Litigation management guidelines are intended to provide guidance and structure to a law firm, particularly in its handling of complex litigation. Many of the litigation guidelines crafted by clients are derived from their significant experience in the management of high profile and costly litigation. The guidelines attempt to articulate commonsense, cost-effective principles of litigation management which, in many cases, will inure to the benefit of both the law firm and the client.
The reporting and pre‑approval expectations contained in most corporate litigation management guidelines aim to keep the client abreast of critical case developments. This is vitally important during the initial investigation stages of a large matter where a myriad of individuals, such as in-house counsel, outside counsel and investigators, may be involved in evaluating the nature and extent of the underlying claims. Comprehensive standards of communication can help organize and streamline the initial investigation and minimize duplication of effort.
Our experience has shown that litigation management guidelines supplement the judgment of counsel by enabling the client to exercise the right and duty to control the costs of litigation while at the same time allowing counsel to have a voice in the strategic direction of the handling of the matter.
Managing Billing Guidelines Assists the Billable Hour
The need for tighter litigation management techniques, such as the implementation of billing guidelines, arose as in-house counsel increasingly became distressed about the attorneys’ fees and costs incurred in big ticket litigation. A close examination of the services provided by their hired attorneys revealed evidence of overstaffing, duplication of effort, hidden profit centers, lack of direction, unreasonable charges and simple inefficiency. As a result, in-house counsel began to carefully examine the legal fee invoices, staffing levels and method of compensation for the services provided. Scrutiny of the billable hour yielded the realization that the historical method of lawyer compensation provided a disincentive for attorneys to dispose of cases quickly and efficiently. This has led to the development of alternative fee arrangements and programs, as well as greater accountability imposed on attorneys who do find it necessary to maintain the practice of hourly billing.
The Essence of Billing Guidelines
In-house counsel need to take a proactive role in the management of litigation costs. A cornerstone of such a program is the development and implementation of billing guidelines aimed at providing efficient, cost‑effective management of litigation. Our firm was active in this effort from the early stages, and drafted billing guidelines for numerous corporations and insurers. Although the billing guidelines can vary from company to company due to differing emphases or approaches to litigation, the core directives remain largely uniform.
Most billing guidelines:
- Address procedures for regular transmission of work product to the client
- Prohibit billing for activities performed for more than one client at the same time (“double billing”)
- Provide for requisite detail in billing statements
- Require attorneys to bill in tenth of an hour units
- Require notice of staff changes
- Mandate effective use of technology
- Impose reasonable limitations on the number of attorneys who may be deployed for various tasks
Some guidelines also require an attorney to obtain the client’s advance approval before undertaking certain types of work. Most guidelines also require counsel to inform the company before commencing various major projects or initiatives.
In general terms, billing guidelines memorialize the economic relationship between the client and retained counsel. These guidelines tend to cover the costs of handling the defense and attempt to prevent exposure to the client to what might be perceived as unreasonable or unnecessary fees. Experience has shown that well‑drafted litigation management guidelines successfully control litigation costs and define the parties’ relationship.
Billing Guidelines’ Provisions Are Typically Derived From Case Law and the Rules of Professional Conduct
Many provisions typically found in billing guidelines are rooted in the legal and ethical obligations attorneys owe to their clients. Litigation over the reasonableness and necessity of attorneys’ fees has, over the years, resulted in a number of principles that now regularly serve as the basis for many billing guidelines provisions. For instance, guidelines typically prohibit hidden profit centers such as “undisclosed markups” for postage, facsimile charges, photocopying and the use of independent contractors.
Many other provisions commonly found in billing guidelines are also grounded in case law. These include the disallowance of blocked billing entries; a prohibition on billing for, or reducing the hourly rate for, work that could have been performed by secretarial personnel or that is properly described as overhead; and the reduction of the amount of time billed for travel. In sum, billing guidelines often reflect the holdings of courts that have considered certain activities to be either unreasonable or inappropriate.
Billing Guidelines Serve as a Tool to Ensure Effective Communication Between Lawyer and Client
Many billing guidelines attempt to set forth appropriate economic parameters of the relationship between the entity paying the attorneys’ fees and the attorney. The guidelines facilitate communication between the client and its attorneys by clearly defining expectations and reducing the likelihood of miscommunication or confusion over the strategic direction of a case and the resulting legal fees and costs. It is our experience that these provisions in fact improve the quality of the legal services provided.
Moreover, communications between a client and counsel are typically improved by the billing guidelines’ consultation and pre‑approval provisions. Clients requiring approval of their attorneys’ activities have reported that the consultation requirement serves to keep both the client and counsel focused on litigation objectives. History and experience have demonstrated that even the most well‑meaning and talented attorney may lose focus of the goal of resolving the case in the most efficient way, particularly in “bet the company” cases. Logic indicates that because attorneys generate income through the delivery of services, there is a natural tendency to provide those services rather than curtail them. Even those attorneys who intend to provide a cost‑effective defense, if left unchecked, can subconsciously resolve doubts in favor of doing more work, thus generating more fees. Both the attorney and client may benefit from a consultation requirement that permits the opportunity for an exchange of information between two parties working toward a common goal.
It is imperative that in-house counsel put into place clear, concise and express billing guidelines to govern outside counsel billing practices, particularly in major litigation. In-house counsel should require your counsel and every member of his or her team to read them and acknowledge the rules. In house-lawyers should openly and directly discuss those billing practices that they cannot tolerate. Old habits may be hard to break. In-house counsel accordingly should discuss their expectations upfront and conduct an early and detailed review of invoices to eliminate practices which are inappropriate.