Solo and Small Law Firm - COST RECOVERY ABA GP/SOLO MEMBERSHIP SURVEY RESULTS

2 Objectives This research was intended to gather information to better understand current cost recovery practices and challenges in small law firms. The objectives of the research were to: –Identify which components of cost recovery costs are recovered –Understand which costs are not recovered –Determine who at the firm is involved in the recovery process –Identify tools and products used to recover online research costs –Discover what aspects of the cost recovery process are difficult

3 Survey Background Survey was open from April 23 – April 28 th, 2008 A total of 585 respondents completed the survey Response rate - 6%.

Findings

5 ONLINE LEGAL RESEARCH SUBSCRIPTION SERVICES To which paid legal research services does your firm subscribe? n=582 2/3 of respondents subscribe to Westlaw or Lexis 66% 1/4 do not subscribe to OLR services

6 COST RECOVERY PRACTICED Does your firm attempt to recover online research related costs by billing all or part of it back to clients? n=417 1/2 of respondents attempt to recover all or part of their online legal research costs

Cost Recovery - Practiced

8 COST RECOVERY PRACTICED COST RECOVERY POLICY Which statement best describes your firm’s cost recovery policy for online research expenses? n=209 Base = those who attempt to recover online research costs Nearly 1/2 review costs on client by client basis, while 1/4 attempt to bill back all costs to clients

9 COST RECOVERY PRACTICED COMPONENTS INCLUDED IN COST RECOVERY What components of the legal research costs are included in your firm’s cost recovery efforts? Legal Research Costs Included in Cost Recovery Efforts Out of plan charges (usage outside your contract) 81% Document retrieval such as dockets, briefs, or other court filings from an online service 69% Copying charges 54% Online subscription charges 40% Printing charges 39% Downloading 17% Other 7% n=194 Base = those who attempt to recover online research costs Most respondents include out of plan charges and document retrieval as part of their legal research costs.

10 COST RECOVERY PRACTICED PERCENT OF CHARGES RECOVERED Overall, about what percentage of actual (Westlaw/LexisNexis) out of plan charges does your firm recover from clients? Overall, about what percentage of actual (Westlaw/LexisNexis) online subscription charges does your firm recover from clients? Mean : 62% Mean: 67% n=76 Base = those who attempt to recover online research costs and include online subscription charges in their cost recovery efforts n=156 Base = those who attempt to recover online research costs and include out of plan charges in their cost recovery efforts On average respondents recover about 2/3 of the online subscription charges or out of plan charges they bill to clients

11 COST RECOVERY PRACTICED PRIMARY LEADERSHIP FOR SETTING AND MANAGING COST RECOVERY POLICY Who at the firm is involved in setting and managing the policy for online cost recovery? n=210 Base = those who attempt to recover online research costs Partners are most commonly involved in setting and managing the policies around cost recovery.

12 COST RECOVERY PRACTICED FACTORS CONSIDERED FOR COST RECOVERY For each of the following statements, please indicate whether or not the factor was considered when setting your firm’s cost recovery policy. Considerations in Setting Firm’s Cost Recovery Policy YesNoDon’t Know Attorney’s experience working at other law firms 55%34%11% Other Solo or small law firms’ cost recovery principles 37%46%17% ABA guidelines 28%51%21% Bar associations’ or other legal organizations’ policy papers 22%62%16% Articles or white papers about cost recovery 20%61%19% Other 13%52%35% n=190 Base = those who attempt to recover online research costs Over 1/2 indicated that an attorney’s experience at other law firms was considered when setting their cost recovery policy

13 COST RECOVERY PRACTICED COST RECOVERY TOOLS Which of the following cost recovery tools or software are currently used at your firm for online legal research? Cost Recovery Tools Currently Used YesNoDon’t Know Other tools developed in-house 29%57%14% QuickView Plus (Westlaw) 25%62%13% LexisNexis PowerInvoice 14%74%12% APS LookUp Precision -87%13% Other 13%66%21% n=190 Base = those who attempt to recover online research costs Tools developed in-house are the most commonly used cost recovery tools, 1/4 of respondents also use QuickView+

14 COST RECOVERY PRACTICED COST RECOVERY TREND OVER PAST 2 YEARS Compared to two years ago, would you say the percentage of online research costs recovered by your firm has increased, decreased or remained the same? n=189 Base = those who attempt to recover online research costs About 1/4 indicate an increase in costs recovered. Most firm’s recovery rate has remained the same over the last two years.

15 COST RECOVERY PRACTICED REQUESTED COST RECOVERY TOOLS Which of the following would help you with your cost recovery strategy and processes? (Firms that practice cost recovery n=171) Base = 200 Firms that do practice cost recovery would find ABA guiding principles, articles or white papers, and market research beneficial tools to help with their cost recovery strategy and processes.

Cost Recovery – NOT Practiced

17 COST RECOVERY NOT PRACTICED REASONS FOR NOT PRACTICING Thinking about the reasons your firm does not recover online legal research costs; indicate your level of agreement with the following statements. 1 – 5 scale where “1” means strongly disagree and “5” means strongly agree. n=197 Base = those who do not attempt to recover online research costs More than 1/2 respondents cite their firms do not recover online legal costs because it is tradition not to charge, or to maintain relationships with clients, or the time and cost for billing and tracking is not worth it.

18 COST RECOVERY NOT PRACTICED REASONS FOR NOT PRACTICING Thinking about the reasons your firm does not recover online legal research costs; indicate your level of agreement with the following statements. Please use a 1 – 5 scale where “1” means strongly disagree and “5” means strongly agree. n=197 Base = those who do not attempt to recover online research costs

19 COST RECOVERY NOT PRACTICED LIKELIHOOD TO START COST RECOVERY How likely is your firm to start recovering online legal research costs in the next two years? n=199 Base = those who do not attempt to recover online research costs Most Overhead SLF firms are not likely to shift to Recovery Model in next 2 years 15% are likely to start recovering costs.

20 COST RECOVERY NOT PRACTICED HELPFUL COST RECOVERY TOOLS Which of the following would help you with your cost recovery strategy and processes? (Firms that do not practice cost recovery n=29) Base = 200 Firms that do not practice cost recovery would find ABA guiding principles, articles or white papers, and market research beneficial tools to help with their cost recovery strategy and processes.

21 SUMMARY OF KEY FINDINGS –Two-thirds subscribe to legal research services through Westlaw/Lexis –Half of respondents attempt to recover all or part of their online research costs. –About half review costs on a client by client basis –Majority of clients include out of plan charges and document retrieval as part of their recovery efforts –Two-thirds of online subscription charges or out of plan charges are recovered –Typically partners are involved in setting / managing policies around cost recovery –One-fourth indicate an increase in costs recovered over the last two years –One-half said their costs recovered have remained the same over last two years

22 SUMMARY OF KEY FINDINGS (cont.) For those who do not recover, common reasons include: Have never charged for research costs Maintain relationships with their clients Administrative time and costs involved Noteworthy: Firms that practice cost recovery and firms who currently don’t practice both state they would benefit most from: –ABA guiding principles –Market research –Articles or white papers about cost recovery