Bill Padding Happens More than We Think
Many have heard the joke about the young lawyer standing at the Pearly Gates. The lawyer tells St. Peter that there must be a mistake as he is too young to die. “But St. Peter, I am only 40,” says the lawyer. “That’s odd, says St. Peter, our records show you are 92.” The lawyer then turns pale and says, “Oh, you must be looking at my billable hours.”
An article in the American Bar Association’s ABA Journal revealed that 21% of lawyers pad their bills! If the ABA is correct, between one in four or one in five lawyers are overcharging their clients.
To arrive at this shocking statistic, two well respected companies, CEB and Wolters Kluwer, jointly analyzed over 57.7 million invoice entries involving $19.6 billion in paid legal fees generated by more than 5,900 US law firms and 146,000 lawyers.
If you think 21% is depressing, a California State Bar study found that over half of all legal bills are probably padded. They say that padding adds 10% to 30% to most client bills!
No one knows just what the percentages are. It’s also hard to catch these unethical lawyers in a lie. Did she spend 30 minutes or 45 minutes writing a letter? How can you prove otherwise? Ofthen the greediest lawyers are caught when they get so greedy that they bill for more hours than there are in a day.
We find that lawyers pad their bills on many ways. Some round up the time spent working to the nearest half hour. Others bill for things like an attempted call even though the encounter took less than a minute.
We learned of one lawyer who call everyone at lunchtime when it was least likely that someone would answer their phone. Because his form billed quarter hours, each 30 second phone call was rounded up and billed at 15 minutes.
Sometimes law firms pad their bills by passing on the costs of firm overhead by transforming secretarial or support work into billable work. An ethical firm should never charge clients for secretarial work, clerical work or word processing. A California federal judge recently rejected hourly bills from lawyers for doing things as "pick-up copies", "tag exhibits", "organize files", "reproduce documents" and "distribute memo."
Yet another variation of bill padding is called “churning.” A lawyer churns a file when she performs unnecessary legal work.
Double billing occurs when a lawyer bills two or more clients for the same work. Typically, this happens with legal research projects. The same research may benefit multiple clients. A dishonest lawyer will bill each client for the full amount of the time.
A sneaky way of bill padding involves “block billing” in which it becomes difficult to determine how the lawyer’s time was spent.
Although not quite bill padding, some larger law firms engage in “pyramiding” which means stuffing a case with associates. Instead of allowing a paralegal or assistant to perform a simple task such as looking up a case, larger law firms will use an associate attorney to do so. Why have a $100 per hour paralegal do the work when you can bill an associate at $350 per hour?
Related to pyramiding is “piling on.” Unless you are involved in a very complex case, there is no reason to have 3 or 4 lawyers attend a meeting or participate on a phone conference.
Bill Padding is Illegal and Unethical
Bill padding is stealing. And when it is done by a lawyer, it is unethical and could cause the lawyer to lose his or her license.
A California insurance defense lawyer was disbarred after billing an insurance company “for more than one hundred hours per day on a substantial number of days.” By billing different files for multiple hours, he thought that he wouldn’t get caught. Not only was he caught, he lost his license to practice law.
In another case, a prominent lawyer was caught after his bills showed 5,941 billable hours per year and for multiple years. To do that, one would have to bill over 16 hours a day every day of the year. That’s right, no weekends or holidays.
Lest you think that is still somehow possible, lawyers have annual training requirements, must attend meetings, and engage in client development. For the average lawyer, it takes 57 hours of work to bill 40. Redoing the math, this “super lawyer” needed to work 23 hours, 18 minutes per day to bill those hours.
Lawyer Lawrence Reich found himself in hot water after his legal bills suggested he worked 1200 days in a single year!
A managing partner at Winston & Strawn earning $500,000 per year evidently wasn’t satisfied with his compensation. Gary Fairchild became well known for delivering speeches on his “A.C.E. Program” (Above Client Expectations). We aren’t sure how well he did meeting client expectations but according to the New York Times, Fairchild was booted by the firm after padding his expenses account by hundreds of thousands of dollars.
It didn’t end there. His wife, a partner at another well known firm. She reportedly was sent to prison after being caught billing for time she wasn’t working or was on vacation with her boyfriend.
The examples above all appear to be motivated by pure greed. Sometimes, however, there can be a tremendous pressure on associate attorneys to bill a certain number of hours. When I was a young associate working at a large law firm, there was an expectation for all associates to bill 1850 hours.
Since often our billable hours were cut by the billing partner on each case, billing 1850 meant really billing in excess of 2000 hours and that meant working many long hours. For some young associates, there is a pressure to treat these billable hourly targets more like a quota. Especially if bonuses are tied to one’s billings.
We have assisted clients with billing disputes. The first took place when an aerospace company came to us and complained about their prior attorney’s bills. A simple audit of the bill showed the attorney billing trips to Washington D.C. to meet with regulators. We soon found, however, that none of the regulators ever remembered meeting the attorney. One was on vacation when the alleged meeting took place.
Rather than suffer the embarrassment of a public lawsuit, the firm removed the attorney and reimbursed our client all the money they had paid.
In another instance we came in as replacement counsel on a highly complex commercial mortgage backed securities real estate case. The clients, a group of 30 elderly investors, simply couldn’t afford their current counsel. These folks not only lost their entire investment to a fraudster, they were being sued by the lender!
We were shocked to find that the a large national law firm had billed them $700,000.00 (mostly for research) and had not even filed an answer to the law firm.
Was the work done? Probably but most was not necessary (churning) or involved having one senior partner, one junior partner and three associates all doing the same work. We also suspect the lawyers were learning a new area of law on the client’s dime.
Last year a giant international law firm got some nasty press when the firm’s billing policy was leaked. The document told lawyers to bill for bathroom breaks. According to that document, “Any short break… of up to six minutes should still be recorded to the matter you are working on, on the basis that you would still be thinking about.” Yes, that means if you are taking a bathroom break but “still thinking about” the client, you can add that time to the bill. After the story was leaked the firm rescinded the policy.
Even when lawyers aren’t sanctioned or subject to the bar’s disciplinary practice, we see many instances when the firm’s bills are cut by judges in class action cases.
What to Do if a Victim of Bill Padding by a Lawyer
Before we discuss how to address a bill padding dispute, let's try to prevent that from even happening. Make sure you have a written representation agreement and that it fully address the scope of the representation. Problems occur when there are ambiguities in the representation agreement.
Assuming there is a problem, step one is to talk to the lawyer and ask for an itemized invoice. This is especially true if the lawyer simply engaged in block billing or submitted an invoice for time simply labeled as “legal research.”
Lawyers owe their clients a very high duty of care called a fiduciary duty. That duty includes honest and complete billing.
If the billing issue can’t be resolved, take it up with the firm’s managing partner. Often the billing attorney only has a limited ability to address a billing inquiry.
If you haven’t paid the bill and still can’t resolve it, consider whether the law firm will sue you. Most legal malpractice insurance carriers don’t like lawyers suing clients for unpaid fees. Suing a client often means a counterclaim for legal malpractice.
Most state bar associations have a fee arbitration process. In some states, if the client demands fee arbitration, the lawyer or law firm must participate. Although run under the auspices of the state bar or state supreme court, most attorney fee dispute panels have public members on the panel and have the experience to ferret out bill padding.
You can also file an ethics complaint if you believe the lawyer stole money or billed for time not spent on your matter. Unlike a fee dispute panel, the disciplinary process in many states doesn’t have the ability to award restitution. But they can suspend or disbar dishonest lawyers.
If the amount is large and you don’t want to or can’t use the state’s fee dispute process, consider hiring a legal malpractice attorney. Technically fee disputes are often not malpractice but most malpractice lawyers are perfect capable of handling a fee dispute. Many lawyers won’t because they don’t to sue other lawyers. (This means often you will have to look in another city or state to find a lawyer willing to take your case.)
If you lost $1 million or more, we will gladly review your fee padding claims. Because we are national boutique law firm, suing lawyers wherever they may be doesn’t worry us.
For a complimentary and confidential review of your legal malpractice claim, give us a call. For more information, contact attorney Brian Mahany at [hidden email] or by telephone at (414) 704-6731 (direct). Most cases can be handled on an hourly or contingent fee basis.