Magazine article Risk Management

Controlling Legal Costs through Bill Reviews

Magazine article Risk Management

Controlling Legal Costs through Bill Reviews

Article excerpt

As legal costs continue to climb, many companies are becoming aware of the need to aggressively manage their business relationships with outside counsel. In some cases, inaccurate, inappropriate or excessive bills are the principal cause of rising costs, said Robert Davidson of Examen, Inc., a legal cost containment firm based in San Francisco. A billing review system can be a solution to this problem.

The first step in creating a billing review system is to realize that outside law firms are a vendor just like any other. "Always remember that your relationship with your law firm is a commercial relationship," said Mr. Davidson. So the client, as in dealings with any other vendor, must first determine the level of service they expect from the law firm. Often, however, there is very little agreement between the two parties on the service to be provided, such as "which attorneys will do the work, what their experience and background should be, and what the client's litigation philosophy is," said Mr. Davidson.

Thus, the client company must clearly communicate their legal needs to the law firm up-front. To assure the best possible service, companies should "meet, interview and get references on every attorney and paralegal the firm wants to assign to the case," said Mr. Davidson. "This is because there may be some people you don't think you can work with, and vice versa."

Next, the client should closely examine the cost of the service, and how frequently the individual attorneys and paralegals will submit their bills, said Mr. Davidson. Noting, however, that legal bills are hard to understand since no standard billing methods exist, Mr. Davidson strongly recommended that clients switch to monthly instead of quarterly or even end-of-case billing since bills that are sent more frequently are much easier to review.

The client must also ensure that the bills accurately reflect the services provided. For example, in some cases a partner or associate may perform a task that should have been done by a paralegal -- and charge the client based on the partner's or associate's hourly rate. Many law firms also have set charges for certain tasks. However, this form of billing, known as "standard" billing, can lead to abuses. An egregious example comes from a workers' compensation attorney who billed a standard rate of 1.2 hours for scheduling a medical exam through a simple phone call.

Clients often assume that attorney and paralegal hourly rates pay for the law firm's overhead costs, such as for word processing, document production, photocopying and incoming faxes, heating and air conditioning, and night staff expenses. …

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