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Category: Billing / Fee Guidelines

IBM’s Watson Could Help Reduce Outside Counsel Spend

May 19, 2017

A recent the Corporate Counsel story by Jennifer Williams-Alvarez, “IBM Says New Watson Tool Could Dramatically Reduce Outside Counsel Spend,” reports that, a new tool using International Business Machines Corp.'s Watson, notorious for defeating its human competitors on "Jeopardy" in 2011, is hard at work for in-house legal departments with the goal of significantly reducing outside counsel spend.

So far, use of "Outside Counsel Insights," or OCI, has been limited to legal departments in the financial services industry, according to Brian Kuhn, co-founder and leader of IBM Watson Legal.  But with the potential to save as much as 30 percent on annual outside counsel spend, it's no surprise that the tool has piqued the interest of some of the largest companies in that field.

The service relies on cloud-based cognitive computing system Watson to reveal billing insights to in-house legal departments, Kuhn said.  The development of OCI, which became an official offering late last quarter, stemmed from the perceived desire of legal departments to get their arms around this line item on the budget, he added.

"Outside counsel spend is really a significant concern for corporate general counsel," Kuhn said, noting that "on average, corporate law departments spend one-third to 50 percent of their annual budget on outside counsel."

To cut down on these costs, OCI looks at the amount of time a lawyer spends on a task and at line item descriptions in a budget, for instance, and creates a nearly complete automation of the invoice review process, Kuhn said.  The tool also shows how outside counsel are working, he added, which "tells you not just what lawyers did, but in a very granular way, the order in which they did things."

Together, these two features will help facilitate fixed-fee pricing, according to Kuhn, because legal departments will have a very detailed understanding of the work being done by outside counsel and can then dictate price.  What's more, Kuhn said, a future capability of OCI is to extract insights, such as how a judge ruled on certain motions and how specific lawyers perform on cross-examination, in order to "enforce appropriate legal strategy based on the outside counsel who've worked for you."

"There are other tools out there on the marketplace that offer just a pure analytics approach and they can only parse structured data," Kuhn said, explaining what makes Outside Counsel Insights unique.  "What Watson's good at is actually reading like a person, reading language ... and the ability to take narrative descriptions of legal tasks and time entries and understand what a lawyer actually intends by that in the context of a company's billing guidelines, is really how we move the needle and how we use AI.”

While OCI is currently only used in legal departments in the financial services industry, the potential savings are far from insignificant, Kuhn said.  He pointed out that in just the one industry, IBM's analysis shows that the service can provide a 22 to 30 percent savings on annual outside counsel spend after two years.  In one company with over $1 billion on annual outside counsel spend, which IBM declined to identify as the financial services company does not give its name as a reference, Kuhn said the benefits case showed close to $400 million a year in savings after two years.

There are also plans to expand use of the tool in the future to other industries that rely heavily on outside counsel, according to Kuhn.  "This is definitely not a sexy use of Watson," he noted.  "It's about creating efficiency for the lawyers and it's about massively reducing outside counsel spend."

Paper: Restraining Lawyers: From ‘Cases’ to ‘Tasks’

February 3, 2017

A forthcoming Fordham Law Review article, “Restraining Lawyers: From ‘Cases’ to ‘Tasks (pdf),’” by Morris A. Ratner, Professor of Law at the University of California Hastings College of Law, argues that law practice is experiencing two parallel shifts: civil procedure amendments are focusing on cost and resource drain, and the private market is giving in-house departments more options to unbundle legal work for lower costs.  A draft version of this article was posted with permission.  The abstract reads:

Developments in the domains of procedure and private contract highlight a continuing shift in authority away from lawyers and towards courts and clients accomplished by a conceptual downshift from “cases” to “tasks.”  The 2015 amendments to the Federal Rules of Civil Procedure limit attorney and party discretion by further empowering the trial court judge to dissect, assess the value of, and sequence case activity, including discovery.  At the same time, in the private sphere, sophisticated clients aided by advances in project and information management are controlling legal spend by unbundling cases into tasks.  From that position, they can source projects to low-cost providers.  Clients are also increasingly demanding litigation budgets and seeking value-based pricing, both of which work best if there is heightened communication between lawyer and client regarding the means to be pursued to achieve litigation aims.  These regulatory and market restraints on lawyers and lawyer-driven adversarialism, while pointing in a similar direction, differ fundamentally in terms of their reach, efficacy, and fairness.  Despite their differences, these developments in tandem have the potential to inspire the creation of new norms and duties calling on litigators to think more deeply and inclusively about the value of litigation tasks from the perspective of court and client.

NALFA Members Bruce Meckler and Mari Henry Leigh Featured in CDLB

October 25, 2016

NALFA members Bruce Meckler and Mari Henry Leigh of Legal Fee Solutions LLP discuss the Legal Fee Solutions practice in a feature story, Keeping Track of Legal Costs Turns into Big Business (pdf) in the Chicago Daily Law Bulletin.

Bruce and Mari are seeing their practice shift from addressing fees that have already accumulated to attacking legal costs on the front end.  Clients are more often hiring LFS ahead of large impending cases to manage company's legal spending beforehandThe article reads:

When people ask legal fee consultant and attorney Mari Henry Leigh what she does for a living, she tries to keep it simple.  “I just say I solve puzzles.  I find answers where other people dig through reams and reams of documents to find facts, I dig through reams and reams of invoices to find facts, to deduce patterns and tell a story from what you find in the invoices,” Leigh said.

Leigh is the vice chair of Legal Fee Solutions LLC, a practice that was first started by Leigh and commercial litigator Bruce R. Meckler after Meckler co-founded a firm in 1994.  The firm owned the fee practice, but they operated separately, Meckler said.

Last year, Legal Fee Solutions became a part of Cozen, O’Connor LLP when the Philadelphia based firm merged with Meckler, Bulger, Tilson, Marick & Pearson, LLP. 

In more technical terms, Meckler, Leigh and the rest of their firm of about a dozen people at Legal Fee Solutions work with clients, which include large corporations, to manage their litigation fees, conduct forensic audits of companies’ attorney expenses, handle fee disputes and provide expert testimony and other services relating to legal fee advice.  They say they’ve been involved in auditing more than $7 billion in legal fees since the practice started.

While the bulk of their work over the past 20 years has revolved around addressing fees that have already accumulated, Leigh and Meckler said they’re seeing the practice shifting as clients seek to attack legal costs on the front end.  They said more clients are approaching their practice about shaping policies that help keep their legal spending in line before the costs accrue.

“I think we’ve seen a huge shift basically in proactivity.  When we originally got started, instead of calling ourselves Legal Fee Solutions we were kind of like fee disputes.  Almost everything was an after-the-fact, retroactive look at somebody who has already had fees that are out of control,” Leigh said.

In addition to working one-on one with clients to do close examinations of costs, the practice’s attorneys have been called on to testify on the validity of fee amounts in cases involving hundreds of millions of dollars.

Leigh said one of the highlights of her career was when she and Meckler were enlisted to help the State Department’s attorneys in a dispute between the U.S. and Iran at the International Court of Justice in The Hague, the Netherlands, in 2012.  The dispute involved attorney fees that came out of a settlement relating to the Iran hostage crisis in 1979.

When they’re not weighing in on international affairs and complex audits, though, more of their time today is spent advising clients on how to best prevent themselves from facing out-of-line legal fees.

Businesses are getting smarter about legal spending, Leigh and Meckler said.  They’re seeing corporations looking closer at legal expenses because of rising rates and the costs of collecting electronic data for cases, known as e-discovery.

There are many factors in complex litigation matters that can lead to various legal expenses, but Meckler pointed out the top three areas in which he finds companies are able to save money.

“I think the biggest thing is controlling hourly rates,” he said.  “That’s Number One.  It’s the driver.  And Number Two, controlling the number of lawyers that law firms like to put on cases, the staffing of cases, and Number Three, controlling the expenses a law firm can incur, most specifically, e-discovery.  I would say those are the big three where we’re able to go in fairly quickly and save our clients money.”

Leigh said she’ll work with clients to develop company policies that prevent issues that might surface in an audit.

“I’m really happy to be able to educate people and see them embrace new techniques,” Leigh said.  My favorite clients are the clients that are the most open-minded.  They’re willing to try new things, engage in alternative fees or value-based fees, a lot of times which limit the need to audit but which deal more on the front-end with figuring out how the engagement ought to be structured, what’s fair.”

Meckler said that traditional legal fee auditing continues to be the core of their business, but he’s also noticing more clients are interested in preventing costs from building up in the first place.

Over the past decade, he’s seen more groups — largely consisting of insurance companies, Fortune 500 companies and governmental entities — that have started reducing outside legal fees by putting in place litigation guidelines, electronic billing and other budgeting measures so that they know what their legal spending is going to be.

Even more recently, though, has been the move toward hiring consultants such as Legal Fee Solutions ahead of large impending cases to manage company’s legal spending beforehand.

“[Some] companies are, in cases that have either just started and are going to be monster cases, where literally tens of millions or hundreds of millions of dollars are going to be spent in legal fees, they now hire us to help manage that legal spend,” Meckler said.

Meckler also said there’s also been a shift in more companies and government agencies simply becoming more savvy in general about their legal spending.

“I think clients’ level of sophistication has grown dramatically in terms of wanting to be educated and sophisticated with reducing legal fees.  I didn’t see that 20 years ago,” Meckler said.

“Twenty years ago, clients who had big cases and thought the fees were too high would call us. I think what we see now is how important maintaining legal fees is to corporations, governmental entities and insurance companies.”

Do These Legal Bill Review Programs Follow Best Practices?

August 9, 2016

As a 501(c)(6) federal tax-exempt organization under the IRC, NALFA has an obligation to “improve the lines of business” within the legal fee analysis field.  Indeed, part of the NALFA mission is to ensure quality and reliability across the legal fee analysis profession, regardless of membership status.

In 2010, NALFA established Best Practices in Legal Fee Analysis.  These best practice measures help ensure integrity in the legal bill review process and reliability in the results.  Yet, some outside legal bill review programs in the U.S. may not be following these professional standards. 

"If these legal bill review programs are not following Best Practices in Legal Fee Analysis, then they are outside the mainstream of legal fee analysis," said Terry Jesse, NALFA Executive Director.  "After 6 years, if these programs are still not adhering to these professional standards, then we'd encourage them to do so," Jesse concluded.

The following U.S.-based outside legal bill review programs (their leadership in parenthesis) may not be following Best Practices in Legal Fee Analysis:

Stuart Maue (Harry Maue)

Legal Cost Control (John Marquess)

Accountability Services (Judith Bronsther)

Professional Fee Oversight Partners (Karen M. Zuckerman)

Devil's Advocate (John Toothman)

Sterling Analytics (David Sterling)

Legal Fee Advisors (David Paige)

Wyatt Partners (Steven A. Tasher)

Alan Gray LLC (Michael Ceppi)

Michael R. Caryl, PS (Michael Caryl)

Moscaret Consulting, Inc. (Ken Moscaret)

You don't need to be a NALFA member to follow Best Practices in Legal Fee Analysis.  For more on Best Practices in Legal Fee Analysis, visit http://www.thenalfa.org/Best-Practices/

Fee Expert Bruce Meckler Discusses General Counsel and Their Budgets

March 17, 2016

A recent Bloomberg BNA article, “Fee Specialist On How GCs Are Tackling Their Budgets,” profiles and interviews NALFA member and qualified attorney fee expert Bruce Meckler on general counsel and their budgets. The article states:

Cozen O’Connor’s Bruce Meckler started his career three decades ago as a prosecutor in Chicago.  Meckler still describes himself as a trial lawyer but lately, his other business has been heating up.

Called Legal Fee Solutions, it’s a stand alone company — owned by Cozen O’Connor — in which Meckler and his team of attorneys, paralegals, and other experts help in-house counsel monitor their outside spend.  The work includes bill audits, expert witness testimony and general legal fee management among other duties.

He said that since around 2008, in-house counsel have been applying new scrutiny to bills, and demanding more information from their outside counsel.

“Since the crash of ’07 or ’08, law firm economics has just been turned on its head,” said Meckler.

Many of the changes originated with practices first implemented by insurance companies in the 1990s, he said, and are now gradually spreading to all corporate law departments.

“There’s a lot more communication in general,” said Meckler.  “The days of hiring a law firm and hearing about the status every six months are over.  GCs need to hear updates every week.”

Still, though, he said that hasn’t stopped some law firms from billing more than they should, including one he recently came across that charged $50,000 for the work to prepare a budget that the firm needed to continue its relationship with the client.

Meckler spoke to Big Law Business about how and why in-house counsel are applying more pressure on their outside counsel, new billing practices and his expectations for law firm economics.  Below is an edited transcript.

Big Law Business: How are corporate legal department’s billing practices changing?

Meckler: The days of hiring a law firm and hearing about the status every six months are over.  GCs need to hear updates every week.

Most of them are requiring e-billing and implementing pretty specific guidelines as to how law firms perform their services.  In the old days, the only parties that used to use guidelines were the insurance companies.  Guidelines govern everything from the work the law firms can do, to how much time they can bill, to what they need approval for.

Another thing is that now, because of e-billing, you’re able to do audits.  Those are very frequently done now.  Most companies that are requiring e-billing are requiring task-based billing.  So now when the bill comes in you can electronically see how much time is being spent task for task.  Most of corporate America is really picking up on this and why wouldn’t they?  If a company can reduce its legal spend by 10 or 20 percent, why wouldn’t they?  And that’s what they’re being told by the billing companies.  You can save 5 to 20 percent off the board if you use our products.

Big Law Business: Are you seeing any other trends?

Meckler: The other thing is GCs are really bearing down and requiring their outside counsel to prepare serious budgets.  That’s a trend that’s going full speed ahead.  Serious thoughtful budgets that should have every task that a law firm is going to be working on.  The best budgets are for three to six months.  It also should say who all the lawyers are that are going to be working on the case, what they’re going to be doing and how much it’s going to cost.

A handful of our big clients are doing these reverse auctions on a lot of their big cases.  If I’m a company, I send out my proposal to five law firms of my choice to bid on a case I have and the low-bid is going to win.  It’s being referred to as a reverse auction.  It’s something that AIG started about five years ago, and it used to only really affect the insurance defense firms.  But it’s evolved and many companies are using it for significant commercial litigation, and it’s moved into the mainstream with Big Law.

Big Law Business: Are law firms able to accurately predict the cost of a big ticket item upfront?

Meckler: That really is a great challenge to Big Law — the idea that you have to understand on the front-end how much you’re going to have to spend to defend something.  It requires lots of consideration and thought about what each stage of the case is going to cost, and … it’s not that different from what these lawyers are being asked to do when they prepare a budget.  But there’s more risk because it’s a longer time period with the usual uncertainties of litigation or a transaction.  I did not think it would take off, but it really has.

Big Law Business: People often talk about how corporate counsel are no longer putting up with excessive billing practices.  Why is this only happening now and how did the balance shift?

Meckler: I would suggest that it was a long time coming, that the law firms controlled way too much and had way too much leverage in the past.  The crash of 2007 and 2008 and the complete change in the law firm business has given clients all the leverage.  Correctly, now these companies are taking advantage of that leverage.

Since the crash of ’07 or ’08, law firm economics has just been turned on its head.  Law firm economics has changed.  Changed in terms of hiring, changed in terms of hourly rates although they’re going up.  It’s changed in terms of companies that don’t want to litigate anymore unless they have to.  It’s changed in terms of companies taking work in house.  It started in the 1990s with insurance companies, in the 2000s it happened with companies and the government and then the crash just gave it a supercharge.

Big Law Business: We recently had a GC tell us,  ‘I hate it when lawyers charge me for reviewing their own bill.’  How common is that?

Meckler: The answer is, I see it all the time in my business.  I see law firms billing for everything from reviewing their own bills to preparing budgets that clients ask for.  I just saw one where a client was being billed almost $50,000 for the time it took a law firm to prepare a budget that the firm needed to continue its relationship with the client.  Things that are administrative in nature, related to the overhead, that should never be billed.  General counsel reject bills like that quite often.  The trick is being able to identify and monitor bills coming in.

Big Law Business: Will the billable hour survive?

Meckler: The billable hour is obviously the hub of law firm economics.  I don’t think that’s going to change.  But the billable hour and the use of it is being carved away at by all the alternative legal service providers and the technology and the companies.

Probably the biggest trend is something that’s here and is here to stay.  The discovery in large cases, e-discovery, has always been one of the largest drivers of law firm billing in big cases.  Period.  In almost every case, clients want that piece farmed out to contract providers who do it at a fifth of the cost of what law firms charge and that’s not going away.

The smartest firms have created their own discovery units and that will become a profit center, but far less than what the firms used to get paid.  I just finished a case where the total bills were $60 million, and the document part was around $11 million.  This firm had used their own attorneys at $350 to $500 hour for their associates, which is of course what rates are at big firms.  But the client got wind of it, and well, it was resolved through arbitration.  That bill should have been more like $4.2 million.  It actually was $10.8 million.  And that’s solely based on had the firm used contract personnel instead of their own people.  It’s just based on hourly rates.  This is the fourth level document review [one of the final stages before production].

Big Law Business: What practices are the better law firms adopting?

Meckler: I see some that are very efficient and are training their lawyers on the right way to bill.  I think there are certainly a percentage of the law firms that are getting it, who aren’t resisting their clients efforts to manage legal fees.  It’s really not difficult to have your lawyers keep track of their time, on a case by case basis, but some of the the older more traditional law firms that never used to do this are having a tough time.  I’m talking about the ones who used to send out the one-liner bill.

There is a trend among lawyers who don’t want to do this and are coming up with a flat fee, or alternative billing method.  That’s a real trend.  They’re getting around the billable hourly rate altogether by charging a flat fee on a monthly basis.  I’m still not sure that is adding benefit to the client but that is a new trend.

For more on Bruce Meckler and Legal Fee Solutions, visit http://www.legalfeesolutions.com/

Great Reviews for NALFA Webinars

June 3, 2015

NALFA is hosting a series of webinars on attorney fee and legal billing issues throughout 2015.  All our webinars are free for NALFA members and NALFA clients.  So far this year, NALFA has...

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NALFA Launches Resource Center

January 29, 2015

NALFA has launched a resource center for our members.  This resource center will be the largest collection of attorney fee related material in the world.  NALFA is building this resource...

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