Legal Fee Guidelines

Guidelines from North Carolina for billing at hourly rates were recently sent to me by Tom Grella, immediate past chair of the ABA’s Law Practice Management Section.

The focus of the opinion is whether it is reasonable to charge for email and other communications among the staff and lawyers about a client’s matter.

Formal Ethics Opinion 13, July 12, 2007, sets forth guidelines similar to ABA’s Rule 1.5. Factors to consider include time and labor required, novelty and difficulty of the matter and the skill required to perform the service properly. Other factors include the fee customarily charged in the geographic and practice areas for similar services, the amount involved and the results obtained.

The real determinant that responds to the original question is whether the services advance the interests of the client or whether the service is derivative of the lawyer’s work for the client.  In other words, a secretary’s work is usually deemed to be derivative of the lawyer’s effort and is to be considered as part of the lawyer’s fee. On the other hand, a paralegal’s work is generally considered independent of the lawyer and advances the client’s interest, thereby permitting a separate hourly (or other basis) charge.

The lawyer must advance the interest of the client, must expedite the legal process for the client, and cannot either time or task pad his/her service.

I thought Tom was going to ask whether the basis of the hourly charge must be explained to the client. In other words, must you address the components of your hourly fee? Must you tell the client how you arrived at the rate of, say, $200 per hour?  I believe the answer is clearly "no."  After all, I don’t think any (certainly not many) lawyers know how they got to their current rate … only that they judged the market- place and put up a number, hoping the client won’t object … and then periodically increasing that number, again hoping the client won’t object.  There is hardly a lawyer (certainly none I know) that says my costs are "X" per hour, and my profit should be 20%, and therefore my billing rate will be "Y."

As firms become larger and more sophisticated, this analysis might actually occur … but I doubt that the billing rates will be set by anything other than the marketplace and the lawyer’s perception of whether he/she can get more/less than that rate … or right on target with the marketplace.

Categorized in: Cash Flow - Finances, Management