A recent article by Jacqueline Vinaccia of Vanst Law LLP in San Diego “What is a Legal Fee Audit?,” reports on legal fee audits. This article was posted with permission. The article reads:
Attorneys usually bill clients by the hour, in six minute increments (because those six minutes equal one tenth of an hour: 0.1). Those hours are multiplied by the attorney’s hourly rate to determine the attorney’s fee. There is another aspect of attorney billing that is not as well known, but equally important — legal fee auditing. During an audit, a legal fee auditor reviews billing records to determine if hourly billing errors or inefficiencies occurred, and deducts unreasonable or unnecessary fees and costs.
Both the law and legal ethics restrict attorneys from billing clients fees that are unreasonable or unnecessary to the advancement of the client’s legal objectives. This can include analysis of the reasonableness of the billing rate charged by attorneys. Legal fee audits are used by consumers of legal services, including businesses, large insurance companies, cities, public and governmental agencies, and individual clients. Legal fee audits can be necessary when there is a dispute between an attorney and client; when the losing party in a lawsuit is required to pay all or part of the prevailing party’s legal fees in litigation; when an insurance company is required to pay a portion of legal fees, or when some issues in a lawsuit allow recovery of attorneys’ fees and when other issues do not (an allocation of fees).
In an audit, the auditor interviews the client, and reviews invoices sent to the client in conjunction with legal case materials to identify all fees and costs reasonable and necessary to the advancement of the client’s legal objectives, and potentially deduct those that are not. The auditor also reviews all invoices to identify any potential accounting errors and assure that time and expenses are billed accurately. The auditor may also be asked to determine if the rate charged by the attorney is appropriate.
The legal fee auditor can be an invaluable asset to parties in deciding whether to file or settle a lawsuit, and to the courts charged with issuing attorneys’ fee awards. The court is unlikely to take the time to review individual invoice entries to perform a proper allocation of recoverable and non-recoverable fees leaving the parties with the court’s “best approximation” of what the allocation should be. The fee audit provides the court and the parties with the basis for which to allocate and appropriately award reasonable and necessary fees.
Audits are considered a litigation best practice and a risk management tool and can save clients substantial amounts of money in unnecessary fees. It has been my experience, over the past two decades of fee auditing, that early fee auditing can identify and correct areas of concern in billing practices and avoid larger disputes in litigation later. In many cases, I have assisted clients and counsel in reaching agreement on proper billing practices and setting litigation cost expectations.
In other cases, I have been asked by both plaintiffs and defendants to review attorneys’ fees and costs incurred and provide the parties and the court with my expert opinion regarding the total attorneys’ fees and costs were reasonably and necessarily incurred to pursue the client's legal objectives. While the court does not always agree with my analysis of fees and costs incurred, it is usually assisted in its decision by the presentation of the audit report and presentation of expert testimony on the issues.
Jacqueline Vinaccia is a San Diego trial attorney, litigator, and national fee auditor expert, and a partner at Vanst Law LLP. Her practice focuses on business and real estate litigation, general tort liability, insurance litigation and coverage, construction disputes, toxic torts, and municipal litigation. Her attorney fee analyses have been cited by the U.S. District Court for Northern California and Western Washington, several California Superior Courts, as well as various other state courts and arbitrators throughout the United States. She has published and presented extensively on the topic of attorney fee invoicing, including presentations to the National Association of Legal Fee Association (NALFA), and is considered one of the nation’s top fee experts by NALFA.