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Category: Legal Bills / Legal Costs

DC Bar Approves Cryptocurrency to Pay Legal Fees

June 30, 2020

A recent Law 360 story by Mike LaSusa, “DC Bar Oks Cryptocurrency Payments for Legal Fees” reports that the District of Columbia Bar has given lawyers the green light to accept cryptocurrencies in exchange for legal services, although the body's ethics opinion said attorneys should take care to ensure the arrangements are fair and that the payments are secure.  The D.C. Bar said in its undated June opinion that it didn't see a reason to treat cryptocurrencies as "a uniquely unethical form of payment" despite some of their potentially troublesome aspects.

"The nature of digital currency — as a new technology, a volatile alternative currency or asset, or client property — raises ethical challenges for lawyers that simply do not exist with fiat currency," the bar said.  "But lawyers cannot hold back the tides of change even if they would like to, and cryptocurrency is increasingly accepted as a payment method by vendors and service providers, including lawyers."

The bar pointed out that cryptocurrencies can fluctuate widely in value, possibly complicating an assessment of whether a particular fee arrangement is fair, especially when a client pays for services in advance.  "The reasonableness of a fee agreement involving cryptocurrency will depend not only on the terms of the fee agreement itself and whether or not payment is for services rendered or in advance, but also on whether and how well the lawyer explains the nature of a client's particularized financial risks, in light of both the agreed fee structure and the inherent volatility of cryptocurrency," the bar said.

Moreover, lawyers need to make sure they keep the payments safe from loss, scammers and thieves, the bar said.  "Because blockchain transactions are unregulated, uninsured, anonymous, and irreversible, cryptocurrency is regularly targeted for digital fraud and theft," the bar said.

John Reed Stark, the president of John Reed Stark Consulting LLC, a data breach response and digital compliance firm, told Law360 that the D.C. Bar's decision was "disappointing."  "Crypto's liquidity risk; price volatility; cybersecurity vulnerabilities; commission fees; AML implications; OFAC concerns; ethical dilemmas; tax burdens; entanglement mishaps and the rest, create a situation that could be unmanageable or even untenable for a law firm's shareholders or partners," Stark said.  "Not to mention that for the most part, the entire crypto system resides amid an unregulated, mysterious and arguably sinister environment — certainly a poor choice of virtual venue."

A growing number of lawyers have been making the jump into virtual currency and accepting client fees in the form of cryptocurrencies like bitcoin in recent years.  And the trend has started to make its way into the world of BigLaw.  In November, Quinn Emanuel Urquhart & Sullivan LLP announced it had started receiving fee payments from clients in bitcoins.  With that decision, Quinn Emanuel followed in the footsteps of other large firms that have started taking bitcoin fee payments, including Perkins Coie LLP and Steptoe & Johnson LLP.

Study: Speed Paying Legal Bills Matters Most to Law Firms During Pandemic

June 25, 2020

A recent Law 360 story by Aebra Coe, “Clients’ Speed Paying Bills Could Make or Break Law Firms” reports that a report out shows law firms have fared "surprisingly well" financially during the coronavirus pandemic so far, but experts say there is still a danger that some firms could run out of cash because of difficulty collecting payments from struggling clients.

Most law firms do not have deep cash reserves and rely on monthly collections from client payments to continue operating.  With the possibility those payments could dry up due to clients' lack of ability or willingness to pay, liquidity is a major concern for some law firms right now, according to Michael Blanchard, managing director of the Law Firm Advisory Team at Aon.  "A lot of firms now are starting to realize that productivity may not be the issue but that liquidity from clients paying in a timely fashion is a bigger challenge to a lot of firms," Blanchard said.

According to the report released by Wells Fargo Private Bank Legal Specialty Group, "the legal industry has fared surprisingly well" so far financially during the coronavirus pandemic when compared to other industries, with demand for the surveyed law firms' services down just 1.4% from the start of the year through June 1 compared to the same five-month period last year.

But that modest decline in demand is skewed by a very strong start to the year, with steep declines in demand in April and May, according to Joe Mendola, senior director of sales for the bank's legal specialty group.  That could result in corresponding declines in the payments law firms receive from clients over the next three to four months since there is a lag between when firms perform work and when they are paid, he said.  Demand appears to have "bottomed out" in May, which would likely translate to the largest dip in cash in hand from payments by around August, Mendola said.

In addition to the problem of fewer bills owed in the second half of the year because of declines in demand during April and May, law firms could also face trouble collecting in a timely fashion and being paid in full as clients themselves struggle financially and seek steep discounts, which could lead to cash-flow difficulties for law firms.  "Certainly, through the first five months of 2020, the legal industry has fared better than most industries. But I think the more challenging months will be ahead of us," Mendola said.

The Wells Fargo survey found that while demand was down during the first five months of the year, the amount of money in the pipeline owed to firms, called inventory, was actually up by 7%, suggesting that collections are lagging, Mendola said.  Additionally, 54% of the firms surveyed said client requests for discounts increased in May over the previous month, and 52% said they saw more payment extension requests from clients in May.

"I think the key to 2020's final results [for law firm financials] will be how collections play out," Mendola said.  While firms have taken a hit and likely will continue to when it comes to collecting bills, the damage has not been as substantial as the industry first predicted, according to Gretta Rusanow, managing director at Citi Private Bank's Law Firm Group.

Surveys her bank conducted found that at the start of April, firms anticipated that they would see a 15% drop in demand, a 15% drop in revenue and an 11% lengthening in the collections cycle.  But the actual numbers for April and May, according to Rusanow, ended up showing an average decline in demand of 6.2%, a decline in revenue of 1.3% and a slowdown in collection times of 3.4%.

"The bottom line is: Going into this there was very much a concern that not only would activity levels drop, but it would be hard to collect from clients, and in fact what's happened is it hasn't been as bad as anticipated at the industry level," Rusanow said.  But Rusanow and Mendola both noted that there was significant dispersion in the industry during the first few months of the year, with some firms performing well and others performing poorly, all of which is wrapped up in those averages.

Actions that firms have taken during this time — likely as a result of fear of major drops in revenue and demand — have made a big impact on preserving their financial health, the experts said.  "Probably the thing resounding across the industry in the past few months has been a very much disciplined approach around billing and collections," Rusanow said.

That means firms have buckled down on attorneys getting their time tracked and bills promptly sent out to clients, and many are having conversations with clients about their ability to pay, she said.  Some firms have drawn on their lines of credit for cash flow, according to Mendola.

In addition, GLC Business Services CEO Michael Hayes said that smaller firms have been able to rely on the federal government's Paycheck Protection Program for loans that are either forgivable or are to be paid back at a very low interest rate.  "The Paycheck Protection Program has added liquidity to small firms and their clients," Hayes said.  "It pushes off the potential for danger at least until the end of year."

In addition to turning a closer eye to getting paid for the work they do and finding ways to keep money flowing in, law firms have also cut costs in anticipation of a dip in revenue, according to Aon's Blanchard.  That has meant reduced partner draws, reductions in associate and staff pay, some layoffs, some cuts in real estate expenses as attorneys and staff work from home, and less money spent in areas like travel, training and firm retreats.

"I think firms have started looking at different ways to improve their margins," Blanchard said.  Mendola said the belt-tightening has helped.  His survey found that at the end of May the industry has reported good liquidity with almost 90% of the responding firms showing three months or more coverage of monthly expenses excluding partner draws.  "I think those cost-cutting measures are paying off.  It's better to be prudent and readjust than not be ready," he said.  "Once money is out the door, you're not going to get it back."

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Fox Rothschild LLP
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins Arroyo LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA

Article: Five Tips for Drafting Effective Legal Billing Guidelines

June 11, 2020

A recent Law 360 article by Chris Seezen, “5 Tips for Drafting Effective Legal Billing Guidelines” reports on tips for drafting effective legal billing guidelines.  This article was posted with permission.  The article reads:

Relationships with outside counsel have taken on increased scrutiny as companies become more focused on the administrative processes of their legal departments and the work they do.  As a result, legal departments are looking more closely at the law firms they hire, what they pay those firms and the outcomes of the cases they've handled.

To properly manage outside counsel, it's imperative to implement and maintain effective legal billing guidelines.  These rules serve as a working guide to determine expectations and processes, allowing a legal department to decide with their law firms what they will and won't pay for, to set processes for staffing cases and requesting rate increases, and to lay out how matters will be handled.  This can include whether a company has a specific budget on a given matter and when it should be submitted, how budget revisions should be handled, or what to do when a matter goes over budget.  It's all about setting the table with the necessary information before the work begins.

Drafting legal billing guidelines requires a legal department to actively assess its case management practices, evaluate its law firm relationships and monitor ongoing guideline compliance — all of which are beneficial to keep track of. While some vendors or partners might not need much beyond a simple contract — such as an IT team, for example — when working with a more complex and costly service such as a law firm, having legal billing guidelines in place is a wise step for the investment and relationship.

To draft effective and enforceable legal billing guidelines, legal departments should consider the following:

Include all pertinent information in an easy-to-read format.

Including a process for law firms to get authorization for new timekeepers or rate increases, or determining a specific person in the department these requests should be sent to are examples of the kind of information that should be ironed out before a new law firm relationship begins.  Depending on the size of the firm, invoicing may be handled primarily by a billing department that doesn't have direct involvement in the matter, so providing all necessary details will improve compliance.

Additionally, most companies prefer to be billed monthly, but some may only want to be billed once services reach a certain amount and may request for the firm to hold the bill until the next pay cycle.  This is another matter that should be determined before work rolls out.  Although the latter option is a convenient way to cut down on administrative costs, monthly bills are still recommended as they keep information flow consistent and recent legal tasks top of mind.

Similar to other business documents, billing guidelines should be organized and presented in an easy-to-review format.  This may include using bullet points and lists instead of long sentences or paragraphs.  Additionally, similar items should be positioned together or organized in categories to keep the guidelines as straightforward as possible, such as travel bills/logistics, noncompensable administrative processes, etc.

Providing a brief overview that highlights the takeaways or expectations in bite-sized format, in addition to a more in-depth document, will also help to present the guidelines in a digestible way that supports compliance.

Identify the purpose of the guidelines.

Many legal departments use these guidelines to better control outside counsel costs.  In this case, they should outline all areas considered noncompensable (such as office overhead, scheduling or review of local rules) or that will have a cap.  The guidelines may also include protocol on matter management practices such as status update requirements or case staffing limitations.  Including this information, as well as requirements for any possible exceptions, will inform outside counsel how to approach similar matters upfront.

Draft a living document and reevaluate the guidelines as needed.

Although important to determine at the outset of the relationship, billing guidelines for outside counsel should not be set in stone.  While what's initially decided and drafted may seem appropriate, needs may change once set into practice and as time goes on.  Some requirements may prove too burdensome on outside counsel while other areas may be too lenient.  Additionally, there will always be that one matter that's the exception to the rule and the guidelines should cover those outlier cases.  Implementing an annual review of the billing guidelines will allow general counsel to revise and incorporate new procedures that best fit the company's needs.

Failing to review the guidelines regularly can cause legal departments to miss accommodations such as new travel time billing (for a case in a city with heavy traffic, for example) or important regulatory changes that may surface.  Therefore, even though a good rule of thumb is to review and update the general guidelines annually, the above situations and others like them should be updated in real time.  It's important to maintain a process that supports the company's evolving requirements.

Additionally, many billing guidelines include hiring protocol to cover what kind of attorney a company wants working on their claims, who will be carrying out tasks that vary in complexity, and what the rate will be for each.  When reviewing bills more closely to ensure they adhere to preexisting guidelines, companies are more likely to catch discrepancies in these agreements (such as an attorney billing time for work that a paralegal should be doing) and can call attention to the matter, lower their rate, or revise the guidelines to reflect the request.

Anticipate and prepare for resistance.

No one likes someone looking over their shoulder or second-guessing their work.  Outside counsel provides a valuable service to legal departments and should be properly compensated for it.  However, some law firms may be resistant to the implementation of billing guidelines, viewing them as intrusive or in place only to cut their bills.  Billing guidelines are becoming standard practice for legal departments, and almost every law firm has a client with billing requirements.  Informing outside counsel of the guideline implementation, as well as the purposes behind it, will help to alleviate any misunderstanding or animosity.

Stand by the guidelines.

The most important piece to consider when implementing billing guidelines is enforcement.  Many legal departments have them in place, but don't have the internal resources to ensure outside counsel is complying.  Failing to enforce the guidelines not only makes the time and effort to draft them a waste, but it can also undermine a company's position with its outside counsel.  In a newer relationship, enforcing the guidelines sets an important precedence.

To ensure all expectations are fairly treated in the event of a billing discrepancy, companies can ask to adjust the current bill down or request a current or future discount.  Referring to the guidelines will serve as leverage for this request.  For law firms that continue to violate agreements, companies have every right to discontinue their work with them.

The purpose of this method is to more clearly show rates that are being paid for the work that's being done.  Fostering a fair and transparent process is the ultimate goal.

Drafting, implementing and enforcing legal billing guidelines for outside counsel allows legal departments to be stewards of their company resources while maintaining control over case management.  For cost savings, streamlined administrative processes and deeper insight into their billing procedures, companies must invest the adequate time and effort into their initial and evolving guidelines — the foundation of a productive relationship with outside counsel.

Demand Grows for Hourly Rate Data in Big Bankruptcy

May 26, 2020

A recent Legaltech News story by Rhys Dipshan, “Reorg Launches New Database to Bring Big Data Analytics to Bankruptcy Fees” reports that the recession is already choosing its winners and losers: The once-strong appetite for M&A work is increasingly being replaced by a growing demand in bankruptcy services.  And due to efforts started in advance of the current economy, some in the legal tech space are looking to capitalize on this new opportunity.

Financial intelligence provider Reorg has announced the launch of its Legal Billing Rates Database, which aims to provide corporations and law firms with benchmarks regarding outside counsel’s bankruptcy fees.  The goal is to help general counsel and other corporate officers make informed bankruptcy hiring decisions, as well as help law firms competitively set their rates.

Darby Green, Reorg’s senior director of product, strategy and innovation, explained that the database pulls interim, monthly, and final fee applications from U.S. Bankruptcy Court dockets in the Southern District of New York and the District of Delaware, which she called the “preeminent jurisdictions for these types of large Chapter 11 [bankruptcy cases].”  She noted that “the attorneys involved in these [cases] come from all over … and also fee examiners expect that from jurisdiction to jurisdiction you’re not changing your fee, so it can become a good place to get an overall sense of what these fees look like.”

To be sure, while demand for bankruptcy services has grown in recent weeks, the new database was not built in response to the current market.  “When you build a data science-driven tool, it actually takes a very long time to do; we’ve been working on this behind closed doors for more than a year,” Green said.

She added that the development was “really a time-consuming process” given the need to structure docket data that was obtained via PACER.  For example, “even something as simple as figuring the department [took time].  Since every law firm is structured a little bit differently, you’re not going to necessarily find ‘bankruptcy lawyers’ at every firm, you might find ‘restructuring,’ you might find ‘financial insolvency,’ etc.”

Of course, Reorg is far from the only company offering legal spend or bankruptcy analytics, with LexisNexis, Bloomberg, Wolters Kluwer, Bodhala and Brightflag, among others, competing in the market.  What’s more, legal research providers such as Fastcase and Casetext are also planning on expanding their bankruptcy analytics and services.

Green, however, believes that where Reorg stands out is in its sole focus on bankruptcy fees.  “Our understanding is that we are the only company that is applying machine learning and this type of analysis to bankruptcy dockets.  There are a lot of providers looking at district court dockets, but what is unique about us is that because we’re so focused on the high yield and stress and distress markets that we are really embedded in bankruptcy dockets, and that provides an advantage,” she said.