Legal Fees, Timekeeping & Billing Part 1 of 2 Chapter 5 Pages

Track your day activity. Track your day activity.

Timekeeping vs. Billing Timekeeping: the process of tracking time for the purpose of billing clients. Timekeeping: the process of tracking time for the purpose of billing clients. Billing: the process of issuing invoices for the purpose of collecting monies for legal services performed and being reimbursed for expenses. Billing: the process of issuing invoices for the purpose of collecting monies for legal services performed and being reimbursed for expenses.

Why paralegals need to know timekeeping & billing: 1) In most law practices you are required to track your time and it can be charged to the case you are working on. 1) In most law practices you are required to track your time and it can be charged to the case you are working on. 2) Many law practices have quotas or minimum billable hour requirements. 2) Many law practices have quotas or minimum billable hour requirements. 3) Most law practices are for profit so billing is crucial to the success of the practice. 3) Most law practices are for profit so billing is crucial to the success of the practice. 4) Paralegals are sometimes put in charge of actually running the timekeeping and billing systems, including managing timekeeping process and generating bills. 4) Paralegals are sometimes put in charge of actually running the timekeeping and billing systems, including managing timekeeping process and generating bills. 5) If you are a contract paralegal or an independent/freelance paralegal then you need to be prepared to generate bills & bill time to earn a living. 5) If you are a contract paralegal or an independent/freelance paralegal then you need to be prepared to generate bills & bill time to earn a living.

Types of Legal Fee Agreements Hourly rate fee: fee that is billed to the client by the hour at an agreed upon rate. Hourly rate fee: fee that is billed to the client by the hour at an agreed upon rate. Can include several types of hourly ratesCan include several types of hourly rates Attorney/Paralegal rates Attorney/Paralegal rates Client hourly rate Client hourly rate Blended hourly rate Blended hourly rate Activity hourly rate Activity hourly rate

Attorney/Paralegal Hourly Rate Fee based on the attorney’s or paralegal’s level of expertise and experience in a particular area. (See figure 5.2 on pg. 270) Fee based on the attorney’s or paralegal’s level of expertise and experience in a particular area. (See figure 5.2 on pg. 270) $200-$500 Partners $125-$200 Associates $60-$125 Paralegals

Client Hourly Rate Fee based on one hourly charge for the client, regardless of which attorney works on the case and what he/she does on the case. Fee based on one hourly charge for the client, regardless of which attorney works on the case and what he/she does on the case. Pre negotiated “fixed rates” that do not change based on years of experience or title.Pre negotiated “fixed rates” that do not change based on years of experience or title. Paralegals $100/hr Paralegals $100/hr Attorneys $225/hr Attorneys $225/hr

Blended Hourly Rate Fee An hourly rate that is set taking into account that blend or mix of attorneys working on the matter. An hourly rate that is set taking into account that blend or mix of attorneys working on the matter. Could include associates, partners and paralegals.Could include associates, partners and paralegals. One rate for ALLOne rate for ALL Makes the bill much easier for a client to read. Makes the bill much easier for a client to read.

Activity Hourly Rate Fee based on the different hourly rates, depending on what type of service or activity is actually performed. Fee based on the different hourly rates, depending on what type of service or activity is actually performed. Court appearances $300/hourCourt appearances $300/hour Legal research by attorney $225/hourLegal research by attorney $225/hour Telephone calls by attorney $150/hourTelephone calls by attorney $150/hour Drafting by paralegal $80/hourDrafting by paralegal $80/hour

Contingency Fee Fee collected if the attorney successfully represents the client. Fee collected if the attorney successfully represents the client. Certain percentage of the total amount of money awarded to the client.Certain percentage of the total amount of money awarded to the client. Personal Injury Personal Injury Worker’s Comp cases Worker’s Comp cases Employment cases Employment cases Medical malpractice Medical malpractice The individual may not have the means to hire a lawyer in the first place. Contingency fees range from 20% - 50%.The individual may not have the means to hire a lawyer in the first place. Contingency fees range from 20% - 50%.

Contingency Fee continued: Must be in writing (all legal fee agreements should be in writing). Must be in writing (all legal fee agreements should be in writing). Check state rules for caps on maximum %’s of recovery. Check state rules for caps on maximum %’s of recovery. Very risky. Very risky.

Flat Fee A fee for legal services that is billed at a fixed amount. A fee for legal services that is billed at a fixed amount. Will preparationWill preparation DivorceDivorce Name changeName change BankruptcyBankruptcy

Retainer Fees Retainer fees are monies paid by the client at the beginning of a case or matter. There are several types of retainers: Retainer fees are monies paid by the client at the beginning of a case or matter. There are several types of retainers: ALL ARE EITHER EARNED OR UNEARNED.

Earned v. Unearned Retainer Earned: money that is entitled to be deposited into the attorney’s own bank account or into the office’s operating account. Unearned: kept in client trust and may be refunded to the client. This is actually the client’s money.

Escrow/Trust Account A separate bank account apart from a law office’s or attorney’s operating account. This is where unearned client funds are deposited and kept.

Types of Retainers Cash Advance Retainer: unearned $ that acts as an advance against the attorney’s future fees and expenses. Cash Advance Retainer: unearned $ that acts as an advance against the attorney’s future fees and expenses. General Representation: typically used when a client such as a corporation or entity requires continuing legal services throughout the year. Similar to a flat fee, but it’s not limited to a specific area of work. General Representation: typically used when a client such as a corporation or entity requires continuing legal services throughout the year. Similar to a flat fee, but it’s not limited to a specific area of work.

Types of Retainers Cont’d: Case Retainer: a fee that is billed at the beginning of a matter, is not refundable to the client and is usually paid at the beginning of the case as an incentive for the office to take the case. Case Retainer: a fee that is billed at the beginning of a matter, is not refundable to the client and is usually paid at the beginning of the case as an incentive for the office to take the case.

Types of Retainers Cont’d: Pure Retainer: A fee that obligates the office to be available to represent the client throughout the time period agreed upon. Pure Retainer: A fee that obligates the office to be available to represent the client throughout the time period agreed upon. Very rareVery rare Office typically must agree to not represent any of the client’s competitors or to undertake any type of adverse representation to the client.Office typically must agree to not represent any of the client’s competitors or to undertake any type of adverse representation to the client.

Court-Awarded Fees Fees given to the prevailing parties pursuant to certain federal and state statutes. Fees given to the prevailing parties pursuant to certain federal and state statutes. Civil rights lawCivil rights law AntitrustAntitrust Civil RacketeeringCivil Racketeering Many othersMany others

Prepaid Legal Services A plan that a person can purchase that entitles the person to receive legal services either free or at a greatly reduced rate. A plan that a person can purchase that entitles the person to receive legal services either free or at a greatly reduced rate. Corporation/Labor Unions (Give a prepaid legal service plan to their employees as a benefit).Corporation/Labor Unions (Give a prepaid legal service plan to their employees as a benefit).

BREAK

What is value billing? A type of fee agreement that is based not on the time spent to perform the work but on the basis of the perceived value of the services to the client. A type of fee agreement that is based not on the time spent to perform the work but on the basis of the perceived value of the services to the client.

Value Billing Arguments against hourly billing: Arguments against hourly billing: The client never knows the total legal fee.The client never knows the total legal fee. Clients avoid contact with attorney/paralegal because they will be charged.Clients avoid contact with attorney/paralegal because they will be charged. Clients have trouble seeing the relationships between the staff and the enormous fees.Clients have trouble seeing the relationships between the staff and the enormous fees. Hourly billing encourages lawyers and paralegals to be inefficient (the longer it takes to peform a job, the more $ they bill)Hourly billing encourages lawyers and paralegals to be inefficient (the longer it takes to peform a job, the more $ they bill) Force attorneys and paralegals to bill a quota # of hours a year, which puts a tremendous amount of pressure on the individual paralegal and attorney.Force attorneys and paralegals to bill a quota # of hours a year, which puts a tremendous amount of pressure on the individual paralegal and attorney.

The Ethics of Timekeeping & Billing Timekeeping and Billing errors were once considered “misunderstandings” or perhaps “clerical errors.” Now, state bar associations have set high standards to govern legal billing. Timekeeping and Billing errors were once considered “misunderstandings” or perhaps “clerical errors.” Now, state bar associations have set high standards to govern legal billing. (See “Billing Abuses of Lawyers”article.) (See “Billing Abuses of Lawyers”article.)

Team Discussion: You work for a large firm. The firm has always done financially well, but given the current economic situation things aren’t going well. There is a great deal of pressure for you to meet your billing requirements of 1,800 hours even if no one has work for you. The firm will not accept the answer, “No one is giving me any work.” You are being encouraged to go up to each attorney’s office and drum something up. Discuss the ethical situation in which you are being placed and how you may handle it. You work for a large firm. The firm has always done financially well, but given the current economic situation things aren’t going well. There is a great deal of pressure for you to meet your billing requirements of 1,800 hours even if no one has work for you. The firm will not accept the answer, “No one is giving me any work.” You are being encouraged to go up to each attorney’s office and drum something up. Discuss the ethical situation in which you are being placed and how you may handle it.