As with Little League baseball, the pendulum is now swinging the other way on soft cost recovery.

On May 11th Daniel Fischer in his blog Full Disclosure (https://blogs.forbes.com/danielfisher/page/3/) writes about a gentleman David Paige and his company Sterling Analytics that audits law firm’s bills for companies such as Regions Bank and Avalon Bay and KB homes. He lists none (9) different ways” law firms pad partners’ profit-sharing at the end of the year but don’t pass the legal or ethical smell test”.

In summary these nine (9) areas are:

1. Grazing – this is where high earning partners spend time with lower-ranking Attorneys to discuss their cases

2. Conference rooms – Some law firms bill out their conference rooms under separate LLCs

3. Pyramiding – Firms charging 2nd year lawyers to make copies, etc.

4. Piling on – Multiple partners billing for the same task

5. Photocopying – Should all be overhead

6. Billing preparation – Even though this was allowed under the Bankruptcy code, Mr. Paige says no client should put up with it.

7. Unspecified Expenses – Billing a percentage of the fees as a miscellaneous expense

8. Paralegals – He contends they should not be used for routine tasks at $100 – $300 per hour

9. Partners – Rainmakers at $750 per hour billing for routine work

While I cannot comment intelligently on every one of his nine areas, I can say that I think he is wrong about number 5 photocopying and number 6 billing preparation. As with most commentaries of this type, Mr. Paige is trying to justify the use of his services and his claims do pass the “smell test” of reasonableness.

In regards to photocopying – if the copies being made are part of the actions of the case and are “priced” fairly or they are hard costs pass-thrus from a third-party vendor, then why are they not justifiable and reimbursable? To label all copies as overhead just shows a poor understanding of the legal process. That is not to say that there are firms out there that charge excessive rates for in-house copies? Absolutely but let’s target them and not paint the whole industry with the same brush.

The example he uses to justify his claim is Baker & Hostetler charging $2,000 for photocopies on a $43.2 million dollar bill – what is wrong with that if the copies are justifiable and the rates reflect the firm’s costs?

In regards to billing preparation, if it is allowed under the Bankruptcy code, why shouldn’t a firm bill for it.

2018-09-20T11:47:24+00:00