August 09, 2017

Can I Charge for What I Don’t Know?

Jenna Nand

One of the hardest aspects of practicing as a young lawyer is trying to figure out when and how much to bill your clients. Many new attorneys are wont to undervalue their services and commit themselves to flat fees and other billing arrangements that cause them to give away a significant portion of their time and effort without adequate compensation. On the other end of the spectrum, some unscrupulous practitioners abuse their position of trust—they may run the clock for non-legal work, double-bill, or fabricate billing items entirely. Admittedly, there’s a lot of room in between. A wise attorney wants to avoid giving away her services, but must guard against the possibility of unethically padding the bill.

A subject of much chatter among new associates and solo attorneys is the propriety of charging your learning curve. Should your client pay for the additional time spent figuring out how to perform a legal task for the first time? Law firms have approached that issue by pointing to their tiered billing rate. One BigLaw partner I spoke to explained that because her junior associates are billed at half the rate that she commands, she allows them to bill up to twice as long as she estimates it would take her to complete a task and then writes off any time after that, so the client effectively pays the same amount for a legal matter regardless of whether the senior or junior attorney works on it.

But that begs the question: Does twenty hours of work by a junior associate lead to the same quality work product as a seasoned partner? In their article, “10 Ways Lawyers Rip Off Clients,” Business Insider reports that one law firm was sued because “[t]he billing statements reflect that these junior lawyers in essence were enjoying the benefits of on-the-job-training at [the client]’s expense.” Armed with a greater understanding of the billing process, and compelled by the financial pressures of the Great Recession, many institutional clients pushed back. They demanded that law firms no longer charge them for work performed by summer and junior associates and codified these restrictions in their retainer agreements.

As for clients who lack the power to negotiate such terms or who may be less sophisticated, the ABA Model Rules of Professional Conduct (RPC) don’t exactly provide a clear guideline. Rule 1.5(a) of the Model RPC ambiguously states that “[a] lawyer shall not . . . collect an unreasonable fee . . . . The factors to be considered in determining the reasonableness of a fee include . . . the skill requisite to perform the legal service properly . . . [and] the fee customarily charged in the locality for similar legal services.”

A new lawyer lacking the guidance of a more senior attorney might try consulting with local attorneys in her practice area to determine what the market billable rate is for discrete legal tasks. While it may be advisable from a marketing standpoint to undercut more experienced attorneys in fees, charging more than the typical market rate for a particular matter might come back to haunt her if a fee dispute with a client results in a bar complaint. And, obviously, don’t willfully commit fraud by double-billing or padding the bill!

Jenna Nand

Jenna Nand is a business attorney at Fortuna Law PLLC in Seattle, Washington.