Ethics Tip of the Month - February 2014

Give the Max for the Minimum

 

Billing practices are among some of the most sensitive aspects of the lawyer-client relationship.  One practice that has received some attention both in law review articles and case law is the phenomenon of billing in minimum time increments such as one tenth or one quarter of an hour.   ABA Formal Opinion 93-379 Billing for Professional Fees, Disbursements and Other Expenses (1993) recognizes this practice stating: 

In matters where the client has agreed to have the fee determined with reference to the time expended by the lawyer, a lawyer may not bill more time than she actually spends on a matter, except to the extent that she rounds up to minimum time periods (such as one-quarter or one-tenth of an hour). 

In 1996, the ABA Section of Business Law published the Statement of Billing Principles,  an excerpt from which states as follows:

…Minimum Time Increments

…For convenience, lawyers generally keep track of the time spent using standard increments of time, commonly six minutes (0.1 hour), ten minutes ( 1/6 hour) or fifteen minutes ( 1/4 hour).   This approach is essential and should not be objectionable unless the increments are unreasonably large or are used in an abusive manner.   It would not be practical to keep track of time in constantly varying measurements, and minimum increments serve the practical needs of both lawyers and clients.   On the other hand, the practice should not be abused.   Legitimate use of a minimum time increment may depend on how the lawyer records the balance of the increment.   Two fifteen-minute charges for two five-minute calls within the same fifteen-minute period seem inappropriate; some balancing should be used.

While the use of minimum billing increments is for the most part an accepted practice, some commentators provide examples of how their use can lead to inflated and unreasonable fees.  See e.g. Douglas Richmond, The New Law Firm Economy, Billable Hours, And Professional Responsibility, 29 Hofstra L. Rev. 207 (2000) in which he states:

…Some firms bill attorney time in minimum quarter hour (0.25) increments, a practice that can lead to artificially large billable hour totals.   Four one-minute telephone calls become one billable hour in a firm that bills in quarter hours. Even firms that bill in acceptable one-tenth of an hour (six minute) increments may mandate minimum times for certain tasks. For example, a firm might require that telephone calls be billed at no less than two-tenths of an hour. Several courts have disallowed or limited attorneys' fees for telephone calls that were so short that the attorneys who received them recorded no time.

See also the following excerpt from the Iowa Practice Series 16 Ia. Prac., Lawyer and Judicial Ethics § 5:5(b)(2) (2012 ed.) that provides the following cautions when billing in minimum increments: 

…Some commentators and courts have singled out, as particularly susceptible to abuse and churning, the practice of “minimum billing increments”—such as charging for two-tenths of an hour (i.e., twelve minutes) for every action by the lawyer even if the actual time expended, say in leaving a telephone message, was less than a minute… At the very least, a lawyer ought not use a minimum billing increment approach unless it is fully disclosed to the client, the increment selected is truly minimal in size, and the lawyer regularly exercises billing judgment to eliminate excessive billing for a series of small tasks that should be measured together within a single increment.  

Of course, whether particular billing practices can lead to inflated or unreasonable fees is a factual question to be determined on a case by case basis.  The bottom line is that under Rule 1.5 Fees, lawyers may not charge or collect a fee that is unreasonable and may not ask a client to consent to a fee that is unreasonable.   

Case Law

There is some case law that has addressed the minimum time billing phenomena. Several have found the practice of billing in quarter hour or larger increments to be suspect.  See, e.g. In re Myers, Kan., No. 95,132, 2/3/06 (lawyer rounded up his billable time to minimum 1 hour time increments when he had spent at least 45 minutes on any given task related to the matter); Conoco, Inc. v. Director, OWCP, 194 F.3d 684, 2000 AMC 2407 (5th Cir. 1999), (judicial precedent in the jurisdiction has found billing in quarter hour increments to be suspect, however under the facts of the case, the court determined that the fees assessed were reasonable).  See Also, In re Barrie Reed Buick-GMC, Inc., 164 B.R. 378, 380 (Bankr. S.D. Fla. 1994) (reducing the  fee request, the court stated “telephone calls were billed for a minimum of one-quarter hour, although, based upon the descriptions contained in the SSA fee application, most of the matters discussed appear to have been of short duration…”).

See Also Matter of Scimeca  265 Kan. 742, 962 P.2d 1080 (1998) a lawyer may bill in quarter hour increments but only when the lawyer does in fact spend the time on the client’s business.  “The violation is in not spending the time billed to the client on the client's business. Here, respondent clearly billed for time not spent in representing the client”.  Ekstrom v. Marquesa at Monarch Beach Homeowners Ass'n Not Reported in Cal.Rptr.3d, 2008 WL 4768861 in which the court found merit in defendant's argument that billing in minimum quarter hour increments results in overbilling.

Depending on the facts and circumstances of a matter, it is easy to see how rounding up to minimum time units can get out of hand and how it could leave a bad impression on a client when time spent on routine tasks appears to be inflated.  To some degree, the bill is a communication with the client and attention to what your bill says between the lines can help build client trust and loyalty.  Billing for the maximum amount of work in the minimum number of hours is sure to favorably impress the client and a certain way to avoid billing complaints.

© 2014 by the American Bar Association

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