they spend on the matter. I’ll explain that billable hours are often broken down into increments, such as most commonly a tenth of an hour (or six minutes). I will then have them multiply the time they record by their hourly rate. If the student spends fifteen minutes on the project, I’ll ask whether they will round up to three-tenths of an hour (i.e., 18 minutes) even though they did not spend that much time working for the client. If the student decides that’s fair, then she or he would bill $60.

The exercise should reveal some interesting results. If students keep time separately (as I will insist), my guess is that there will be discrepancies in the amount of time recorded. That will provide an opportunity to discuss the necessity to be careful in contemporaneous recording and developing the habit of recording precisely when one starts and finishes a project or task. Moreover, we can discuss the common practice of rounding up to the next tenth of an hour (the 18 minutes noted above). Although the practice is common, the professor can ask students whether they believe such a practice out to be spelled out in the engagement letter if they plan on doing it. Students then ought to realize that clients are less likely to be surprised or object if they make the practice of rounding up time clear from the outset.

Regardless of how each group’s time(s) and bill(s) works out, the exercise should be a valuable opportunity to teach even more facets of lawyer-client relations. After such a session, the professor could bring into class respected practitioners and ask them how they are able to keep accurate time. Most will say they developed the habit of keeping contemporaneous time records throughout the day. Perhaps these lawyers will also offer tips such as the author learned in practice about how important it is not only to keep accurate time, but also to describe one’s work thoroughly. If the client’s bill shows two-tenths of an hour and, for the description, “telephone conversation,” they likely will wonder what the telephone conversation was about. With a little more effort, the lawyer can amplify the description, e.g. “telephone conversation with opposing counsel negotiating protocol for reducing the cost on my client of producing electronic documents.” Perhaps the bill should also include some entries where the lawyer does a task of one-tenth of an hour and puts “no charge to client.” Students need to know that clients will remain happier if they can see that the time spent was meaningful and have a sense of the significance to their case. If clients see their lawyer exercising the judgment to give the client a break and not charge for every little thing, that ought to create goodwill between the lawyer and client. Happy clients tend to be ones who return when they need legal help in the future.

In short, the Piper billing scandal may hurt the credibility of more lawyers than it should. However, for those of us adapting legal education to better prepare law students and to make them more attentive to ethical concerns, the scandal may be the prompting we need to begin teaching the importance of careful time-keeping and of billing practices that may actually strengthen the lawyer-client relationship.

2 Responses

  1. [...] Lawyers Fellow, recommends that law schools turn it into a learning opportunity “to better prepare law students and to make them more attentive to ethical concerns.” Professor Madison suggests that by teaching students more about billing, such as the [...]

  2. [...] Lawyers Fellow, recommends that law schools turn it into a learning opportunity “to better prepare law students and to make them more attentive to ethical concerns.” Professor Madison suggests that by teaching students more about billing, such as the [...]

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