In my CLE seminars on ethical billing practices for attorneys, I gave 4 main tips on how to avoid disputes with clients over legal bills. These tips also mirror an attorney’s ethical obligations when it comes to dealing with clients on fee billing.

Tip no.1 is to provide an adequate disclosure up front to the client on how fees and expenses will be billed.  Not only is this also a good risk management policy to follow, it also is required by ABA Model RPC 1.5(a)(2). And while the RPC do not require written disclosure (except in certain situations), it is again a good risk management practice to always provide a written disclosure.

Often times what a client is complaining about in a bill is something that was set out in the disclosure and agreed to by the client. However – and this is an important however – this can only work to an attorney’s benefit in a fee bill dispute if the attorney can show that the client “fully understood” what was presented to him in the disclosure or fee agreement. See The ABA Task Force on Lawyer Business Ethics (2010) “Disclosure and Understanding.” Also see Marathon Oil, S.A. v. Morrissey, 982 F.2d 830, 838 (2nd Cir. 1993)(lawyer has burden to establish that fee agreements are “fully known and understood by their clients”).

So if you are trying to slip in some aggressive billing practices, you had better have documented that you provided adequate disclosure to the client. And when I say “documented,” I mean that in addition to a written disclosure that you also verbally went over the terms with the client to ensure that there were no misunderstandings. For an example of what can go wrong when disclosure is inadequate, see my prior post on “Weaponized ADR Clauses.”

Tip no. 2 to avoid fee bill disputes is to engage in good billing practices. Now, if you are unsure what good billing practices to follow, I would suggest you read my previous blog posts or my books. Or you may want to read what one legal malpractice insurer, Lawyers Mutual Insurance Company of Kentucky (LMICK), had to say about lawyer billing in one of their newsletters. Here are some of what LMICK listed as “billing mistakes” along with their side comments in italics:

• The bill is as big as the client’s file – looks like over-practicing the matter.
• Secret identities – no names and no billing rates for the work done.
• Overqualified personnel for the work or conversely charging lawyer rates for administrative work.
• Too many meetings, telephone calls, and research hours – looks like over-practicing the matter.
• Billing for several lawyers reviewing or preparing to discuss the file – looks like over-practicing the matter.
• Billing for several lawyers attending a meeting when one would have been adequate – looks like over-practicing the matter.
• Itemized bills with generic terms such as “phone call” or “meeting” with no substantive information.
• All telephone calls take exactly .2 hours; all dollar amounts are nice round numbers or end in five.

But although LMICK’s list names most of the common billing issues observed in a legal bill audit, I would add one more: “sloppy billing practices.” By sloppy, I mean such things as misspelled words, obvious double entries, hard-to-figure-out abbreviations, and insufficient explanations of tasks. This leads into tip no. 3.

Tip no. 3 to avoid fee bill disputes is always, always, always, read your pre-bills to eliminate any errors or remove or reduce excessive or inappropriate charges. Courts call this exercising “billing judgment.” See Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). In fee bill disputes, attorneys must provide evidence that they exercised billing judgment in the disputed fee bills. Where the evidence of the exercise of billing judgment is lacking in billing disputes, courts tend to make reductions. See, e.g., Green v. Adm’rs of Tulane Educ. Fund, 284 F.3d 642, 662 (5th Cir. 2002)(“The proper remedy for omitting evidence of billing judgment does not include a denial of fees but, rather, a reduction of the award by a percentage intended to substitute for the exercise of billing judgment.”).

While going over your bills before they are sent out may seem like a no-brainer, you would be surprised at the number of careless errors I see each month in legal bills I review. These errors include double entries, misspellings, and hard-to-understand jargon and abbreviations. Perhaps the most careless error observed is insufficiently explained entries, such as billing for “research – 2 hours” but failing to state what was researched. And these careless errors are not just in legal bills from small law firms; they are also in legal bills from large national law firms.

As I have told attorneys in past seminars, your client may not read the 50-page brief that you sweated bullets over and is error-free, but they will read your legal bills! And if your legal bills have errors or are hard to understand or fail to properly state what it was you did, then clients are more likely, out of frustration, to turn to someone (like me) who can help them understand the legal bills.

Tip no. 4 is when you send out a (hopefully, error free) legal bill to a new client, do not just put the standard phrase “if you have any questions on my bill, please let me know,” in your cover letter, but also schedule a time to call the client up (at no charge) and go over the bill with the client. This is perhaps the most important piece of advice I can give. You may think the bill is error-free and is clear as clear can be, but does the client think so? And how would you possibly know for sure if you do not ask the client?

Having this conversation with a new client will help you know if you need to provide additional or different information in future bills. It will also demonstrate that you are adequately discharging your ethical duty to provide detail in your bills “in such specificity as the client requests.” The ABA Lawyer Task Force on Lawyer Business Ethics, (1996). Also see ABA Formal Op. 93-370 (1993) at p. 3 (attorney must provide a “sufficient explanation in the statement so that the client may reasonably be expected to understand what fees and other charges the client is actually being billed”). And, most importantly, make sure the client knows that if the client ever has a question about a future bill, to contact you directly.

So, there you have it. Just follow these 4 simple tips and you will significantly reduce, if not totally eliminate, your chances of becoming embroiled in a fee bill dispute with a client. Plus you will have the added satisfaction of knowing that you are putting me and the entire legal bill audit industry out of business!