The Perfect Crime? – How to Detect Attorney Bill Padding
“The ‘perfect crime’ [is the] padding of bills…”
Thankfully, since Mr. Ross’ essay, some guidelines and advice have been developed to help clients identify when a legal bill includes bill “padding” – the nefarious practice where an attorney’s invoice overstates the amount of time required for work performed. In sunny California, the Committee on Mandatory Fee Arbitration has issued Arbitration Advisory 03-01 “Detecting Attorney Bill Padding”. Below is a quick summary of 03-01.
Since most bills are a collection of “estimates” that are not contemporaneously recorded and are hard to individually challenge, the bill reviewer should look at the following three things:
- Examine staffing
- Generally, the more timekeepers on a case, the higher the bill will be. Particular attention should be paid to associates who are under “great pressure” to bill very high hours and who “will give in to the temptation to guess and to exaggerate in order to meet the demands on them…”
- The ABA Commission on Billable Hours Report (2002, pp. 6-8) notes that hourly billing penalizes efficient and productive lawyers and “may allow, indeed may encourage, profligate work habits.”
- Evaluate the work performed against the time billed and evaluate for reasonableness
- Quantify the time spent on major tasks, i.e., add up the many incremental time entries for a task like motion for summary judgment, and then look at the final work product to see if the time billed appears reasonable. Many smaller entries may not flag a problem until they are added up and reveal a red flag.
- Another key area – “reviewing documents”. The general rule of thumb commonly used by experts in bill reviews is that it will take a lawyer about 8 hours to review a box of relevant documents. Thus, it is important to ascertain how many document pages were actually produced or reviewed and cross-check the hours billed here.
- Look for certain patterns in the form of the work descriptions which can suggest bill padding, such as:
- Formula billing
- billing a time entry for every task, even if it takes less than a minute, i.e., reading 10 brief emails and billing them at 0.1 each for a total of one hour, when the total time only took 10 minutes.
- High minimum increments
- The standard increment is 6 minutes or 0.1. If a higher minimum is used, the time spent on these tasks is generally 15-25% higher than if 0.1 increments are used.
- Time estimates
- Even numbers like 8.0, 9.0, or 10.0 are likely estimates rather than time actually spent.
- Block billing
- Lumping multiple entries into one time entry can be used to hide accountability and has been shown to increase time by 10-30%.
- Standardized work descriptions
- Repeated entries like “review documents” may allow some down time to be folded into these routine categories.
- Lack of detail
- Lack of detail is not specific enough to allow the reviewer to know what has been done.
- Wrong times
- Check times billed vs. known times, i.e., depositions have an identified begin and end date in the transcript.
- Timeliness of invoices
- The longer the time between work done and the invoice, the likelier it is an estimate or “best guess” and not indicative of actual time spent.
- Experts and outside investigators
- Review corroborating bills of experts and note whether they have actually been paid.
- Computer Assisted Legal Research
- Verify against actual invoices paid by the firm on the client’s case.
- Overhead items
- Overhead is generally not billable to the client and is assumed to be reflected in the attorney’s hourly rate.
“The vast majority of lawyers are honest and their bills are reliable statements of what was done.”
“However, the economic pressure on lawyers and firms is enormous, continuous, and irrefutable.”
“Some few timekeepers will pad the bill by inserting extra hours from time to time, and the cumulative effect of this practice can be very significant.”