Comments on: Billing for Contract Attorneys – My Mixed Views

By: David Montgomery

David Montgomery — Sat, 22 Sep 2007 09:18:15 +0000

Hi, Carolyn. I enjoy your blog. Regarding contract attorneys, I just wanted to make a few points. First, I think the issue of what is appropriate to charge has already been answered. Any bar association who has looked at this topic agrees that the mark-up should be “reasonable” (typical attorney response, huh?). I’ve seen this interpreted to be as much as 100% mark-up. Presumably, if the contract attorney who performed the work was very experienced and the marked-up cost for his/her work is still less than what would be paid for a firm attorney with that experience, an argument can be made that this is reasonable.
As someone who places contract attorneys into law firms and corporations, I certainly don’t encourage 100% mark-ups. The idea is to save the law firm’s client significant money while still providing superior work product. However, I think some law firms don’t want clients to know how much they save by using contract attorneys for fear that they will demand their use on other projects. I also think some firms unfortunately look at this as a potential profit center.
One advantage to law firms of using contract attorneys is that beyond the price paid to the contract attorney placement firm, they have few costs. We pay employment taxes, unemployment compensation insurance, workers’ compensation insurance, even some liability insurance, etc. We indemnify against employment claims. The law firm adds the contract attorney to their malpractice insurance (insurance companies won’t let us purchase malpractice insurance because we are not supervising their work) and may have to cover them for any premises liability claims. Law firms also have costs of supervision, assuming this is not already passed through to the client. Thus, law firms should not have a lot of extra cost to cover when hiring contract attorneys. Most of the mark-up is pure profit.
I think you raise an important point when you state that sole practitioners may be doing themselves and their clients a huge disservice when they fail to hire contract attorneys due to fear of pricing. However, at least in large markets, contract attorneys are not too expensive for small firms. In fact, some of my small firm clients are becoming big users of contract attorneys because our contract attorneys’ rates are still lower than the attorneys in their firm. Small firms can be one of the biggest beneficiaries of contract attorneys because the spikes inherent in the practice of law dramatically affect small firms because they have fewer attorneys to whom they can spread the work. Hiring a contract attorney is the perfect answer.
Regards,
Dave Montgomery
Legal Solutions, Inc.
312 924 2851

By: David Montgomery

David Montgomery — Sat, 22 Sep 2007 09:18:00 +0000

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By: David Giacalone

David Giacalone — Mon, 11 Jul 2005 07:53:10 +0000

Jennifer, The nomenclature loophole offered by the ABA Opinion is the sort of “lawyering” and “lawyerese” that gives the profession a bad name. How can an “ethics” issue depend on the name given to the item on the lawyer’s billing statement? I suggest that the “ethical” law firm must, at the very least — as a fiduciary, agent and counselor for the client — inform the client that the services have been outsourced at a lower fee than the firm’s normal fee, and told the markup involved. Otherwise, the lawyer is merely “lawyering” his or her own client.
See http://blogs.law.harvard.edu/ethicalesq/2005/06/29#a4100 .

By: David Giacalone

David Giacalone — Mon, 11 Jul 2005 07:53:00 +0000

By: Jennifer A. Stiller

Jennifer A. Stiller — Wed, 06 Jul 2005 17:26:50 +0000

The ABA has answered your query as to what makes the mark-up of a contract attorney’s work “reasonable.”
Many of the online discussions I’ve seen don’t seem to be aware of Formal Opinion 00-420 of the American Bar Association’s Standing Committee on Ethics and Professional Responsibility (2000), which stated that when the costs associated with legal services provided by a contract lawyer are billed to the client as fees for legal services, the amount that may be charged for such services is governed by the requirement of Model Rule 1.5(a) that a lawyer’s fee shall be reasonable. A surcharge to the costs may be added by the billing lawyer if the total charge represents a reasonable fee for services provided to the client. If the contract lawyer’s fee is billed as an expense to the firm that retained it, the rules regarding mark-ups to expenses (i.e., minimal and cost-based, if any) apply.

By: Jennifer A. Stiller

Jennifer A. Stiller — Wed, 06 Jul 2005 17:26:00 +0000