Honest Billing Methods

Honest Billing Methods

A fee can clear all eight factors and still violate Rule 1.5(a), because the rule reaches the way a lawyer arrives at a fee as well as its size. The rule forbids a lawyer to make an agreement for, charge, or collect an unreasonable fee.¹ To be reasonable, a fee must appear reasonable in amount and must have been calculated by accurate and honest methods.² A fee based on false documentation, on a departure from the rate or basis communicated to the client, or on any other dishonest method is an unreasonable fee by definition, whatever its total.³

The factors cannot catch these defects, and the reason lies in what a bill is. A bill is the lawyer’s own report of facts the client cannot observe: how many hours were worked, on which tasks, at what rate, and on what basis. A total of $4,000 may sit comfortably inside the local range and still come from ten hours recorded for one hour of work. The factors compare a price with the work done, so applied to that bill they would compare the price with a work history that never happened. A reviewer who finds a dishonest method therefore need not ask whether the number could have been defended, because the bill fails at its source.

Dishonest billing also breaks a second rule. Rule 8.4(c) imposes a duty of truthfulness that applies with special force to a client who confides in the lawyer and reposes fiduciary trust, and inflated time and expense billings constitute fraud upon the party who receives the bill.⁴ One padded invoice can thus support discipline under two rules. As Professor Charles Wolfram confirms, “[c]ourts have insisted that lawyers be entirely honest in discussing fees with clients.”⁵

The temptation to inflate is well documented. Scholars have long pointed to high billable-hour expectations in elite firms as pressure on harried associates to pad bills and overwork matters. Corporate clients that audit their legal bills may constrain large firms, while unsophisticated clients in family law, bankruptcy, and probate may be more vulnerable to unscrupulous billing. Yet the prevalence of bad practice in some regions or sectors cannot change or lower the ethical standard.⁶ Two applications follow: the time record on which every hourly bill rests, and a billing practice, the minimum increment, that can raise a total even when no single entry is false in the ordinary sense.

Accurate Time Records

An hourly bill is a statement of what the lawyer did, and every part of it must be true. The hours must have been worked, the tasks must be described as they were done, and the rate and basis must be the ones the client was told. Inflated entries, whether for time or for expenses, defraud the person who pays,⁷ and the fee they produce is unreasonable however modest the total looks.

Courts that award fees show how much a contemporaneous record counts. An attorney seeking a fee must document the hours for which compensation is sought, and the Supreme Court has long declared a strong preference for contemporaneously recorded time records. A growing number of federal courts of appeals treat such records as a prerequisite to any fee application, though a smaller number let an attorney reconstruct them after the fact if the reconstruction is proven accurate.⁸ Those rules govern applications to a court, while the duty to a private client comes from Rules 1.5(a) and 8.4(c). The two settings share one idea. A record made as each task ends can be tested against the work, and a record rebuilt on billing day invites the inflation the rules condemn, so the lawyer who rebuilds it must be ready to prove it accurate.

The two totals match, so the amount cannot separate the bills, and the method does. An honest method only qualifies a fee for review on the factors, and that review may still find it excessive. A dishonest method ends the inquiry.

Reported disputes show how courts look at the way a fee was built. In one, a reviewing court agreed that the trial court’s detailed factual findings established that a lawyer’s fees were unreasonable. It was especially troubled by testimony that the fee arrangement, which carried a lien, was structured so that the firm would be paid regardless of any ruling that the fees were or were not reasonable.⁹ Scrutiny reaches the structure of the arrangement as well as the figure it produces. In another case, the trial court’s findings list concerns about a fee, among them dual billing for the training or supervision of another attorney, expenses not relevant in the community, and computer billing that did not describe the work done, and the court then found the fees reasonable under the factors.¹⁰ That passage marks the entries that draw scrutiny without holding any of them improper. Each is a way an entry can misdescribe what the client received, and an entry that does not describe the work leaves the client nothing to check.

An honest bill may still charge more than the hourly arithmetic would, so long as the client agrees first. A lawyer cannot bill a second client for a document at a fictitious hourly rate, but may charge a flat fee for the document above the normal hourly rate if the fee was agreed to in advance.¹¹ The difference is candor. A flat fee tells the client the price, and a fictitious rate tells the client something untrue about the work.

On the MPRE, a stem that reports a total within the local range and then describes how the lawyer built the bill is testing method. An answer that runs the eight factors on the total misses the issue. If the hours were never worked, or the bill uses a rate or basis the client was never told, the fee is unreasonable before any factor is weighed.

Minimum Billing Increments

A minimum billing increment is the smallest unit of time a lawyer will charge for any action, however briefly the action actually took. The standard example is two-tenths of an hour, or twelve minutes, charged for every action even when the lawyer’s actual time, say in leaving a telephone message, was about a minute.¹³ Because the unit is a convention applied to every entry, a lawyer who uses it may sincerely believe each line of the bill is accurate, and that belief makes the practice harder to judge than an inflated time sheet.

Some commentators and courts have singled the practice out as particularly susceptible to abuse and churning. One commentator calls it a “practice that can lead to artificially large billable hour totals.” Another ethics scholar reports that, while attorneys differ on its legitimacy, billing a minimum period for work that takes less time “account[s] in part for the startlingly large numbers of hours that many attorneys manage to record.”¹⁴

The danger is arithmetic. Hourly billing assumes that the time charged tracks the time spent, and a unit larger than the task breaks that link on every small task. The overcharge on each entry is the gap between the unit and the time actually used, and the number of entries multiplies the gap. A lawyer’s day is full of short tasks, so the distortion is greatest where the work is briefest and most frequent. The lawyer chooses the unit and records the entries, and the client sees only the total.

Because the practice varies in degree and lawyers disagree about it, the sound treatment is conditional and not a flat ban. At the very least, a lawyer ought not use a minimum billing increment unless it is fully disclosed to the client, the increment is truly minimal in size, and the lawyer regularly exercises billing judgment to eliminate excessive billing for a series of small tasks that should be measured together within a single increment.¹⁵ A fact pattern can be run through those conditions in order and then checked against the total.

Disclosure comes first because a lawyer setting up a fee arrangement must reveal any billing policy or practice that would otherwise mislead the client.¹⁶ A client who sees twelve-minute entries and was never told about the unit will assume each entry reflects roughly the time its task took, so the undisclosed unit makes the bill say something untrue about the work even though every line follows the convention. Telling the client at the outset removes that false impression and lets the client compare lawyers, ask for a smaller unit, or choose another arrangement.

Size limits how much distortion the unit can produce. When the unit is only slightly larger than the task, the gap on each entry is slight, and even a long run of entries cannot multiply it into a large figure. A twelve-minute unit applied to one-minute tasks makes every entry twelve times the work. No figure is fixed for what counts as minimal, so the question is one of degree: how far the unit exceeds what the lawyer’s typical short tasks require.

Billing judgment reaches the distortion that even a small unit leaves behind. Six brief calls in one afternoon about a single question form one block of work, and charging a full unit for each treats that block as six separate jobs. The lawyer who exercises billing judgment steps back before the bill goes out and measures such tasks together within one increment, so the bill tracks the time used and not the number of entries made.

Both lawyers use an increment, so the existence of a rounding convention decides nothing. What separates them is whether the client was told, how large the unit is compared with the tasks, and whether anyone reviewed the entries as a group. Dropping any one of the three weakens the practice: a disclosed twelve-minute unit applied without combining still inflates the total, and a small unit the client never heard about still leaves the client misled about what each entry means.

Meeting the conditions leaves the fee subject to Rule 1.5(a). Disclosure by the lawyer and acquiescence by the client do not save a billing policy if its application results in an unreasonable fee. Where the fee is unconscionably large and the client may lack effective information and bargaining power, courts are not deterred from finding it excessive by the fact that the client consented.¹⁷ The rule forbids charging or collecting an unreasonable amount whatever the signed letter says,¹⁸ and a later section takes up client consent in full. Two wrong answers recur on exam facts. One treats any rounding up as dishonest billing, which overlooks that a disclosed, small, regularly reviewed increment is acceptable. The other treats the client’s signature as a cure for any increment, which overlooks that consent never rescues a practice that produces an unreasonable total.