The Estrin Report

U.S. Supreme Court to Hear Paralegal Fees Case

Paralegal fees are once again up for discussion in the U.S. Supreme Court with the Court's Nov. 12 decision to hear the Richlin v. Chertoff case.  This is an important case for law firms and paralegals in promoting the further utilization of paralegals.

The issue before the Supreme Court in the Richlin case is pretty straightforward:  Under the Equal Access to Justice Act, can a prevailing party be awarded fees for paralegal services at the market rate for such services or should such reimbursement be limited to the actual cost incurred by the attorney?

After prevailing on the merits, Richlin sought an award of attorneys fees and other expenses under the EAJA for time spent over nearly nine years by its lawyers and paralegals. The Board found that the government's position on the merits was not "substantially justified" and awarded Richlin about $50,000 for work done by its lawyers.

The Board did not, however, award Richlin fees at the $50 to $95 per hour market rates for paralegals charged to Richlin over the course of the proceedings.  The Board searched the Internet for paralegal salary information and decided to award Richlin $35 per hour as a reasonable cost to the law firm awarding approximately $10,600 for about 300 hours of compensable paralegal time.

This practice discourages law firms from utilizing paralegals thus additionally hampering clients to receive lower cost legal fees.  What law firm wants to take a loss in profits? What incentive does the law firm have in utilizing paralegals if it cannot push this profit center towards profit? For those Negative Nancys who claim that the increased use of paralegals might result in the less efficient performance of legal services, remember: the attorney is ultimately responsible for the performance of the paralegal.  Therfore, there is no incentive to delegate work to a paralegal that is beyond the paralegal's capability or to the extent that it would be inefficient.

Oral arguments in Richlin are set fro March 19th with a decision expected by the end of June.

"Commentary: A Career Not Measured in Billable Hours"

Author Debra Bruno (Special Reports Editor at Legal Times), ponders some interesting questions in this Law.com article:

"I grew up the child of teachers. Besides learning the obvious lack-of-privacy lessons ('Does your father know you left the house in that outfit?' my high school history teacher once muttered to me), I also internalized the idea that in the working world, people get home every day at 4 p.m. and have summers off. To this day, it feels to me as if spending a beautiful summer afternoon sitting in an air-conditioned office goes against the natural order.

"I'm getting a sense that more and more people are on the same page -- or a nearby one. Don't we all want more time away from work?

"Yet at the same time, the office seems to be increasing its demands on our hours. One of the stickiest elements of the traditional working world is the often intractable and sometimes irrational insistence that people put in plenty of face time. The problem is especially acute in law firms -- places where associates [& paralegals?] actually worry about taking a 10-minute bathroom break. (Is it billable?) It doesn't take a rocket scientist to see a link between attrition and the legal world's obsession with the clock.

[snip]

"'But are the law firms listening? They have done a brilliant job of creating initiatives with fancy-sounding names. More than one firm boasts that it offers flexible schedules, sabbatical time and varieties of telecommuting. Press releases tout all these wonderful programs. But try to find a lawyer who's made partner and worked a truly part-time schedule: It's about as rare as getting a seat on the bus at rush hour."

Using Technology (& a paralegal!) to Cut Legal Costs

Interesting profile of Mark Chandler, senior VP, general counsel, & secretary for Cisco Systems Inc. This technology company (based in San Jose, CA), produces Internet protocol-based networking services:

"Chandler is keenly focused on applying technology, some developed by Cisco and some that it has purchased, to lower in-house legal costs on repetitive but crucial work. 'If you are dealing with a compliance matter that will affect how the company is perceived, you have to get it perfect, but other times very good is good enough,' he said. 'There are areas where you want to make sure you are doing the best you can, but you also want to be very efficient at the way you do it.'

[snip]

"Outside counsel: TurboTax can replace the tax preparer and Travelocity allows anyone with a computer to become his or her own travel agent. The same forces are engulfing the legal profession. 'Fundamentally, service businesses like law are not dissimilar from any other industry,' Chandler said.

"For example, Fenwick & West of Mountain View, Calif., which does nearly all of Cisco's corporate, securities and mergers and acquisitions work, notified Chandler last year that its hourly rates were going up. He replied that he planned to pay Fenwick 5 percent less in 2007 than he had the year before.

"'To do that, I wanted them to figure out what was the 10 percent of their work that was the least value-added,' Chandler said. 'We found they had lawyers billing us $400 to $500 an hour doing fairly routine work filling out forms associated with some of our acquisitions.'

"Chandler and Fenwick came to an agreement. Cisco is adding a paralegal to fill out the forms and will save $400,000, but it is reducing its payments to Fenwick by just $250,000."

"Firms Predict More Work, Less Equity"

What does this news mean for paralegals? I'm guessing higher required billable hours & maybe higher salaries too:

"Although law firm leaders at a recent conference publicly pooh-poohed predictions that industry profitability would stumble, in a new survey they say increasing expenses will cut into their bottom line this year.

"Lawyers can expect to be pushed for more billable hours while facing a harder struggle to make equity partner. And the ranks of associates and nonequity partners will rise much faster than any increase in equity slots, law firm leaders said.

"The first managing partner confidence index [be sure to check the comments to this post!] -- a survey of more than 100 Am Law 200 firm leaders -- was released this week by Citigroup Private Bank, which serves as banker to 550 law firms, including many of the nation's largest.

[snip]

"Am Law 200 firms reported big growth last year. But while most respondents predict revenue will continue to climb, they also expect expenses -- led by lawyer salaries -- to do the same. More than 90 percent said lawyer salaries would be the primary rising cost this year -- and that was before the recent round of associate salary raises that brought first-years up to $160,000 in New York and $145,000 most everywhere else.

[snip]

"Non-lawyer staff salaries and real estate costs are also expected to grow at a faster clip [emphasis added] than last year, [Danilo DiPietro, client head of Citigroup's law firm group] said."

"Time and Billing: Be Trigger-Happy"

I love how "trigger" reminders work:

"Does your current time and billing software help you manage your law firm's workflow? Does it identify key 'events' that trigger paperwork? If not, it may be time to upgrade.

[snip]

"By simply defining certain conditions, or rules that must be met -- such as the payment of an invoice, the generation of a specific type of document or even billable time that does not meet minimum amounts -- event software integrates with your time and billing program.

[snip]

"Once rules are established and thresholds are set, these systems are designed to be self-maintaining and will run transparently to automatically trigger notification alerts. Common events which can act as triggers in event-driven software include new clients, cash receipts over or under limits, vendor payments, new matters, unbilled time and/or cost write-offs, missing time, check processing, aged open vouchers, delinquent accounts receivable and hours-worked budgets on matters."

And here's a handy list of vendors from the article:

Cronacle, Redwood Software Inc., www.redwood.com.
Elite Extend, and Elite 3E Business Monitoring, Thomson Elite, www.elite.com.
Expert Notifications, Aderant, www.aderant.com.
EDA Suite, Oracle Corp., www.oracle.com.
MyJuris, Juris Inc., www.juris.net.
Omega Legal, Omega Legal Systems Inc., www.omegalegal.com.
Rainmaker Platinum Suite, Rainmaker Software Inc., www.rainmakerlegal.com.
RollCall and DTE, Advanced Productivity Software Inc., www.aps-soft.com.
TABS3, Software Technology, Inc., www.tabs3.com.

"11 Time Management Tips"

Yes, the challenge of smart "time management"! How do you control work time?

"Do you feel the need to be more organized and/or more productive? Do you spend your day in a frenzy of activity and then wonder why you haven't accomplished much?

"Time management skills are especially important for small business people [& paralegals!], who often find themselves performing many different jobs during the course of a single day. These time management tips will help you increase your productivity and stay cool and collected.

[snip]

2) Find out where you're wasting time.

"Many of us are prey to time-wasters that steal time we could be using much more productively.

[snip]

6) Prioritize ruthlessly.

"You should start each day with a time management session prioritizing the tasks for that day and setting your performance benchmark."

"Compensation Survey Shows Lofty Rewards for Firms"

What do law firms bill their clients? You might be surprised; then again, maybe not:

"Miami attorney Eugene Stearns may prove true the old cliche about getting what you pay for.

"The plaintiffs attorney is credited with taking a teetering case against ExxonMobil and turning it around to win his clients a $1.1 billion judgment.

"After the verdict, Stearns and other firms who worked on the 15-year-old case brought against the oil company by gas station owners battled over what they should be paid.

"Stearns asserted his firm was instrumental [PDF link] in winning a case that was bogged down and going nowhere when his firm signed on 10 years ago.

"U.S. District Judge Alan S. Gold agreed. He threw out a fee agreement signed when Stearns first joined the case in 1996 and awarded his firm $249 million in fees, more than triple what the firm would have received under the agreement.

"In the July fee ruling [PDF link], Gold called Stearns' work in the case 'groundbreaking' and 'highly skilled.'

"But Stearns is a pricey lawyer to have on your side, billing $700 an hour, the highest fee found for a south Florida attorney in the Daily Business Review's first annual lawyer billing survey."

"Temporary Solution"

Must read this article!

"The $16 billion merger of SBC Communications Inc. and AT&T Corp. represented a high-water mark in the legal cattle call known as document production. Some 600 contract attorneys converged in Washington, D.C., to work on the SBC side of the deal, where the telecom giant's antitrust counsel, Crowell & Moring and Arnold & Porter, ran a massive antitrust regulatory review. A few hundred more in Chicago labored for Sidley Austin at AT&T's behest.

[snip]

"Crowell's use of an army of temps for document review is hardly unique. In an age when law firms spend huge amounts of money on marketing efforts to build their brands, they also increasingly rely on off-label, generic lawyers, most of whose resumes would never get a second glance for an associate-track job. Law firms do it because they have to: Clients are pressing counsel to trim costs, and labor-intensive document reviews are a natural target. Firms, for their part, increasingly find they can't handle the work alone anyway-even if they wanted to-as each new class action or securities fraud investigation brings on a landslide of electronic documents. As a bonus, firms can bill out at higher attorney rates the kind of work that a decade ago might have been assigned to paralegals."

OMG! Instead of firms hiring temp paralegals for document review work, they're now hiring temp attorneys -- at paralegal rates -- billing clients at higher attorney rates. This goes against what paralegals were brought in to do -- save the client money.

What's going on here?

Time Billing 'The Perfect Crime'?

Must-read post on the Wall Street Journal's Law Blog:

"William Ross, a professor at Samford University’s Cumberland School of Law in Birmingham, Ala., calls it 'the perfect crime.' NYU legal ethics guru Stephen Gillers says there’s a 'general consensus' that the practice is on the upswing. The practice? Law-firm billing fraud, and the WSJ’s Nathan Koppel takes a look [subscription req'd] at the issue through the lens of a series of incidents that allegedly took place in Holland & Knight’s Chicago office.

"After Matthew Farmer, a 42-year old junior partner with the firm, suspected that his own hours on a trial for home builder Pinnacle Corp. had been inflated by the partner in charge of billing, 62-year-old Edward Ryan, he blew the whistle on the firm."

Are paralegals also pressured like associates for billable hours? 

Many firms have 1800 minimums. That's billing 7.5 hours a day,  or 35 hours a week for 12 straight months. Is that possible? How much is overtime? What about those firms that don't approve OT? 

Do paralegals feel the need to pad time just to make the minimum?

While firms no longer call the quota "minimum" (using the word "suggested" instead), the underlying message is the minimum is the minimum just to hold your job.  With no partnership carrot dangling, how do paralegals feel about the pressure?

We need to hear from you!

"The Billable Hour's Staying Power"

One of my least favorite tasks -- & I'm sure others' as well -- billing time!

"As Abraham Lincoln once said, "A lawyer's advice is his stock in trade." That short phrase has been repeated by attorneys throughout the years and is etched on brass plaques hanging in law firms worldwide.

"Clearly, Abe knew the value of his expertise. He also was reportedly a stickler for collecting payment. If money was tight, clients might hand over a milk cow or plump hen as payment for his services.

[snip]

"Livestock aside, billing schemes have become more complex as years passed. Trends continue to shift. In a highly competitive marketplace, many firms find themselves forgoing their standard billing procedures to accommodate a client's demands for alternative billing arrangements.

"'Most firms are embracing alternative billing arrangements as an expected part of doing business these days,' says John Marshall, a partner at Powell Goldstein in Atlanta. 'Clients are steering more in how they want to be billed. Since a large part of keeping clients is pleasing them, it means lawyers are becoming more flexible in how they view the billing process.'

"However, as clients consider alternative billing arrangements, law firms face the economic pressure of maintaining revenue. When hourly rates begin to climb to meet law firm costs, clients look to reduce expenses. It can seem like a never-ending cycle."