5 Ways Even Good Lawyers Charge Their Clients Too Much
5 Ways Even Good Lawyers Charge Their Clients Too Much
Anyone that has ever worked with a lawyer knows that we are not cheap. Our time is valuable, and even the best of us will use that as justification for all types of activities that ultimately impact your bottom line.
Of course, there are stories in which law firms have criminally over-billed their clients, such as here and here. Sometimes there’s a general culture of racking up bills, which might not be criminal, but certainly will still get a law firm in hot water. But these aren’t the activities I’m talking about here.
Some of these activities are more common than others. Law firms will use them (sometimes intentionally, and sometimes not) to pad their bills that ultimately cost you at the end of the day. What’s most disappointing is that none of these practices are even against a lawyer’s code of ethics, so many will do them and face no repercussions.
When hiring or working with an attorney, these are issues you should be on the lookout for:
1) Not Absorbing Routine Expenses
As with many of the items on this list, technology has changed the way we lawyers practice in major ways. One of the biggest ways is how we operate our offices. Services that used to be metered are now much more affordable and are often even set at flat fees. For instance, most phone companies have dropped added charges for long-distance calling.
Despite these significant changes, many law firms continue to charge clients for expenses that are now easily absorbed by the firm. I still see client bills that have charges for long-distance and internal printing, despite nationwide phone plans and paperless alternatives.
Some expenses need to be passed off. For instance, trial presentation materials, such as blow ups, can quickly mount up and should be charged to the client. However, there’s no reason that a $3.65 charge should show up on a client’s bill for a lawyer’s assistant printing out a 36-page contract for review.
2) Charging Top-Dollar for Low-Level Tasks
Lawyers are notoriously bad at delegating. Lawyers are generally well-educated and bright people (emphasis on generally), which means we are usually fairly confident in our abilities to handle different matters and tasks. This also extends to certain tasks that might be better left to others.
Many lawyers are afraid to delegate these tasks for fear that someone else won’t do them as well as the lawyer or up to that lawyer’s expectations. As a result, clients are often charged for work that could easily be done by support staff. I routinely see lawyers charge their clients for preparation of documents that require a basic understanding of Microsoft Office and little more, and certainly not a legal education.
Considering that a senior partner might charge as much as 15x more per hour than his assistant, no client should have to pay a lawyer to create something that could be done at a mere fraction of the price.
3) Not Automating
I am often amazed at how little even experienced attorneys know about the tools they use on a daily basis. For instance, Microsoft Word can be used as a relatively simple automation tool, but most lawyers don’t even know that they can automate the formatting of their legal pleadings. Most clients I know would be shocked to learn how much time lawyers and support staff spend on simply formatting documents.
In many practice areas, there’s an active disincentive to automate. For instance, even the Alabama State Bar has taken the position that a client should only be charged an hourly rate for document preparation unless there is an explicit, up-front flat fee arrangement. The practical application of that rule actively discourages automation amongst lawyers in Alabama. Why would a lawyer charge a flat rate when they could easily charge an hourly rate to completely recreate an otherwise-standard document?
Clients, on the other hand, are increasingly putting pressure on law firms to set flat fees, which requires sufficient ability to automate simple tasks and routines. Law firms’ clear economic incentive to charge a higher rate (i.e. an hourly rate) for a document that could easily be automated puts them at odds with what clients are demanding.
4) Not Minimizing 3rd Party Costs
This is a dirty little secret of the legal industry: There is no incentive for us to minimize third-party costs. As lawyers, we don’t necessarily carry a fiduciary duty to our clients in a general sense. Our fiduciary duty extends to the money that you place in trust with us, but that duty is fairly minimal. That means that lawyers will not negotiate rates or expenses from third parties that will be passed on to the client. In fact, there are even some rewards programs designed to benefit law offices and their staff with benefits at the expense of clients. This places an incentive structure on a law firm to hire 3rd party firms with no consideration for the actual cost to the client because the firm will not incur any expenses.
5) Not Having Honest Conversations about Money
Probably the biggest indirect cost to clients at the end of the day is the lack of an honest conversation about money. Legal services are expensive. There’s no doubt about that. However, many law firms are guilty of trying to sugar-coat the expense by not having an honest conversation about what the final cost will be.
Some of this hesitancy isn’t always deceptive. Each case is different. The cost of a case that settles before a complaint is filed will be far cheaper than one that goes to trial and up on appeal, even if the facts are the exact same. It’s hard to estimate what the budget for those two cases would be on the front end. One of the biggest benefits of experience in a particular practice area is learning how much it costs to try a case. If an inexperienced lawyer quotes a low fee on a case, it’s probably as much a factor of his or her inability to predict the amount of time and expense necessary as it is a factor of his or her lower hourly rate.
Sometimes lawyers are generally adverse to talking about money. It’s a common problem in the law. Many of these lawyers legitimately want to help a client in a tight situation, and so they charge some minimal fee to get the client to sign up, but fail to adequately communicate that the small fee they quoted is only to get started on the case, and it is not reflective of the total cost of trying the case. Hell, I’m as guilty of this as anyone else.
Don’t be deceived by low initial retainers. Try to get an idea of what it will cost to handle a legal matter start to finish.
Hiring a law firm is inherently expensive. No one should try to pursue a legal case on a tight budget, as it will almost necessarily cost more than you expect. However, that shouldn’t give a law firm a blank check to charge you as much as they would like. Have an honest conversation with your existing law firm or any law firm you’re looking to hire about how they handle their expense and fees, and take a proactive role in setting realistic expectations for your legal budget.