Managing legal costs is essential for in-house legal teams, and overbilling is a common issue that can lead to inflated expenses. Brian Arbetter of Legal Bill Review, provides valuable insights on recognizing and addressing overbilling. Here are effective strategies to help identify and combat common overbilling practices, particularly in areas like online legal research and expense markups.
Common Areas of Overbilling
Online Legal Research
Law firms often charge clients for the use of paid legal research services such as Westlaw or LexisNexis. These charges can be substantial, especially if multiple timekeepers are involved, and are often passed through without negotiation or caps on usage.
Expense Markups
Firms may mark up routine expenses, such as copying, postage, and transportation. These costs can add up quickly and unnecessarily inflate your legal bills.
Tips for Addressing Overbilling
To effectively manage your legal budget and ensure fair billing, consider these strategies:
1. Set Clear Billing Guidelines
Provide all outside counsel with written billing guidelines that outline expectations, including rules against block billing and policies on allowable expenses. Include consequences for violations, such as a percentage reduction in billed amounts for non-compliance.
2. Demand Detailed Billing Descriptions
Insist on detailed and specific billing entries. Avoid accepting vague descriptions like “legal research” without context; instead, require details that specify the issue researched and the time spent.
3. Encourage Timely Timekeeping
Advocate for real-time logging of work performed. Discourage practices such as end-of-month entries, which can lead to duplicated or inflated charges. Time entries should be recorded accurately and in increments (e.g., tenths of an hour) to avoid overbilling.
4. Monitor Staff Allocation
Ensure that tasks are assigned to the appropriate level of personnel. Avoid having high-cost attorneys perform basic tasks that could be handled by less expensive staff, such as paralegals. Regularly review invoices to ensure efficient use of resources.
5. Negotiate Research Costs
Establish reasonable limits for online legal research costs in your engagement letters. Negotiate caps or flat rates for research expenses, and require justification for extensive research hours.
Effectively managing legal costs requires diligence, clear guidelines, and assertive communication. By focusing on these strategies, particularly in common overbilling areas like online legal research and expense markups, in-house legal teams can protect their budgets and maintain a transparent billing relationship with outside counsel.
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