Supporting and Challenging Attorneys’ Fees – Q3 2022 Facts & Findings
Law firms bill clients by the hour, usually in six-minute increments (because those six minutes equal one-tenth of an hour: 0.1). Those hours are multiplied by the hourly rate of each biller to determine the legal fees charged to the client. For many of us, this is the most stressful part of our jobs; filling out our timesheet or inputting the time we spent working on client files into our firm’s billing program. However, no one gets paid if our time is not billed to and fees collected from our clients.
In some circumstances, the fees and costs we bill to our clients may be ordered to be paid by our opponent in litigation. This can be an exciting event for both attorneys and clients. On the flip side (and often in cases involving consumer protection statutes), our clients can be ordered to pay the attorneys’ fees and costs of our opponents. This can be devastating for some clients and a cost of doing business for others. In either case, attorneys and paralegals are placed in the position where they either need to justify their own billing or challenge the billing of our adversaries. It was these types of situations that gave rise to my niche practice as an attorneys’ fees auditing expert.
Legal fee auditing is not limited to prevailing party situations in litigation. It is also used by clients, including businesses, large insurance companies, cities, public and governmental agencies, and individual clients when there is a dispute between an attorney and client or when an insurance company is required to pay a portion of legal fees. In some circumstances, the fee auditor can be tasked with allocating the fees and costs billed into categories that are or are not recoverable by the opposing party.
Both the law and legal ethics restrict attorneys from billing fees that are unreasonable or unnecessary to the advancement of the client’s legal objectives. This can include an analysis of the reasonableness of the billing rate charged by attorneys. The ABA Model Rules of Professional Conduct, Rule 1.5 Fees, subdivision a, states:
(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee
include the following:
- the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
- the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
- the fee customarily charged in the locality for similar legal services;
- the amount involved and the results obtained;
- the time limitations imposed by the client or by the circumstances;
- the nature and length of the professional relationship with the client;
- the experience, reputation, and ability of the lawyer or lawyers performing the services; and
- whether the fee is fixed or contingent.
Nearly every state has either adopted the ABA Model Rule or authored its own statute regarding the factors considered when determining whether attorneys’ fees and costs are reasonable and necessary. Fees billed by paralegals are considered part of the attorneys’ fees invoice and are every bit as recoverable, or challengeable on the same basis as are fees billed by attorneys. (See Missouri v. Jenkins 491 U.S. 274, 109 S.Ct.2463 (1989) and Richlin Security Service Co. v. Chertoff, Secretary of Homeland Security 218 S.Ct.2007 (2008)). These professional rules, statutes, and
cases provide ample basis for challenging fees and costs sought as recovery in many legal scenarios.
Often the attorneys in the litigation use their own declarations and the declarations of people familiar with their work in the community to support or challenge attorneys’ fees and costs sought
in recovery. If the amount of fees at issue is small, this is the best use of resources to support or challenge the fees and costs at issue. If the fees and costs at issue are high and perhaps unwieldy, proving or challenging fees and costs often require the retention of a fee auditing expert.
During an audit, a legal fee auditor reviews billing records to determine if hourly billing errors or inefficiencies occurred and deducts unreasonable or unnecessary fees and costs or affirms that the time and effort spent on a case was reasonable and necessary to the representation of the client in the action. The auditor can interview the client, and review fee invoices in conjunction with legal case materials to identify all fees and costs reasonable and necessary to the advancement of the client’s legal objectives, and potentially deduct those that are not. The auditor also reviews all invoices to identify any potential accounting errors and assure that time and expenses are billed accurately.
Fee auditors also support or challenge the hourly rates charged by the billers on the case. The use of and familiarity with national rate surveys and with the variabilities of regional legal markets can provide valuable expert opinion that rates are reasonable, too high, or in some cases, too low.
Once the audit is complete, the auditor usually produces a report for use by counsel and is available for testimony in deposition, trial, or arbitration. Oftentimes, the auditor helps prepare the opposition to a fee motion, helps counsel develop an argument in support of or challenging the fees and costs billed, and signs a declaration supporting or challenging the fees and costs billed.
The legal fee auditor can be an invaluable asset to parties in deciding whether to file or settle a lawsuit and to the courts charged with issuing attorneys’ fee awards. While the court is the ultimate decision-maker regarding the reasonableness and necessity of the fees charged in the case before it, the court is unlikely to take the time to review individual invoice entries to perform a proper allocation of recoverable and nonrecoverable fees leaving the parties with the court’s “best approximation” of what the allocation should be. The fee audit provides the court and the parties with the basis for which to allocate and appropriately award reasonable and necessary fees.
Audits are considered a litigation best practice and a risk management tool and can save clients substantial amounts of money in unnecessary fees. It has been my experience, over the past two decades of fee auditing, that early fee auditing can identify and correct areas of concern in billing practices and avoid larger disputes in litigation later. Fee auditing experts can assist clients and counsel in reaching an agreement on proper billing practices and setting litigation cost expectations.
I have been asked by both plaintiffs and defendants to review attorneys’ fees and costs incurred and provide the parties and the court with my expert opinion regarding whether the total attorneys’ fees and costs were reasonably and necessarily incurred to pursue the client’s legal objectives. While the court does not always agree with all aspects of my analysis of fees and costs incurred, it is usually assisted in its decision by the presentation of the audit report and presentation of expert testimony on the reasonableness and necessity of the fees and costs billed.
Jacqueline S. Vinaccia is a California trial attorney, a national fee auditing expert, and a partner at Vanst Law LLP. Her practice focuses on business and real estate litigation, construction disputes, and municipal litigation. Her attorney fee analyses have been cited by the U.S. District Courts in California and Western Washington, and the California Court of Appeals, as well as by various other state courts and arbitrators throughout the United States. She has published and presented on attorney fee invoicing and is considered one of the nation’s top fee experts by National Association of Legal Fee Association.