A recent Law 360 article, “5 Tips For When GCs Balk at the Bill,” by Jimmy Hoover reports on general counsel and legal costs.  Two NALFA members, Joe Studer and John O’Connor, were interviewed in the article.  The article reads:

Fee complaints from general counsel can often feel like they're diminishing the hard work that goes into a legal matter, but experts advise attorneys to save their personal feelings for later and work to solve a dispute without damaging a client relationship.

From in-person meetings with the client to consulting with experienced colleagues, Jerome Studer of Cozen O'Connor says to "do whatever you can to deal with the situation," as small grievances can "potentially be relationship-destroyers" if not nipped in the bud.

Here, experts tell Law360 five steps lawyers can take to defuse a fee dispute before it explodes.

Assess the Situation

Taking a breath and understanding the nature of a GC's qualms with a legal fee is the first crucial step to resolving a billing dispute and potentially salvaging a critical firm relationship, experts say.

Jessica G. Kelly of Boston-based Sherin & Lodgen LLP advises attorneys to "stay level-headed" and avoid getting angry, considering GCs are merely looking out from their bottom line.

"They don't want to be throwing money out the door," she said.  "At the end of the day, it's still business."

Because grievances can range from small details like unnecessary line items to systemic issues such as litigation that has spun out of control, "assessing the problem allows you to best figure out how to deal with it," said Studer, who practices with Cozen subsidiary Legal Fee Solutions LLC.

Indeed, Studer says making a GC happy again can sometimes be as simple as crossing off imprudent billing entries for associate training and all-team conferences.

However, he warns, situations in which a client was unaware of the costs associated with a particular legal strategy require more work and communication to avoid the dispute from spiraling out of control and destroying a professional relationship.

Make the First Move

A firm's initial reaction to complaints about a bill from in-house counsel can be the difference between a quick, amicable resolution of the underlying issue and ugly fee litigation involving malpractice claims and, inevitably, a lost client, experts say.

That's why legal consultant John O'Connor of San Francisco-based O'Connor and Associates says the best thing for a lawyer or firm to do when faced with a fee issue is to "be proactive," rather than defensive.

"It's very, very important that there not be a defensiveness and a retreat behind one's own ramparts," he said.

Michael C. Ross, a consultant for Altman Weil Inc., explained just how effective a quick response can be.

Ross, former GC for Safeway Inc., described an instance in which a firm gave the grocery store chain an unsolicited, yet significant discount on an insurance matter after Safeway's in-house raised questions about the bill.  According to Ross, the firm had pressed the company to pursue claims, but the decision turned out to be ill-advised, "looking at rulings along the way."

Ross said the speedy resolution nipped what could have been a fee dispute in the bud, ensuring a healthy attorney-client relationship going forward.

"It takes the wind out of one's sail and it creates a very favorable impression," he said.

O'Connor told Law360 that billing disputes often stem not from the quality of work but client expectations surrounding cost and strategy.

If an attorney meets with a client in person and walks through the reasoning behind the charges, "sometimes the client will say, 'I understand what you're doing and keep on doing exactly [that],'" O'Connor said.

Get a Fresh Pair of Eyes

Experts also advise asking a senior partner or someone else in the firm with knowledge in fee matters to examine a disputed client bill, saying it can lend much-needed objectivity to a fraught and uncomfortable process.

Given the reality that attorneys who have worked diligently on a matter sometimes struggle to disregard their personal feelings of offense when reviewing a bill, it is far easier for someone removed from the case to step into the client's shoes and identify a problem.

"Having that kind of outside perspective can often defuse a bad situation," Studer said.

O'Connor discourages management committees from "unblinkingly" supporting the position of an attorney, and conducting an independent investigation of the complaint.

"I think it behooves management to find out if the client is being unreasonable or perhaps the litigators were excessive or unreasonable in their approach in the case," he said.

In smaller firms, where perhaps the advice of an objective senior partner experienced in fee matters is wanting, O'Connor says it's wise to tap an outside expert on the subject.

"It doesn't hurt to call up somebody," he said.  "You may just want to talk about a few hours of expenditure and say, 'What do you think? Should we do something here?'"

Kelly recommended reaching out to ethics hotlines operated by state bar associations for that second opinion.

"If you've put in those hours and somebody's challenging them, it's going to feel like a personal attack," she said.  "To get an objective opinion about it definitely is a good idea."

Ask Yourself: Is It Worth It?

Kelly says pushing back against billing gripes can be appropriate when a firm has given a GC considerable warning ahead of time of the expected litigation costs they will incur.  "Then, you can stick your ground," she said.

But if a GC refuses to pay up even after a diligent review of the bill finds nothing unreasonable, then a firm needs to ask whether the client relationship is even worth saving, experts say.

Studer says that, while many attorneys treat their in-house counterparts more like friends than clients, firms would be well-served to ditch the the GCs that nickel and dime "just for the sake of negotiating," or are constantly ranting about incessant client demands.

"It's not so bad" in those cases, Studer said.  "Those clients are kind of a pain."

"When I'm looking at a good client, I'm thinking about who I want in my life. People who are reasonable," he said.

Be Realistic

O'Connor cautions that, in today's hyper-competitive legal environment, "an awful lot of law firms don't like the idea of firing litigation clients."

In cases where a law firm is committed to holding on to a client after receiving a GC's complaints about a bill, it's important to be realistic with any possible compromise and not jeopardize the relationship further by over-promising.

For instance, pledging to write off an entire bill before receiving the certainty that such an action can be done, or promising to do better in future matters despite the fact that billing practices will go unchanged is "going to make a bad situation worse," said Studer.

According to O'Connor, that means cutting the "best deal possible" that will leave both parties satisfied.