Biglaw, Billable Hours, In-House Counsel, Money

Inside Straight: What Really Is Billable?

During the decades that I worked in Biglaw, I occasionally felt put upon by clients.

“You won’t pay for travel time? Why not? I’m not flying to Philadelphia for my health. And I’m sure not on vacation. If you want me to travel to Philadelphia, then you pay for the time I kill making the trip.”

But many clients felt very differently about it.

“If you’re doing productive work on my matter, then I’ll pay. If you’re flying around the country reading a novel, then I won’t pay. You surely don’t expect us to pay for time that you choose to make unproductive?”

[Or, in some situations: “If you want to handle a matter that’s based in Philadelphia, then you eat the time (and travel costs) of getting there. If that’s not acceptable to you, then we’ll hire a Philadelphia firm. Do you want the matter?”]

These discussions strike me as fair fights. There are things that law firms plainly should not charge clients for, things they plainly should, and the middle ground, where fights are arguably fair. Today, I’m walking the middle ground . . . .

Drafting engagement letters.

The firm has not yet been retained. It’s preparing an engagement letter for the firm’s benefit as much as for the client’s. Most firms won’t accept a new client (or matter) without having an engagement letter in place.

Should the cost of preparing the engagement letter properly be charged to the client?

(For the benefit of junior associates who’ve never been saddled with the task of preparing engagement letters, or lawyers at small firms who haven’t experienced the joys of big-firm conflicts, “preparing an engagement letter” does not mean “asking your assistant to copy the form out of the computer system and put your name at the bottom of it.” Preparing an engagement letter may take many hours of time, spread over the course of months, as you work through the tedious but essential tasks of identifying potential conflicts of interest, disclosing them, and obtaining the necessary consents (or taking other steps) to resolve them, before crafting a letter that explains the situation to the new client.)

Budgeting.

On the one hand, projecting the cost of defending a case is an administrative task. It should be routine, and it’s arguably part of the law firm’s overhead.

On the other hand: “If you really want me to provide rolling 12-month budgets on a monthly basis, breaking down what category of lawyers will perform what work — ABA Task Code by ABA Task Code — that ain’t the usual budgeting process. That’s frittering away many of hours of my life at the coffee shop on Sunday morning to satisfy your idiotic demands. The cost of that nonsense should come out of your hide, not mine.”

Preparing bills.

If bills are going to be comprehensible and self-justifying, then preparing them takes time. It requires a lawyer who is generally knowledgeable about all of the outstanding matters to review the time entries to be sure the time spent was appropriate for the task performed and the narrative adequately describes the work. If you’re sending a client several hundred thousand dollars worth of bills in a month, preparing bills requires a ton of of time and effort.

On the other hand, you’re sending bills in order to be paid. Surely that’s as much for the benefit of the firm as it is for the client. And preparing bills is arguably part of a firm’s overhead cost of doing business.

Is it properly chargeable to the client or not?

Finally, responding to audit letters.

Once again, junior lawyers or folks at small firms may not appreciate the horror of the words I’ve just written. If a firm is handling dozens (or scores, or thousands) of matters for a client, then it’s a huge task to gather information, discuss certain matters with your colleagues, and finalize the audit letter response in a way that both serves the client’s needs and protects the firm.

The firm is responding to those letters at the client’s request; absent the auditor’s request, there’s no need for the firm to do the work.

On the other hand, auditors send these requests as night follows day. And many large firms employ “audit letter assistants” whose sole job is to help respond to these requests. The salaries of those assistants is arguably overhead, not meant to become a profit center when the assistants’ time is billed to clients for $100 or more an hour.

As you’ve surely noticed, I’m not passing judgment here. I’ve worked at a firm in the past, and I work at a client today, so I’m sensitive to both sides of the debate (and likely subject to criticism if I publicly came down on the “wrong” side of these issues).

But the questions are worth thinking about. And lawyers who are choosing to write off the time associated with some (or all) of these tasks as nonbillable administrative time might profitably mention that choice to clients. If you’re not getting money for your work, you might as well get brownie points.


Mark Herrmann is the Chief Counsel – Litigation and Global Chief Compliance Officer at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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